Streamlining cross-border payments for the trade industry: the benefits of an FX Marketplace
Emerging markets have shown resilience to turbulent times the world has been experiencing, amplified by the global pandemic, the war in Ukraine, and the rising cost of energy. A weakened US dollar and slowing inflation have helped improve their outlook and relieve some pressure on exporters in emerging markets. In particular, markets across Asia are showing strength and benefiting from China’s reopening economy which has been an important growth driver for industries like tourism, semiconductor exports, and trade.
The international trade industry is a cornerstone for the diversification of goods and services, boosting the economy and creating jobs as well as building supplier relations. But the trade industry is not without its challenges. As banks fall short of providing the necessary tools to expand into new markets without suffering the related high costs, trust is impacted, and growth is hindered for emerging market trade. Cross-border payments show no signs of slowing down, instead, a study from Juniper Research found that by the end of 2024, the global spend on B2B cross-border payments is set to exceed $40trn. We’ll be looking into practical ways to overcome cross-border challenges for the trade industry, with a particular focus on a foreign exchange (FX) marketplace.
Challenges on the horizon for trade
When it comes to traditional cross-border payments, there are high associated exchange fees, delayed settlement times, lack of communication and transparency, and overall, a poor user experience which can cause frustration and disjointed business relationships. When it comes to the trade industry, this experience impacts a business’ performance and, without intervention, can give them a competitive disadvantage. McKinsey & Co. reported that cross-border payments take an average of five days to settle, and with multiple touchpoints, they become at risk of cybersecurity threats and hackers. Delays, errors, and failure to land in accounts result in poor business relationships, loss of sales, and problems with cash flow for the trade industry.
With the trade industry’s heavy reliance on a volatile foreign exchange, the exchange rate can affect the business’ competitiveness when it comes to exports and imports. In fact, according to a report by American Express, currency volatility was cited by 29% of SMEs as a significant challenge when operating internationally, and 30% reported difficulty managing foreign currency risk. To keep up, businesses may end up paying a premium for specialised currency conversion services, or even succumb to exchange rate fluctuations that cause losses or have no choice but to settle for unfavourable exchange rates.
Similarly, heavy local regulations may cause difficulties in moving funds and cause further delays due to time-consuming administrative processes, which may also come with a fee. Jana Poulsenova, managing director of Nordea Markets, spoke on this matter saying “When you do business in more regulated countries, it is important to remember that local regulation and volatility in the FX market affect your business and your counterparties, even if you have your contracts in EUR or USD.” Trade businesses need a solution that enables them to unlock fast, low-cost foreign exchange with no compromise on security or compliance with regulatory providers in relevant jurisdictions.
Trade your way becomes a reality
Better technology can be the answer for the trade industry as a secure FX hub for real-time and 24/7 transactions at a rate set by businesses has evolved from a dream to a reality. An FX marketplace is designed for greater control and flexibility when exchanging currencies. Rather than trading instantly at a fixed exchange rate set by banks or other payment providers, businesses can enter the marketplace where they place an FX order at their desired rate and negotiate with other businesses in the marketplace to get their preferred outcome, or simply accept other FX orders on offer.
Businesses can maximise their returns by trading at the price that suits them and get peace of mind there are no hidden charges or risk of interception as the platform is transparent and secure. According to Accenture, businesses that use an FX marketplace can save up to 80% on transaction fees and reduce settlement times by up to 90%. A marketplace could be the obvious solution for greater control and FX efficiency as the middleman is removed. Instead, businesses get the freedom to trade and communicate directly with other businesses and liquidity providers.
Finding the right fit
Navigating the cross-border payment technology waters can be daunting for some trade businesses so finding a partner who’s here to introduce these innovative solutions is key. At Verto, we’re equipped to handle businesses of all shapes and sizes and help them grow into new markets and expand their customer base. This means bespoke introductions to our solutions suite, including our unique FX marketplace where businesses all over the world are waiting to trade currencies.
With Verto’s marketplace, businesses can exchange a plethora of currencies, including more than 40 illiquid currencies like rands, shillings and rupees. In just a few simple steps, businesses can exchange at their desired rate and the funds land in your Verto account. Trade businesses get the technology they need, along with Verto’s support, to expand their reach to new heights, saving themselves time and money for safe, compliant, and customised trades.
The trade industry, especially in emerging markets, looks geared for strong growth potential if it can overcome the hurdles of global payments like long settlement times, high costs, unfavourable exchange rates, and the risk of fraud.
An FX marketplace could give businesses in the trade industry a unique opportunity to have freedom and flexibility over their currency trades with direct exchange and greater cost-efficiency. Discover Verto’s unique marketplace where businesses can trade and negotiate for the best exchange rate possible.