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Managing Cross-Border Payment Costs, Risks and Efficiency

by Ebru Pakcan, Global Head of Payments, Citi Transaction Services

Globalisation is accelerating the flow of people, goods and services, capital, energy and information across country borders. For a multinational corporation, the impact of globalisation extends further than the opportunity to expand into new markets: it involves new ways of doing business, creating strategic and operational challenges and opportunities. Treasurers have a pivotal role in facilitating their company’s global expansion and supporting changing business models, creating the backbone for supplier and customer engagements by enabling efficient, cost-effective payments and collections. Innovations in cross-border payments are a prime example of how business trends are changing. In a growing number of businesses, traditional treasury mechanisms for facilitating cross-border trade no longer support these emerging business models effectively, necessitating new techniques and approaches.

Increased costs, reduced efficiency

Cross-border payments are typically considered by treasurers as a challenging but necessary condition for doing business. These challenges include:

Cost. Cross-border payments are more expensive than domestic payments, and it is often difficult to assess and deduce charges incurred through multiple correspondent banks, leading to a loss of value and a lack of visibility and auditability.

Information. As payment messages are transferred between banks and across borders, information held on the payment may be truncated or the detail lost, making payments and collections more difficult to reconcile.