A good business cannot exist without profits, and the foundation of profits is a secure and convenient payment mechanism. If a company cannot make and receive payments on time, it will be unable to cover its operating expenses.
Despite apparent progress in the financial system, not all legitimate businesses can access high-quality financial services in 2023. Payments remain a challenge rather than a given opportunity for many businesses worldwide. This is true for businesses in logistics, e-commerce, marketing, IT, and a variety of other fields. Companies have difficulty opening accounts and conducting international transactions, or the service is ineffective and unsuitable for their needs.
What or who could make a difference? Fintech. Not a single ‘perfect’ platform, but an industry that acts as a layer over banking rails, bringing financial innovation. In this article, we will look at existing payment challenges in the world’s most popular industries, as well as the potential for improving business activities in these sectors.
Convenient Payments Remain a Privilege in 2022
Those who are used to convenient banking apps or whose businesses have access to a variety of payment methods may be surprised to learn that convenient payments aren’t available to everyone.
There is, however, a spectre of fields where businesses frequently face difficulties with account opening, not always because they are risky but simply because of their specific needs and complex structure.
Furthermore, most non-residents are unable to open a business account in a foreign country where they intend to expand their businesses. Merchants are frequently unable to obtain proper financial services because of short processing histories, selling digital goods, and sending payments outside of the EU is considered risky.
When all of these parameters are combined, a business is not welcome.
What Fintech Brings to the World’s Top Five Most Popular Industries
So, while traditional financial institutions play an important role and can perform many operations that fintech cannot, payments are not a one-size-fits-all proposition. Some industries require greater flexibility. Even within the same industry, different companies’ financial needs can be drastically different.
To demonstrate this point, we can consider how they diverge in just five popular industries where new businesses emerge every day and tens of millions of people are employed, with even more aspiring to be a part of them.
Logistics
The logistics industry is heavily reliant on on-time payments. In order for the logistics business to function properly and legally and to make and receive payments, the company often requires accounts in multiple countries. Traditional finance would necessitate visits to local branches in each jurisdiction to make it happen, which would be time-consuming and costly.
Furthermore, if payment is delayed at any point, it delays the entire process for the logistics company, its client, and the recipient of the goods.
However, compared to payment delays, uncertainty is a bigger issue. The inability to predict when payments will be received is the most frustrating aspect. Smaller carriers that rely on this predictability to manage cash flow are especially harmed by the lack of transparency about when payments will arrive.
Fintech can help here because logistics companies can gain access to a global network of banks with fast, high-value payments that won’t get stuck when transacting internationally with a single onboarding. Innovative platforms can issue Visa debit cards in order to simplify international company payments. Cards are an excellent tool for instantly paying sailors, truck drivers, and other personnel, rather than issuing checks or handling cash.
Check out the latest FMLS22 session on “Pay Attention! Trends defining 2023 in Payment Processing.”
E-commerce
Merchants probably understand better than anyone else how critical it is for their businesses to be present in multiple markets and accept payments easily. However, each region has its own payment methods, card systems, and so on.
International payments are especially difficult for aggregators because they involve not only multiple payment systems and processors, many of which are highly localized, but also the difficulty of transacting across borders. As a result, merchants require a separate universal account that will allow them to not only accept payments from customers in different locations but also track revenue across their product offerings.
The payment is routed between the customer and the merchant via a piece of technology known as a ‘gateway’, which is linked to the merchant’s website and where their customers enter their credit card information. Such a gateway quickens the transaction and reduces the chance of payment loss.
Tourism
More than e-commerce, tourist-oriented businesses must be able to accept payments from people all over the world. Furthermore, there are numerous hotels, excursion bureaus, and rental services available, and customers will always choose the one that is easiest to pay for.
Many issues also stem from the fact that, even before the pandemic, the payments industry regarded travel as a high-risk vertical.
In the travel industry, the time between when a consumer pays and when they receive goods or services is 60-90 days. If the goods or services are not delivered for any reason, whether due to cancellation, unforeseen circumstances such as COVID-19, or the business ceasing operations, it is the acquirer’s responsibility to repay the customer. Acquirers may be exposed to tens of millions of pounds in risk for a single travel business. Many people simply cannot afford to take that kind of risk.
Fintech firms are currently looking for new ways to replace cash collateral with a trust-based mechanism known as safeguarding. The travel company still keeps a cash reserve with a third party in a safe. However, rather than being repaid in large sums at the acquirer’s discretion, the funds are released gradually and on a planned basis either when or shortly before travel occurs.
This new way of working addresses both the travel industry’s liquidity and transparency concerns. In that case, funds held in trust can remain on the company’s balance sheet.
Marketing and IT
Marketing and IT firms now have thousands of contractors living in completely different countries all over the world. This is why it is critical for them to be able to collaborate with employees and freelancers remotely, and payments can be a significant impediment to this. It is critical to send payments on time, regardless of where a contractor is located, and to issue a virtual card without the need for additional paperwork or visits to a physical office.
Moreover, IT firms need to pay for things such as AWS, GSuite accounts, hosting, and cloud storage. Every tech company requires an account, but opening current accounts in foreign banks abroad for all types of IT companies has become much more difficult in recent years.
This means that, in addition to a standard list of corporate documents and information about the ultimate beneficiaries, the firm must have a detailed structure of all business processes as well as an active and structured website. Furthermore, not only the applicant’s company is investigated but all of his declared partners as well as affiliated companies in the event of possible mutual settlements.
Fintech can provide marketing and IT firms with trackable and cost-effective multi-currency payments to any location on the planet. Furthermore, fintech makes it possible for them to accept specific payments for digital goods and services, which traditional financial institutions might flag as suspicious transactions.
