Unveiling the True Cost of Cross-Border B2B Payments: A Whitepaper by LTP, Sponsored by Payoneer

Cross-border payments have become a critical part of millions of lives as we moved towards a more globalized world and multicultural societies. The segment represents a massive market, great opportunities and very promising players. As large, cross-border payments become more common, B2B merchants are looking for the most convenient, cost-efficient and transparent options. This is driving more of these transactions to the Web and mobile channels vs. traditional agent-based and bank-based options.

To evaluate the various options and players available in India for B2B cross-border transactions, LTP has come up with a white paper which is focused on solutions for Indian businesses or professional service providers that need to get paid by their international clients (the US, EU and UK) or freelance marketplaces expecting payments for their services from abroad. For comparison, we conducted real transactions to compare the actual fees and currency conversion rates offered by the players. The players involved in our comparison are Payoneer, PayPal and banks and our analysis reveals that payment fees can be reduced by as much as 71% by switching to Payoneer.

India provides enormous opportunities for B2B players, both domestic and foreign. Compared to other developed markets, India is largely under-penetrated with a huge potential for growth in the cross-border B2B transaction market. But often, B2B merchants face problems while receiving payments from across the border.

According to a report by Atradius, the major problems faced by Indian B2B merchants while receiving foreign payments are:

  1. Sales made on credits: This is one of the major issues faced by merchants who engage in cross-border business. According to a survey, around 39.3% of the sales are made on credit given to foreign customers.
  1. Unpaid B2B invoices: Late payments of invoices incur financial and administrative costs and can negatively affect cash flow and business growth. Merchants in India receive payments on foreign B2B invoices around 63 days after invoicing on an average. The average payment duration for the region starts at 61 days for foreign ones. The unpaid invoices are one of the greatest concerns for Indian respondents when it comes to managing receivables and collections.
  2. Time taken for transfer: One of the biggest cross-border payment challenges for small and medium-sized businesses is making and receiving payments of less than $10,000 and the time that needs to be allocated for funds to clear. When it comes to overseas transactions, the complexity of the issue – i.e., when businesses find themselves trying to navigate their way through the correspondent banking model – the completion of payments (even low-value payments) can often take months and incur a substantial amount of charges along the way.
  1. The risk of loss of information: Payment messages are often transferred across banks and borders which creates a high risk of critical information being lost about the payment. Apart from that, difficulty in tracking payment progress when dealing with foreign businesses, in-payment reconciliation, and lack of foreign exchange fee transparency are also some of the other challenges faced by merchants.

In the white paper, the two scenarios evaluated by us were:

Scenario I: Working with an international client directly, i.e., where an Indian company bills a US-based company directly.

Given below is the conclusion of our analysis:

Out of the three given options, Payoneer offers the best currency conversion fee of 2% above the mid-market rate available and is the best option for making cross-border transactions. Also, the transfers made through Payoneer allow customers to save on forex conversion & transaction fees. The option of direct wire transfer between banks is a very expensive and has the probability of the transfer being delayed or getting lost. PayPal is another option for directly transferring money but has a very heavy landing fee of 4.4%.

Scenario II: Working on a freelance marketplace such as Upwork which presents the freelancer or service provider with several options of how to withdraw (transfer) the funds out from their Upwork account.

For freelance marketplaces in India, Local fund transfer is one of the most preferred options by freelancers as it does not charge any landing fee. Payoneer is also a great way to receive payment from various companies that are popular among Indian freelancers & bloggers. The biggest benefit is that freelancers save a notable amount in the withdrawal done through Payoneer.

Introduction to Payoneer and its point of differentiation:

Payoneer empowers global commerce by connecting businesses, professionals, countries and currencies with its innovative cross-border payments platform. In today's borderless digital world, Payoneer enables millions of businesses and professionals from more than 200 countries to reach new audiences by facilitating seamless, cross-border payments. Additionally, thousands of leading corporations including Airbnb, Amazon, Getty Images, Google, and Upwork rely on Payoneer's mass payout services.

Unique point of differentiation:

  • Free collection service: It is free to receive payments when using Payoneer’s Global Payment Service.
  • Low currency conversion fee: Payoneer transfer payments from a local bank in India (in INR), which provides a good conversion rate
  • Real-time money transfer facilities: One of the main advantages of Payoneer is that it allows you to withdraw your money faster. Even on verified accounts, PayPal still takes three to five days to process withdrawals. On the other hand, funds are usually made available within 24 hours when using Payoneer. Some transactions even take minutes to be prepared.

With Payoneer's fast, flexible, secure and low-cost solutions, businesses and professionals in both developed and emerging markets can now pay and get paid globally as easily as they do locally. For more information, click here.

To read the full whitepaper, please click here.

Note: The research has been funded by Payoneer, but the views expressed in this paper are those of Let’s Talk Payments, reflecting our independent analysis.