Cross-border transfers: The complete guide to wholesale cross-border payments

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Cross-border transfers: The complete guide to wholesale cross-border payments
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In this comprehensive guide, we'll explore the best methods for cross-border transfer and transactions, address some common challenges wholesalers experience in their cross-border payments, and offer solutions to these issues.

What are cross-border payments?

A cross-border payment refers to the transaction that takes place between entities located in different countries. This exchange of funds can involve individuals, businesses, and financial institutions. 

As the world becomes increasingly interconnected, cross-border payments are expected to surge, especially in the B2B sector, with a projected 43% increase by 2027, solidifying their pivotal role in allowing for the seamless flow of money across borders.

Cross-border transfers play an integral role in enabling businesses and individuals to engage in cross-border activities with ease. As businesses continue to expand their global reach, the demand for efficient and secure cross-border transfer solutions is set to rise surge, driving innovation and transformation within the global payments landscape.

The significance of cross-border payment services for wholesalers

Cross-border transfers play a pivotal role in the global operations of wholesalers. They enable wholesalers to seamlessly conduct global businesses by facilitating secure and efficient fund transfers across borders. Singapore wholesalers often deal with a diverse clientele spread across different countries, necessitating a reliable and accessible means of receiving payments for goods and services. Cross-border payment solutions offer currency conversion capabilities, allowing wholesalers to deal with foreign customers while managing exchange rate risks. Additionally, they aid in building trust and credibility with international partners by ensuring timely and transparent transactions. In a world where global commerce is the norm, cross-border payment services empower Singapore wholesalers to expand their reach, tap into new markets, and streamline their financial operations, ultimately contributing to their growth and success on a global scale.

Growth of cross-border payments market in Singapore

In Singapore, the cross-border payments market has witnessed remarkable growth in recent years. In 2022, this burgeoning sector experienced a year-on-year growth rate of 12%. The surge in cross-border payments is closely tied to Singapore's thriving wholesale industry, which contributed to a substantial 18% (equivalent to S$90 billion) of Singapore's GDP in 2021.

What's particularly interesting is that a staggering 91% of the revenue share in the wholesale industry originates from foreign wholesale trade, highlighting the role of the wholesale sector as a key driver for the import and export of goods.

Before the pandemic, the fastest-growing segments in this sector were fuels and chemicals, while post-pandemic, machinery and equipment – including electronics, telecommunications, and semiconductors – took the lead. Other notable contributors include metals, furniture, food and beverages, and household goods.

As Singapore continues to thrive as a global trade hub, international trade is poised to be more and more important for wholesalers.

Global payment systems and methods for cross-border transactions

Cross-border wire transfers / Bank transfers

Traditional banks often enable international payments through the SWIFT network, a globally recognized network that facilitates secure and efficient cross-border payments. To initiate a SWIFT bank wire transfer, you'll need the recipient's banking details, including their bank's SWIFT/BIC code, account number, and branch address. 

When you're considering ways to transfer money through bank transfers, it's essential to comprehend the foreign transaction fees that come into play during the process. These fees can significantly impact the overall cost of your cross-border transfer. There are several types of fees to be aware of:

  • SWIFT fees: This is often referred to as the cable charge. SWIFT involves fees for its services, and these charges can vary depending on your bank and the specific transfer.

  • Bank fees: When you initiate a cross-border transfer, your bank may engage intermediary banks, often referred to as agent banks, to facilitate the transaction. These intermediary banks can impose fees for their role in processing the transfer, further contributing to the overall cost.

  • FX fees: Foreign exchange fees come into play when you're converting your currency into the recipient's currency. Banks and financial institutions often apply a mark-up on the exchange rate, which can result in additional costs for the sender.

Credit card transactions

Wholesalers can use their company cards to make purchases from international suppliers. However, it's essential to be mindful of transaction fees and foreign exchange rates, as these can add to the overall cost. Additionally, credit card payments may not always be suitable for large transactions due to potential limits and higher fees.

Digital wallets

Digital wallets have gained popularity as a secure and efficient way to conduct cross-border transactions. Platforms like PayPal, Apple Pay and Google Pay allow wholesalers to send and receive payments internationally with ease. Many digital wallets provide added convenience with features like multi-currency wallets, making them a valuable tool for wholesalers engaged in global trade.

However, it's important to consider potential disadvantages. While digital wallets are widely accepted, not all international suppliers may support them. Wholesalers should also be cautious about currency conversion fees and fluctuating exchange rates, which can impact the overall cost of cross-border transactions. 

Cross-border payment providers

Payment providers like Airwallex have gained popularity for cross-border transactions. They offer competitive exchange rates, low fees, and speed, making them attractive options for wholesalers. Airwallex Global Account allows wholesalers accept payments in their customers' preferred currencies and use those funds for local expenses without incurring costly conversion fees. By avoiding unnecessary currency conversion, businesses can optimize their finances, holding foreign funds until exchange rates are favorable for conversion into their home currency, ultimately streamlining international transactions.