A good business cannot exist without profits, and the foundation of profits is a secure and convenient payment mechanism. If a company cannot make and receive payments on time, it will be unable to cover its operating expenses.
Despite apparent progress in the financial system, not all legitimate businesses can access high-quality financial services in 2023. Payments remain a challenge rather than a given opportunity for many businesses worldwide. This is true for businesses in logistics, e-commerce, marketing, IT, and a variety of other fields. Companies have difficulty opening accounts and conducting international transactions, or the service is ineffective and unsuitable for their needs.
What or who could make a difference? Fintech. Not a single ‘perfect’ platform, but an industry that acts as a layer over banking rails, bringing financial innovation. In this article, we will look at existing payment challenges in the world’s most popular industries, as well as the potential for improving business activities in these sectors.
Convenient Payments Remain a Privilege in 2022
Those who are used to convenient banking apps or whose businesses have access to a variety of payment methods may be surprised to learn that convenient payments aren’t available to everyone.
There is, however, a spectre of fields where businesses frequently face difficulties with account opening, not always because they are risky but simply because of their specific needs and complex structure.
Furthermore, most non-residents are unable to open a business account in a foreign country where they intend to expand their businesses. Merchants are frequently unable to obtain proper financial services because of short processing histories, selling digital goods, and sending payments outside of the EU is considered risky.
When all of these parameters are combined, a business is not welcome.
What Fintech Brings to the World’s Top Five Most Popular Industries
So, while traditional financial institutions play an important role and can perform many operations that fintech cannot, payments are not a one-size-fits-all proposition. Some industries require greater flexibility. Even within the same industry, different companies’ financial needs can be drastically different.
To demonstrate this point, we can consider how they diverge in just five popular industries where new businesses emerge every day and tens of millions of people are employed, with even more aspiring to be a part of them.
Logistics
The logistics industry is heavily reliant on on-time payments. In order for the logistics business to function properly and legally and to make and receive payments, the company often requires accounts in multiple countries. Traditional finance would necessitate visits to local branches in each jurisdiction to make it happen, which would be time-consuming and costly.
Furthermore, if payment is delayed at any point, it delays the entire process for the logistics company, its client, and the recipient of the goods.
However, compared to payment delays, uncertainty is a bigger issue. The inability to predict when payments will be received is the most frustrating aspect. Smaller carriers that rely on this predictability to manage cash flow are especially harmed by the lack of transparency about when payments will arrive.
Fintech can help here because logistics companies can gain access to a global network of banks with fast, high-value payments that won’t get stuck when transacting internationally with a single onboarding. Innovative platforms can issue Visa debit cards in order to simplify international company payments. Cards are an excellent tool for instantly paying sailors, truck drivers, and other personnel, rather than issuing checks or handling cash.
Check out the latest FMLS22 session on “Pay Attention! Trends defining 2023 in Payment Processing.”
E-commerce
Merchants probably understand better than anyone else how critical it is for their businesses to be present in multiple markets and accept payments easily. However, each region has its own payment methods, card systems, and so on.
International payments are especially difficult for aggregators because they involve not only multiple payment systems and processors, many of which are highly localized, but also the difficulty of transacting across borders. As a result, merchants require a separate universal account that will allow them to not only accept payments from customers in different locations but also track revenue across their product offerings.
The payment is routed between the customer and the merchant via a piece of technology known as a ‘gateway’, which is linked to the merchant’s website and where their customers enter their credit card information. Such a gateway quickens the transaction and reduces the chance of payment loss.
Tourism
More than e-commerce, tourist-oriented businesses must be able to accept payments from people all over the world. Furthermore, there are numerous hotels, excursion bureaus, and rental services available, and customers will always choose the one that is easiest to pay for.
Many issues also stem from the fact that, even before the pandemic, the payments industry regarded travel as a high-risk vertical.
In the travel industry, the time between when a consumer pays and when they receive goods or services is 60-90 days. If the goods or services are not delivered for any reason, whether due to cancellation, unforeseen circumstances such as COVID-19, or the business ceasing operations, it is the acquirer’s responsibility to repay the customer. Acquirers may be exposed to tens of millions of pounds in risk for a single travel business. Many people simply cannot afford to take that kind of risk.
Fintech firms are currently looking for new ways to replace cash collateral with a trust-based mechanism known as safeguarding. The travel company still keeps a cash reserve with a third party in a safe. However, rather than being repaid in large sums at the acquirer’s discretion, the funds are released gradually and on a planned basis either when or shortly before travel occurs.
This new way of working addresses both the travel industry’s liquidity and transparency concerns. In that case, funds held in trust can remain on the company’s balance sheet.
Marketing and IT
Marketing and IT firms now have thousands of contractors living in completely different countries all over the world. This is why it is critical for them to be able to collaborate with employees and freelancers remotely, and payments can be a significant impediment to this. It is critical to send payments on time, regardless of where a contractor is located, and to issue a virtual card without the need for additional paperwork or visits to a physical office.
Moreover, IT firms need to pay for things such as AWS, GSuite accounts, hosting, and cloud storage. Every tech company requires an account, but opening current accounts in foreign banks abroad for all types of IT companies has become much more difficult in recent years.
This means that, in addition to a standard list of corporate documents and information about the ultimate beneficiaries, the firm must have a detailed structure of all business processes as well as an active and structured website. Furthermore, not only the applicant’s company is investigated but all of his declared partners as well as affiliated companies in the event of possible mutual settlements.
Fintech can provide marketing and IT firms with trackable and cost-effective multi-currency payments to any location on the planet. Furthermore, fintech makes it possible for them to accept specific payments for digital goods and services, which traditional financial institutions might flag as suspicious transactions.
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Girts Straujums