Cross-border payments have become a critical part of millions of lives as we moved towards a more globalized world and multicultural societies. The segment represents a massive market, great opportunities andvery promising players. As large, cross-border payments become more common, B2B merchants are looking for the most convenient, cost-efficient and transparent options. This is driving more of these transactions to the Web and mobile channels vs. traditional agent-based and bank-based options.
India provides enormous opportunities for B2B players, both domestic and foreign. Compared to other developed markets, India is largely under-penetrated with a huge potential for growth in the cross-border B2B transaction market. But often, B2B merchants face problems while receiving payments from cross border. According to a report by Atradius, the major problems faced by Indian B2B merchants while receiving foreign payments are:
1. Sales made on credits: Is one of the major issues for the merchants when doing cross border business. According to a survey, around 39.3% of the sales are made on credit given to foreign customers.
2. Unpaid B2B Invoices: Late payments of invoices incur financial and administrative costs and can negatively affect cash flow and business growth. Merchants in India receive payments on foreign B2B invoices around 63 days after invoicing on an average. The average payment duration for the region starts at 61 days for foreign ones. The unpaid invoices are one of the greatest concerns for Indian respondents when it comes to managing receivables and collections.
3. Time taken for transfer: One of the biggest cross-border payment challenges for small and medium businesses is making and receiving payments of less than $10,000 and time that needs to be allocated for funds to clear. When it comes to overseas transactions, the complexity of the issue – i.e., when businesses find themselves trying to navigate their way through the correspondent banking model – completion of payments (even low value payments) – can often take months, and incur a substantial amount of charges along the way.
4. Risk of loss of information: Often payment messages are transferred across banks and across borders which creates a high risk of critical information being lost about the payment. Apart from it, difficulty in tracking payment progress when dealing with foreign businesses, in-payment reconciliation, and lack of foreign exchange fee transparency are also some of the other challenges faced by merchants.
To evaluate the various options and players available in India for B2B cross-border transactions, LTP has come up with white paper which is focused exclusively covering solutions for Indian businesses or professional service providers that need to get paid by their international clients (the US,theEUand the UK) or freelance marketplaces expecting payment for their services from abroad. For comparison, we conducted real transactions to compare the actual fees and currency conversion rates offered by the players. The players involved in our comparison are Payoneer, PayPal and banks.
The two scenarios evaluated by us were:
Scenario I: Working with an international client directly, i.e., where an Indian company bills a US-based company directly
Given below is the conclusion of our analysis:
• Out of the three given options, Payoneer offers the best currency conversion fee of 2% above the mid-market rate available and is the best option for making cross border transactions. Transfer made through Payoneer allows customers to save on forex conversion & transaction fees.
• Payoneer offers a great service called the “Global Payment Service” (used by LTP for making a direct international transfer) which provides users with local US, EU and UK receiving account numbers. Funds paid into these accounts are received into the user’s Payoneer account and then transferred automatically to the user’s local bank account in INR which keeps the cost of transferring money low, and efficiency high.
• The option of direct wire transfer between banks is a very expensive and has the probability of the transfer being delayed or getting lost. PayPal is another option of direct transferring of money but is charges a very heavy landing fee of 4.4%
Scenario II: Working on a freelance marketplace such as Upwork. Upwork presents the freelancer or service provider with several options of how to withdraw (transfer) the funds out from their Upwork account.
• For freelancer marketplace in India, Local fund transfer is one of the most preferred option by freelancers as it does not charge any landing fee.
• Payoneer is also a great way to receive payment from various companies that are popular among Indian freelancers & bloggers. The biggest benefit is that freelancers save a notable amount in the withdrawal done through Payoneer.
• According to LTP analysis, Payoneer is the best option available in India when withdrawing money from Freelance marketplace.
• Payoneer offers a dynamic discount on the conversion fee based on profile and volume of transactions processed by the customer.
Introduction to Payoneer and its point of differentiation:
Payoneer empowers global commerce by connecting businesses, professionals, countries and currencies with its innovative cross-border payments platform. In today's borderless digital world, Payoneer enables millions of businesses and professionals from more than 200 countries to reach new audiences by facilitating seamless, cross-border payments. Additionally, thousands of leading corporations including Airbnb, Amazon, Getty Images, Google, and Upwork rely on Payoneer's mass payout services.
Unique Point Of Differentiation:
• Free collection service: It is free to receive payments when using Payoneer’s Global Payment Service.
• Low currency conversion fee: Payoneer transfer payments from a local bank in India, in INR. which provides a good conversion rate
• Real-time money transfer facilities: One of the main advantages of Payoneer is that it allows you to withdraw your money faster. Even on verified accounts, PayPal still takes three to five days to process withdrawals. On the other hand, funds are usually made available within 24 hours when using Payoneer. Some transactions even takeminutesto be prepared
• For Payoneer India, there is a transaction limit of $10,000.
• Currency conversion charge of just 2%
With Payoneer's fast, flexible, secure and low-cost solutions, businesses and professionals in both developed and emerging markets can now pay and get paid globally as easily as they do locally. For more information, visit.
Note: The research has been funded by Payoneer, but the views expressed in this paper are those of Let’s Talk Payments, reflecting our independent analysis.