Fintech's Role in Revolutionizing Cross-Border Remittances

What Are the Challenges of Traditional Remittance Methods?

Until a few years ago, exporters had to rely on traditional remittance methods. Some of the related challenges include:

Unfavorable exchange rates

With the lack of technology to monitor the process and the resulting delays, exporters had to involve intermediaries in the remittance process. This would result in correspondent banking charges/SWIFT charges and banks charging forex charges that eat into the already thin profit margins of exporters struggling in a competitive international market.

Interminable delays

When funds are remitted by the buyer for an order, the time taken to realize the amount in the exporter’s account is long. As a result, the seller (in this case, the exporter) cannot determine if the amount has been paid in full and if the foreign transaction fee is correctly applied until it arrives in their account. Often, the time to take action against any shortfalls would have passed before receiving the amount.

Lack of transparency

The cross-border remittance process often involved several parties who stepped in to facilitate it. This coupled with differing time zones between beneficiary and remitter geographies resulted in a lack of transparency. Since exporters could not be sure when the funds would be received, they were not in a position to plan for further orders.

Scope for misuse

Since the remittance process involves numerous entities and there are limited ways to trace the payment route, it allows for misuse by related parties and can result in legal issues.

Compliance issues

Without new technology, documenting cross-border remittances becomes difficult, and exporters often cannot collect and file all the related paperwork. Given the longer process, reporting transactions can also become difficult.

How does new-age technology ease the cross-border remittance process?

Finance technology or FinTech, has addressed these issues with the creation of robust remittance platforms like LeRemitt. Digital platforms help you initiate the payment with a few clicks, allowing for complete transparency. Once the exporter raises the invoice, the buyer will have all the details of the goods shipped and the shipment details within seconds. Once the buyer receives and checks the goods, they can share the goods-received note to the seller, who can request the payment.

Also Read: What is FIRC (Foreign Inward Remittance Certificate)?

At LeRemitt, the remitter is provided with global foreign currency accounts, to which they can locally transfer funds without incurring SWIFT charges. What is more, customers can also track the payment throughout their journey. The process includes built-in security measures and checks to check the identity of the sender and receiver, as well as access and verification codes. Technology support from FinTech companies like LeRemitt also makes it easier to ensure all the required documentation is accessible and available to meet compliance requirements.

New Challenges Despite Technological Advancements

Nevertheless, despite these technological strides, new challenges persist as business-to-business (B2B) money transfers surge alongside international trade, cross-border e-commerce, and remittances. MSMEs face changes like SWIFT charges, a lack of transparency in foreign exchange fees, and many times, MSMEs also struggle with reporting paperwork and limited updates on payment statuses.

According to Vantage Market Research, the global B2B payments market, valued at USD 994.20 billion in 2022, is projected to reach USD 2146.70 billion by 2030. Despite this growth, cross-border transactions lack the efficiency of domestic payments due to their complexity and inadequate infrastructure.