In today's interconnected global economy, businesses are expanding their reach across borders. According to Statista, this growth is accompanied by a surge in cross-border transactions, making forex payments an integral part of international trade and the largest financial asset market. However, as beneficial as these opportunities are, they come with a set of challenges that can impact forex businesses' financial stability and operational efficiency.
In this article, we will delve into the forex payment challenges that businesses commonly face and explore effective strategies to cope with them.
Exchange rate volatility
Fluctuations can occur suddenly due to economic, political, or geopolitical events, leading to uncertainty in the final payment amount. This volatility can erode profit margins and strain financial planning.
Solution: Implement hedging strategies
Forward contracts and options help mitigate the risks associated with exchange rate volatility. These strategies allow businesses to lock in exchange rates for future transactions, providing a level of certainty in their forex payments.
What is a forward contract? 💡
A forward contract is a customised derivative contract between two parties to buy or sell an asset at a specified price on a future date. It can be used to lock in an exchange rate for a future transaction, helping protect a business or investor from losses caused by unfavourable exchange rate movements.
Forex transactions often involve hidden costs, including conversion fees, intermediary bank charges, and poor exchange rates. These costs can add up and significantly impact the overall cost-effectiveness of international transactions.
Solution: Use a payment orchestration platform
Utilising advanced payment platforms and fintech solutions can enhance transparency and efficiency in forex transactions. For example, payment orchestration platforms can offer dynamic currency conversions and real-time exchange rate information to help businesses automate payment processes and gain insights into transaction costs.
Streamline your forex payments💸
Facilitate global expansion effortlessly by connecting international acquirers and seamlessly accepting multiple currencies, regardless of the country you operate in.
Cross-border payments can experience delays due to factors such as time zone differences, banking holidays, and intermediary banks. These delays can disrupt supply chains, affect cash flow, and damage business relationships.
Solution: Partner with relevant payment service providers
Connecting with suitable payment service providers and offering your clients a proper choice of payment options can help you optimise payment flows, reduce transaction fees, and expedite payment processing.
As forex businesses operate globally, their clients might stumble upon inevitable payment hassles during the payment journey. For instance, in regions with poor Internet connection, the payment page can take about 20 seconds to load. Also, some African payment peculiarities include the requirement for customers to go through SMS verification or enter a card PIN while making online payments. The chosen payment method, card issuing country, time of payment, and many other parameters also influence conversion rates.
Solution: Sophisticated checkout & payment routing
First, ensure your payment page has a high-quality design for proper page speed. The buttons should be intuitive, and it’s essential to facilitate the user's path by implementing debounce for automatic transition between the fields. The payment page should also be dynamic so that when customers enter their BIN, the system identifies the issuing country and changes the fields in accordance with regional payment features. We’ve taken care of all these specificities in our Checkout solution. Also, by opting for our smart routing engine, you can configure specific rules to send each cross-border transaction via the route with the highest chances for successful processing.
Different countries have various regulations governing forex transactions. Certain jurisdictions impose stringent requirements regarding the segregation of client funds from a business's operational funds. This aims to minimise the potential for fund misuse, enhancing financial security. Failure to comply with these regulations can result in penalties or delays in payment processing.
Solution: Get virtual merchant accounts
By maintaining virtual accounts, businesses achieve regulatory compliance, segregate payment traffic by source, and create independent payment processing flows. These accounts also enable businesses to hold funds in different currencies, reducing the need for immediate conversions.
Virtual merchant accounts💰
Lack of transparency
The lack of transparency in the forex payment processing can make it challenging for businesses to track their payments and ensure they have been processed accurately and on time.
Solution: Timely reconciliations & clear communication
Using a holistic tool for reconciliations, you can efficiently consolidate and harmonise transaction data, maintaining a firm grip on your business performance. Maintain clear communication with your suppliers, clients, and financial partners and tackle timely reconciliations to track all mismatches and errors in payment processing.
Companies can successfully navigate the intricate landscape of forex payments by implementing the proper strategies and leveraging technology and expertise.
Getting MIDs & integrating PSPs
Forex businesses offer a range of payment options to cater to their clients' needs. It implies establishing connections with payment service providers and maintaining and updating them. To do so, businesses should hire a team of developers, which implies additional expenses and potentially influences the overall profitability. Also, due to their high-risk nature, forex businesses often face challenges opening MID accounts for their projects. Acquiring banks and payment processors often require stricter underwriting criteria, higher fees, and increased scrutiny during the MID application process.
Solution: MID account opening services & payment orchestration platforms
Utilise the expertise of companies with large payment service provider networks. They understand the specific needs of different business types and sizes and help choose and contact the best-suited providers. For instance, we at Corefy offer 300+ ready-made integrations with payment providers and acquirers across the globe, and our PayAtlas provides guidance on selecting and contacting payment providers tailored precisely to your project's demands.
How does Corefy help forex businesses?
We at Corefy offer a white label payment solution specifically tailored to forex businesses. Its advanced tools enable forex businesses to connect hundreds of payment service providers seamlessly, expand globally, and reduce transaction processing costs.
Here’s how we help:
- Payment team as a service assists you all the time and helps you choose the most relevant payment providers and configure the best routes to increase conversion rates.
- Customisable and user-friendly checkout offers a smooth payment experience to your clients.
- Flexible payment routing enables you to set up individual rules and route each transaction to the best-suited payment processor.
- Firewall solution helps to decrease the risk of fraud.
- Reconciliations centre allows your accounting department to easily reconcile transactions, matching payment statuses and resolutions between our platform and the provider.
Opting for our forex payment processing solution, you can focus on the core business operations while delivering a frictionless payment experience for your clients. Feel free to check out our solutions – request a live demo and see how your business can benefit from it!