From payment initiation to currency conversion, B2B cross-border payments can be complex. This complexity increases the risk of errors and fraud. This was as demonstrated by a UK engineering firm that fell victim to a £20 million deepfake scam. In this case, fraudsters used artificial intelligence to impersonate company executives during a video call, convincing an employee to transfer funds to fraudulent accounts.
With the UK’s B2B transaction value projected to grow from $2.8 trillion in 2024 to $3.8 trillion by 2028—a 36% increase—it’s crucial for companies to refine their processes and mitigate fraud risks using secure verification platforms like Trustpair.
What are B2B cross border payments?
B2B cross border payments are transactions between companies in different countries, typically with different financial currencies too. International business payments are usually digital, made online directly from bank-to-bank, through marketplaces or using purpose-built payment systems.
B2B global payments provide a way to get suppliers paid quickly, often in real-time. This reduces delays in the procurement and production cycles caused by cash flow issues. In turn, this means that suppliers can finance production sooner, and can prevent delays in costly factors like shipping. However, they are complex. The nature of B2B cross border payments means that there can be several intermediaries before the recipient ends up with their funds. Each of these middle points elevates the risk around the payments, with particular risk around fraud and payment errors.
How to understand the cross border payment process flow
The cross border payment process is firstly dependent on the method of payment, such as:
- Bank transfer: typically used to pay invoices – read all about invoice fraud here –, a direct financial payment method where the sender and recipient banks interact to take the payment and convert the currency.
- Card payments: convenient payment method solutions for the sender, it also requires communication between intermediaries.
- Payment processor: typically used in B2B marketplaces, a third party intermediary takes the payment and then deals with the sender and receiver banks
Once the payment method has been chosen, here is what a cross border payment process flow can look like:
-
- Check the exchange rate: this can impact the amount taken and fees associated with an international payment.
- Fill out the sender and receiver bank details: this information must be correct to avoid payment errors or ‘bounceback’.
- Verify the payee and recipient: validating the details prevents fraudsters from impersonating suppliers and rerouting the payments.
- Send the payment: the banks communicate (often with intermediaries like payment providers) to move the money from one account to another.
- Track the payment: for successful confirmation, it’s important to verify that the payment made its way to the recipient without delays, and that the sender did not experience unexpected fees, which is a very real occurrence.
This is one example of a B2B payment flow, but most of these steps can be automated, depending on the payment method or processor.
How do currency fluctuations impact cross border transactions?
Currency fluctuations can significantly impact cross border transactions because they can change the cost of the payment. And when fees are calculated as a percentage of the overall payment, they’ll also increase the overall cost of services.
For businesses, where average payments tend to be three times greater than B2C payments, this has a much bigger impact on profits. Favorable exchange rates mean that a company will save on their planned expenses, leaving more room in the budget for other costs, or simply more profit. On the other hand, unfavorable currency rates can put departments over budget in the financial sense. This can diminish profit over time.
The role of compliance and security in international payments
Every jurisdiction has its own payment rules and technology systems. This can cause challenges for both payees and recipients. Thanks to the UK’s open banking network, organizations can automatically pull account information, match and validate their payments. Organizations must give their consent to participate in open banking when making or receiving payments with a UK business. This applies even if they are not based in the UK markets themselves.
Security measures are often determined by the rule makers, and the payment system participants must follow them. From a corporate perspective, this usually means added procedures involved in the bank’s process to ensure compliance.
Platforms like Trustpair also exist to promote the security of global business payments, largely by verification. We validate bank account ownership across borders, even where the rules are different and where the data is less accessible. It’s only after third parties pass their suspicious data and activity checks that funds are transferred, minimizing the risk of international payment fraud.
Not only do different countries have their own rules and regulations, so do the banks. This further complicates the payment process, especially when there is a language barrier, as this often changes the formatting of payments data.
But compliance isn’t optional – it’s a legal obligation. UK businesses making or receiving a high volume of corporate payments must account for the additional time and resources required to stay compliant and secure. Key requirements include:
- AML and KYC checks: Under UK anti-money laundering (AML) regulations and FCA guidelines, businesses must conduct robust Know Your Supplier and Know Your Customer processes to ensure funds are transferred to legitimate recipients.
- Strong Customer Authentication (SCA): Mandated by PSD2 and enforced through UK Open Banking standards, two-factor authentication is essential to prevent fraudsters from accessing accounts or initiating unauthorised B2B transactions.
- Secure vendor data management: To prevent fraud and maintain payment integrity, companies must ensure their vendor master data is protected from tampering, regularly verified, and centrally controlled across systems.
Strategies for streamlining B2B cross border payment processes
Streamlining the B2B cross border payments process firstly requires an overhaul in the way that businesses view international payments. By building a standard operating procedure, including currency exchange and security, companies can overcome their fragmented and time-consuming approach.
Choosing the right payment method(s)
The right payment method for your organization and recipient will depend on a number of factors, including size of payment, regularity, urgency, and purpose.
However, it will also depend on the resources and technology capabilities of your business.
Making payments manually with your bank for direct transfer is likely to require more upfront work on your end, because you’ll be responsible for some of the demands of compliance. By working with an international payments processor, many of those demands will be removed as the solution takes care of it. In the UK, the most commonly used B2B payment methods for cross-border transactions include bank transfers via SWIFT and SEPA, which remain the standard for sending larger sums securely across borders. Card payments using Visa, Mastercard, and increasingly virtual cards are also widely used. This is particularly the case for smaller or recurring transactions.
The rise of Account-to-Account (A2A) payments, enabled by Open Banking, is offering businesses a faster and more cost-effective alternative by bypassing traditional card networks. Additionally, fintech platforms and digital payment providers like Wise, Revolut Business, and Payoneer are gaining traction. They offer competitive exchange rates and transparent fee structures, making them attractive for SMEs and enterprises alike.
Dealing with currency fluctuations
Currency fluctuations can wreak havoc on your budgeting, so it’s important to consider how best to manage exchange rates. When it comes to exchange rates, transparency can be your best friend. Work with a platform which provides an insight into not only the current exchange rates, but past fluctuations to figure out the best time to make a payment. Platforms with fee calculators are even better. Indeed, they’ll show you the true cost of making the payment depending on the currency rate.
Building security and compliance into the process
Streamlining the security and compliance process for B2B payments can save time all the way through, from payment initiation to delivery. Yet, creating a standard operating procedure which meets the requirements of international regulations is tough – especially because of the sheer number of different rules.
The solution is to integrate a pre-existing platform to automatically manage security, complete due diligence and maintain compliance.
Trustpair helps businesses to secure their complex international transactions. We eliminate the risk of payment fraud by constantly verifying your business partners and suppliers – thanks to the largest market access to financial data sources. From bank account ownership to country-wide blacklists, we do the compliance heavy lifting to ensure that funds are transferred to the right vendors. Our customers include enterprise companies around the world – in the UK, US, France, Italy, etc.
To sum up… Managing B2B cross border payments
Cross-border B2B payments require careful inputting of payment details, consideration of the exchange rate, and verification of payee and suppliers. To streamline the process, ensure you’re choosing the right payment methods, gain transparency over currency and build security and compliance into the process with a platform like Trustpair.
