Nigeria is a strong FinTech hub. Its digital ecosystem and landscape are quite impressive compared to other regions. However, there are prevailing challenges faced by startups, especially emerging ones. One of such is cross-border payments for SMEs. Startups that get involved in cross-border payments have improved the lives of SMEs in Nigeria. When compared with multinational corporations, cross-border payments are yet to be fully streamlined by most Nigerian SMEs.
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Conversely, MNCs have dedicated in-house treasury teams responsible for all their financial exchanges and managing end-to-end cross-border payment requirements. In contrast, SMEs historically have not had access to this level of support and the consequence is they are left struggling with opening and managing multiple bank accounts and battling with inflated costs. Furthermore, FinTechs are faced with engaging in an enduring cross-border system. Hence, this article investigates how cross-border payment challenges faced by businesses in Nigeria can be overcome through the help of FinTechs using four proven strategies.
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Research The Market And Cut Costs
FinTechs are the only hope of helping SMEs engage in cross-border payments. However, to do this, FinTechs must reduce the reliance on banks exploring third-party providers outside Nigeria that can facilitate cross-border payments. They can do this by researching which Third-Party provider specializes in small and medium-sized businesses. FinTechs are one option and are now integrating all the same features into their payment solutions. Many offer more aggressive and transparent cross-border payment pricing – while also adding value – enabling SMEs to better manage and reduce their costs.
To help address the pressing consequences of payments and allow cheaper transactions through various International Know Your Customer (KYC), Anti-Money Laundering (AML), and Counter-Terrorist financing controls (CTFC) policies, these FinTechs are also promoting SMEs setting up US-based accounts. There are banks in the US that are interested in cross-border payments from Africa.
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Partner With Credible Platforms
Another way FinTechs can overcome cross-border payments challenges among SMEs is by partnering with credible international platforms domiciled in their locality. FinTechs can build payments infrastructure by entering into several partnerships with pan-African banks (majorly Ecobank, UBA, and Orabank), telcos (MTN, Orange, Moov, etc), and international payments companies Visa and Mastercard who enable international transfers.
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Increase The Speed Of Payments
Executing a cross-border transaction, traditionally, takes SMEs,s weeks to process. Certainly, this amplifies the complexities of managing cash flow. However, there is something FinTechs can do about it due to the digitalization of payments is rapidly changing this reality. The development of virtual wallets is one strategy same-allowing SMEs to make same-day payments. Consequently, it enables businesses to organize their funds and store multiple currencies, ready for making rapid payments or a currency exchange.
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Cross-border payment is often stifled with low transparency which hampered the fast adoption of its services. The problems of unpredictable fees and slow processes intrinsic in the traditional banking process mean it is difficult – and often impossible – for SMEs to foresee just how much a payment will cost and how long it will take. Furthermore, this problem of a poor transparency system also extends to accessing a complete understanding of exchange rates, payments history, and market data, important for intelligent decision-making and reporting. Implementing cross-border payments through traditional banks is hell. Conversely, several FinTechs without much baggage and bottlenecks can provide up-front pricing and fee transparency, and at the same time with the capacity to track a payment using Blockchain, AI, and ML technologies. According to Finextra, a digital advisory company, an emerging option for SMEs is to set up their international account with a multi-currency IBAN in their organization’s name. Hence, SMEs can regulate corporate cash flows and view trading history, market data, and statics, in a streamlined manner form.
Featured Image Source: crossborder payments.co
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