How the FMCG industry can overcome cross-border payment challenges with a digital driven strategy

By Sophie Proctor, March 23, 2023 · 9 mins read

There are significant cross-border payment challenges for the FMCG sector, particularly in emerging markets, which can stifle growth in both revenue and market size. This industry has a particular reliance on cross-border payments to expand into new markets, pay overseas suppliers, and connect with new customers to give them a competitive advantage. These challenges span from inefficient foreign exchange, slow settlement times delaying the flow of cash, complex regulatory requirements, and lack of digital payments. The FMCG sector has shown no signs of slowing down, in fact, according to 360 reports, the global FMCG market size was valued at USD 11951.95 million in 2021, but is expected to expand at a CAGR of 3.17% during the forecast period, and reach an impressive USD 14415.47 million by 2027.  

Spend in this industry has been pushed higher following rising inflation, particularly across Africa and Asia. Grocery spend in China rose by 3.1% in Q4 2022, and this was mirrored across in the UAE where the FMCG sector thrived in 2022, with Q4 seeing the highest spend since the peak-COVID period in March 2020. Since COVID, retailers and manufacturers have had to adapt to the increasingly digital world and to consumer spending habits as an important part of growth. So, improving cross-border payments could help produce important results for FMCG businesses! We’ll be addressing some ways to overcome these challenges and how we can help. 

The current state of cross-border payments for FMCG

The cost of sending funds overseas can be a significant burden financially if using the wrong payment provider, with the World Bank estimating the average cross-border payment cost can range from 5% to 20% of the transaction value. Relying on this for daily payments can cause a significant dent in revenue growth for industries such as FMCG. Add on payment delays or lack of visibility over payment status, and the frustration and friction of this issue continues to grow. 

Furthermore, operating on a global scale means being aware of regulatory requirements not only in your country, but in other jurisdictions too. This can be a complicated matter and businesses not keeping abreast of any changes or differences to the AML/CFT regulations may incur fines or penalties. Particularly challenging for FMCG is complying to currency exchange regulations and being kept aware of compliance protocols as they penetrate new markets. A study conducted by SWIFT found that 75% of businesses saw compliance with regulations to be the biggest challenge when making cross-border payments. FMCG businesses would strongly benefit from improved risk management strategies and a payments partner which ensures their adherence to regulations to remain compliant.  

The FMCG industry still seems to be playing catch up to reaching the modern world with the prominence of cash payments. A 2018 study by the World Bank found that retailers could be losing between 4 and 15% on average of their total revenue due to the costs of cash handling and leakage. Businesses dealing with predominantly cash can leave themselves vulnerable to theft and fraud, as well as wasted time and resources with cash handling and bank deposits. This issue can grow more time-consuming if these are small retailers in rural areas with no nearby banks or choose to hire additional security when transporting cash. Missed trips to the bank, or lack of drivers or security, can leave large amounts of cash in their stores or unnecessary closure to attend to this matter.

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Strategies for overcoming cross-border payment challenges

Adjusting to digital

A quick switch to digital only payments is no easy feat however, as many customers may be accustomed to paying with cash and reluctant to switch. Cash provides anonymous purchasing with no surcharge or the need for technology, which some customers may resist. However, sourcing a solution which drives value and ease without incurring any additional costs or charges helps for a smoother upgrade to digital. COVID sprung an influx of cashless retailers, cafes, and restaurants as it meant safer touchless payments could be made in order to keep the businesses afloat. Digital payments help widen the net of collecting payment should customers come into the store with only a bank card or no local currency in cash.

Trend spotting

FMCG businesses can get greater oversight of their financial operations by moving digital as a centralised dashboard with all incomings and outgoings allow them to monitor revenue growth, compare monthly performance, and stay on top of any payments to suppliers. It can also help identify consumer trends and help to adjust their stock accordingly, depending on the time period. Switching from cash to digital can also help improve supplier relationships as payments can be made in their local currencies for ease and not needing to convert and supply cash. 

Helping big and small FMCG businesses

Introducing a payments partner that facilitates intelligent digital payment solutions for both collecting funds and paying out funds in multiple currencies with ease could be the step forward the industry needs. Smaller retailers may see this as the way to break through into new markets, reach more customers, and take greater control of their finances. Large FMCG corporations might feel ahead of the curve with cashless transactions and digital adoption, but still experience high exchange fees or lack real-time visibility over payment status. Overall, a digital upheaval may be the boost FMCG businesses need to capture new markets and a widened customer base.

Once the digital transformation is underway, a key solution for improved cross-border payments is introducing global accounts and digital wallets which provide safer, faster, and more global-friendly payments. By offering greater convenience and security, businesses can adopt a better global growth strategy, reaching new customers and suppliers with less concern regarding cross-border payments. For smaller rural retailers, it can help them break out into reaching new business and accepting payments from cashless merchants. This has already found popularity in Kenya and India in order to expand reach and streamline inefficient payments. However, there is still great opportunity for more widespread adoption of digital wallets for the FMCG industry.

How Verto can help FMCG 

With Verto, we can offer FMCG businesses a safer, faster, and fuss-free alternative to cash or bank transfers. Our multi-currency wallets offer free transfers between wallets, and zero fees when you collect illiquid currencies, making it simple for businesses of all sizes. Multiple currencies can be held in digital wallets, allowing for collection in your local currency, but ready for paying out to suppliers in their local currency. Multi-currency wallets can be easily managed via the dashboard for better treasury management. Businesses can also use Global Accounts for seamless currency collection from customers with up to 25 different currencies landing in one international account. Retailers can help reduce their payment processing costs by up to 85% and build better customer relationships by offering collection in their local currency. Verto helps businesses take the step forward to growing their business and improving both customer and supplier relationships. 

Likewise, Verto opens the doors to a truly compliant process with diligent regulatory adherence and keeping in line with the utmost security and compliance protocol. This means secure data, safeguarding accounts, and remaining FCA compliant. This can soothe concerns of FMCG businesses who want to operate digitally, but are concerned about compliance when entering new markets. 

Next steps

The FMCG industry is growing, but businesses shouldn’t fall by the wayside by not adopting digital payment solutions, or partnering with the right payments provider that will prioritise security, compliance, and deliver smoother cross-border payments. FMCG businesses can easily sign up to Verto and start reaping the benefits of a streamlined process that helps them to deliver results. Get started today!