Irish businesses see international trade as crucial for growth, but cross-border payments come with many challenges, including hidden fees, uncompetitive exchange rates, and complex processes. Overcoming these obstacles is vital for businesses to thrive globally.
1. Currency Conversion Costs
Smaller businesses often receive poor exchange rates compared to larger firms. Banks typically mark up FX exchange rates significantly, shrinking profit margins. Lack of hedging services (e.g. FX Forwards) also expose small and medium enterprises (SMEs) to foreign exchange risks. Many SMEs underestimate these risks, leading to unexpected financial losses.
2.High Payment Processing Fees
Cross-border payments often carry high fees, such as international wire and currency conversion charges. For urgent transactions, some providers charge up to €50. These costs hit smaller firms harder, especially those with thin margins, making low-cost payment options essential for competitiveness.
3. Lack of Dedicated Account Manager
Unlike in the past, today many businesses, especially smaller firms do not have a dedicated account manager at their banks. This creates stress for finance teams when payment issues arise, as personalised support is harder to access. Studies show 46% of customers prefer human interaction in banking, highlighting the demand for better service.
4. Transaction Delays
Complex regulations and manual checks often cause delays in foreign currency payment processing. Incorrect details, like IBANs or SWIFT codes, can add days or weeks to transactions. Banking infrastructure differences between countries can also slow down processing times, disrupting operations. Not having a dedicated account manager to help resolve the issue can further add to the delays.
5. Regulatory Compliance
Navigating the regulatory environment for cross-border payments can be overwhelming for many firms but particularly SMEs, which often lack the resources to handle compliance issues. Meeting anti-money laundering and other regulations adds complexity and increases operational costs.
6. Fraud and Security Risks
Cross-border transactions expose businesses to security threats, such as phishing scams and fraudulent activities. In 2023, SMEs in Ireland lost €10 million to email-related fraud, with cases rising by 25%. Stronger fraud protection measures are essential to safeguard businesses.
7. Limited Access to Payment Options
In some markets, many Irish businesses face restricted access to international payment methods. Without the ability to pay in local currencies (e.g. Chinese renminbi or Indian rupee) businesses risk losing out on more advantageous pricing, and potential global growth opportunities.
Addressing these challenges is key to Irish success in global markets. By adopting transparent, innovative and cost-effective payment solutions, businesses can protect their bottom line and improve operational efficiency.
If you would like to find a solution to address any cross-border payments challenge you may have, please reach out to John Barry, jobarry@fexco.com or visit the dedicated ISME member Fexco page https://internationalpayments.fexco.com/en-ie/isme/.
