SMBs are increasingly reliant on cross-border payments, with a preference for digital solutions

While the pandemic affected businesses of all sizes, SMBs were hit especially hard. However, they displayed great resilience, and many find themselves better off than they were before the pandemic.

Mastercard's borderless payments report 2022 found that, of the 3000+ SMBs surveyed globally, 46% reported generating higher revenues than before the pandemic. Business owners and executives themselves are surprised by this, with more than half saying their business grew much more than expected.

The report argues that this recovery was in part because SMBs generally moved from a local to a global perspective, pivoting to e-commerce and international sales. Three-quarters of SMBs said the pandemic forced them to look abroad for business, and around 60% say this allowed them to grow their businesses. What powered SMBs' ability to pivot was the increased sophistication of digital solutions to cross-border payments, enabling businesses to make and receive payments securely and in a timely manner.

Working with suppliers overseas

Selling on an international scale, through digital or traditional channels, comes with the need to work with global suppliers.

Almost half of the SMBs reported using more international suppliers than before the pandemic. Additionally, around 60% said they are sending and receiving more cross-border payments now than they were before the pandemic, a significant increase from around 38% in 2020.

Many SMBs dealing with international suppliers were doing it for the first time, and encountered some roadblocks along the way. When dealing with cross-border payment services, the most reported challenges were:

• 39% of SMBs said cross-border payments slowed down their supply chain;
• 36% of SMBs felt a lack of transparency about how much money they would lose in foreign exchange/transfers;
• 24% reported feeling unsure when their international partners would receive the payments made to them;
• 25% said suppliers refused to work with them due to uncertainty over payment times.

Today, the majority of SMBs expect to continue doing more business internationally than they did before the pandemic. Additionally, around 63% plan to continue sourcing more suppliers across multiple countries to spread risk. 

Therefore, cross-border payments will continue playing a key role for these businesses, and consequently represent an important element of the global economy.

Digital solutions to cross-border payments

While SMBs were already using digital payment solutions before the pandemic, their need for and dependency on digital payments was amplified by it. In 2021, nearly three-quarters of SMBs were reportedly using web-based payment platforms from banks, money transfer companies and other providers, while approximately two-thirds were using mobile apps. Furthermore:

• Over 80% of SMBs say they feel comfortable using online cross-border solutions to send payments;
• Around 80% say that digital cross-border payments platforms help improve their business efficiency;
• Over 50% say these platforms have helped them grow, improve cash flow, and ultimately survive.

SMBs were nervous about global payment systems going into the pandemic, fearing that they may fall through, and were pleasantly surprised. More than half said they feared the network would be more negatively affected by the pandemic. There was also uncertainty around whether governments would restrict cross-border payments as a pandemic response measure.

But, the more important question for payment system providers is, what do businesses want from digital cross-border payment solutions?

The most important thing for businesses was security – assurance from any service provider that the transaction, and their personal and financial information, will not be compromised. 

Secondly, time was found to be of great importance – businesses expect funds to be delivered within 24 hours. Efficiency of a companion mobile app is also significant for businesses – they not only want to be able to use cellphones to complete a transfer, but also want constant updates about its completion, or the ability to track it in real time, for example. 

How much businesses are charged for moving funds abroad is also of significance. SMBs expect service providers to give them awareness of how much the transfer will cost, and how much will be received upfront. Additionally, competitive FX rates and fees have also become more or less an expectation now.

How cross-border payment providers can meet consumers’ and businesses’ needs

Mastercard, in the report, identified six steps that providers can take to grow their business and serve their customers better.

First, it's important that providers build safe networks, and adequately educate their users about them. Almost half of users, consumers or businesses, fear fraud when transferring funds internationally.

Providers need to also focus on improving their pricing. Almost half of users feel they receive poor exchange rates, and are charged high fees for their transactions. Hand in hand with the last point, businesses wish for greater transparency. That means receipts for each transaction, and the ability to track them.

Additionally, for SMBs, a big network is important. They find it frustrating if their preferred provider does not operate in the country they wish to send money to. SMBs also demand a greater variety of payout options, so that their international partners can take advantage of that, and hence be more likely to want to work with them.

Lastly, just speed up the process.