Currencies

Currency Matching Key to Competing in International B2B Markets 


A business-to-business (B2B) payment is never just a payment. The global B2B marketplace, with an annual payments volume over $100 trillion, is supported by a myriad network of workflows and data; many of which still rely on legacy, paper-based processes. And the inherent complexity of the operating ecosystem is scaled up to the Nth degree when businesses look to transact internationally and grow their cross-border market share. 

The Bank for International Settlements announced Wednesday (April 3) that it is working in tandem with seven central banks — including the Federal Reserve Bank of New York — to test tokenization in a bid to improve cross-border payments, putting cross-border payments innovations top of mind for B2B firms. 

After all, successfully competing in international B2B markets isn’t as easy as 1, 2, 3 – it requires a nuanced understanding of local customs and regulatory requirements, as well as the cultural context behind global partners’ behaviors and expectations. Understanding the needs and preferences of international buyers and suppliers can help streamline the B2B payments experience, enhancing the likelihood of repeat business and referrals.

For businesses looking to tap into the benefits of cross-border growth, a new working paper from the National Bureau of Economic Research (NBER), titled “Invoicing Currency Choice: Strategic Complementarities and Currency Matching,” offers important clues for making the process more advantageous for both B2B buyers and suppliers. 

Namely, the paper found that currency matching for exports and imports is as essential as strategic complementarity for two-way exporters, regardless of dominant currency, producer currency, or local currency invoicing. 

That’s because currency matching can improve customer relationships by simplifying transactions and providing transparency in pricing — and with B2B dynamics constantly in flux, any advantage buyers and suppliers can find to foster trust and loyalty over time can help build a strong competitive moat. 

See alsoReal-Time Treasury Management Pays Off for Multinationals

Navigating the B2B Cross-Border Maze

Unlike consumer transactions, the intricate workflows and data-centric nature of B2B payments necessitate extensive reporting capabilities and role-based entitlements. Multiple pain points along the payments journey can cause major headaches for firms looking to grow their cross-border sales. 

As PYMNTS Intelligence’s “Cross-Border Sales and the Challenge of Failed Payments” revealed, faulty cross-border payments cost U.S. merchants at least $3.8 billion in sales last year.

B2B payments acceptance costs alone are a fundamentally significant line item on any P&L, and payments failures only contribute to that bottom-line detraction. 

Conducting transactions in the same currency as the supplier or buyer can reduce transaction costs associated with currency conversion fees and exchange rate spreads. These savings contribute to overall cost efficiency, making products or services more affordable for customers or increasing profit margins for businesses.

Currency matching also allows businesses to offer competitive pricing in international markets. When transactions are conducted in the buyer’s currency, it eliminates the need for them to convert currencies, making the purchasing process more straightforward and potentially more attractive. This can give businesses a competitive edge over rivals who may not offer such convenience.

Read moreCan Payments Innovations Solve U.S. Merchants’ Top 5 Cross-Border Challenges?

New Expectations Around B2B Payments

PYMNTS Intelligence’s “The Treasury Management Playbook: Spotlight on Cross-Border Payments” found that 59% of Citi’s corporate clients name speed as one of their biggest pain points when it comes to cross-border transactions, followed by 47% who cited cost, and 40% who named transparency as a key area of friction, as tracking and receipt information may be lacking with traditional payments such as wires.

“Not every buyer is going to pay all of their suppliers the same way … unlike traditional consumer payments, where there’s a standardized way in which consumers pay and merchants get paid — within the B2B arena, no two buyer-supplier profiles are the same,” Dean M. Leavitt, founder and CEO at Boost Payment Solutions, told PYMNTS. 

“It is important to focus on what’s important to buyers, because that dictates their dealings with their supplier base … and buyers want flexibility with respect to their payment options,” he added.

That’s why integrating innovations like currency matching for foreign transactions can be one tool to help B2B players looking to expand internationally in removing typical transaction bottlenecks. 



Source link

Leave a Reply