Cross-border payments are complex, time-consuming and can lead to supply chain disruptions

Laurent Descout examines how technology innovations can help businesses combat delays and make payments easier and faster.

Supply chain disruptions are widespread and could cost European economies up to €920 billion in GDP losses by 2023. The Covid-19 pandemic and current geopolitical situation will only exacerbate existing problems within the supply chain, such as long cross-border payment cycles.

Inventory days are an important factor when considering supply chain disruptions. Any delay in shipping an item increases the days’ supply (the amount of time each item or inventory is in the warehouse).

Reducing inventory days should be a priority for businesses, but external factors such as rising interest rates and funding costs are increasing the risk and urgency of action. In today’s volatile financial markets, the more days of inventory, the higher the cost a business is likely to encounter on a commodity.

Factors such as manufacturing and production have a significant impact on supply chain timescales, but so do cross-border payment cycles. The problem is that traditional approaches to cross-border payments are complex, time-consuming, costly, and increase inventory days. This means it’s imperative for his CTO, who works with the finance team, to find solutions to late payments with technology.

Why are cross-border payments so long?

This is a time-consuming process for finance teams using traditional banking systems. Opening an international bank account is a difficult, long and painful process. The transaction itself may take more days. As companies need to collect money from all over the world, they end up having different accounts for each country and currency, adding complexity and further delaying transactions.

If a company needs to onboard suppliers in another market, it can take weeks to get the infrastructure in place. Businesses are also losing costs on cross-border payments. Many banks do not charge just the exchange rate and exchange margin. It also inflates the overall price.

To make matters worse, the limited and incomplete payment information provided by many banks makes reconciliation of payments difficult and delays the shipment of goods. All of these negatively impact the smooth running of the supply chain.

If your company has an average payment cycle of 2 weeks and you can shorten it by 2 days, just 25 payments will save you 50 days. This has the potential to significantly reduce the cost of goods.

In today’s world of supply chain disruption, agility and speed are key, neither of which is available through traditional banking partners. This means it is imperative that the CTO work with her CFO colleagues to find new approaches in cross-border payment practices to reduce inventory days.

Innovation in cross-border payments

As cross-border payments become more popular, businesses need to find faster, more cost-effective and transparent solutions to their approach to reducing days of inventory.

It’s time for CTOs to reassess traditional relationships and explore how new technology can give finance teams the tools they need and the services they deserve. Payments innovation now allows us to offer up-front pricing and fee transparency, along with the ability to track payments.

Businesses no longer need multiple different accounts to collect money for each country and currency. CFOs can set up their own international accounts using a multi-currency International Bank Account Number (IBAN) in the organization’s name. As a result, you can manage your company’s cash flow and see your trading history, market data and statistics all in one place.

The advent of virtual wallets allows businesses to make same-day payments. Businesses can use them to organize their funds, store multiple currencies, and be ready to perform quick payments or currency exchanges. This makes it much easier for businesses that need to onboard suppliers in various markets.

These new approaches enable businesses to simplify and expedite payments, reduce inventory days, and ultimately reduce costs. This will not only help these companies survive the current uncertain times, but it will also save them money in the long run.

About the author

Laurent Descout is the CEO of Neo. Laurent is a serial Fintech Entrepreneur and Investor and has been a Financial Advisor for Property Finance for over 10 years. In 2017, from a single platform he founded Neo, the first European fintech to offer MiFID II compliant investment services and he PSD2 compliant payment services, enabling SMEs to take part in many international banking operations. Helped me overcome challenges.

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