Common challenges faced by wholesalers in cross-border payments

Transaction time

Wholesalers often face the critical issue of time sensitivity when it comes to payments. Ensuring that payments reach suppliers promptly is crucial to guarantee the timely delivery of goods for trade. Through SWIFT, traditional banks usually need 24-48 hours to process international transfers. Delays in payments can disrupt supply chains, affect production schedules, and strain supplier relationships. To mitigate this challenge, wholesalers should explore payment solutions that offer faster transaction processing times, such as fintech cross-border payment specialists.

Payment message delay

Communication gaps in the payment process can lead to payment message delays. In the SWIFT network, payment messages often traverse multiple intermediary banks, causing communication bottlenecks and increasing the likelihood of delays. This issue can result in misunderstandings between wholesalers and their suppliers or customers, incorrect payment details, and even leading to increased transaction times.

Cashflow

Wholesalers, typically offering credit terms to their customers, face a unique cashflow challenge when payment delays occur due to long transaction times, payment message delays, and fluctuations in payment schedules. These delays can significantly affect their cash reserves, as they've extended credit to buyers but haven't received payments promptly. When funds don't arrive as expected, it can create financial constraints, affecting their ability to manage day-to-day operations, invest in inventory, and fulfill their financial obligations.

Fluctuating exchange rates

Wholesalers, dealing with substantial transaction volumes, are particularly susceptible to fluctuating exchange rates. In cross-border transactions, there's a significant time gap between receiving an order, issuing a quotation, and completing the transaction, often spanning weeks or even months. Within this time frame, exchange rates can undergo numerous fluctuations. Imagine a scenario where you've prepared a quotation for a foreign customer based on the prevailing market exchange rate at the time. However, due to unforeseen currency movements, their local currency depreciates significantly before you can fulfill the order. Situations like this can eat into your profit margins, making international trade less profitable.

Hidden fees of large transactions

Large cross-border transactions often come with hidden fees that can catch wholesalers off guard. For example, when funds pass through multiple traditional banks or financial intermediaries during international transfers, each entity may impose fees. Some banks or payment providers may apply service charges for handling large transactions, and these charges may not be explicitly disclosed upfront. It’s worth considering alternative payment methods that minimize hidden costs to safeguard profits and maintain financial stability in cross-border transactions.

Transparency across financial institutions

Navigating the complexities of cross-border payments can be challenging due to the lack of transparency across different banks and financial intermediaries. Wholesalers should seek partnerships with payment providers that offer clear visibility into possible transaction fees, exchange rates, and settlement times.

Tools for retail cross-border payments

While wholesalers primarily deal with bulk transactions, they may also encounter the need for retail-level cross-border payments for various purposes, such as refunds or small-scale transactions. 

Many also lack convenient tools for scheduled and systematic subscription payments, such as automated batch payments. The absence of these automated solutions forces wholesalers to manage payments manually, leading to inefficiencies, increased workload, and a higher risk of errors in payment processing.

To address this challenge, wholesalers can explore global payment platforms that offer both wholesale and retail payment solutions, ensuring flexibility in their financial operations.

An alternative payment method for enhancing cross-border payments - Airwallex

What is Airwallex?

As a global payment company, Airwallex simplifies international business operations with its Global Business Account, which allows wholesalers to collect funds and pay suppliers in multiple currencies. This hassle-free solution comes with zero monthly fees, low transaction costs, and complete fee transparency. By accepting payments in customers' local currencies, wholesalers can avoid unnecessary conversions and exchange rate fluctuations, gaining full budget control. With Airwallex's multi-currency account, wholesalers can process their cross-border payments within just one business day, while enjoying market-leading exchange rates that can help their business stay competitive financially.

How does Airwallex improve cross-border payments?

Using Airwallex, wholesalers can handle cross-border payments effortlessly to fuel their global expansion. Our multi-currency Global Business Account simplifies foreign transactions, so you don’t have to worry about opening local currency accounts around the world to pay your foreign suppliers.

For wholesalers, time sensitivity is paramount in supplier payment to ensure an efficient supply chain process. Through SWIFT, traditional banks usually need 24-48 hours to process international transfers. With Airwallex, you can have your payments received within just one business day, ensuring fast and reliable supplier payments, along with guaranteed full amount delivery.

Airwallex also provides market-leading foreign exchange (FX) rates, free from hidden transaction fees. Traditional banks offer less favorable exchange rates, leading to additional costs. In contrast, our platform offers real-time competitive rates with no minimum transaction threshold.

The advantages of using Airwallex

Large global reach: Airwallex offers fast and secure international transfer services to 150+ countries in 46+ currencies, removing the barriers of foreign transactions. For wholesalers who work with suppliers from around the world, this means they can tap into Airwallex’s vast network to make cross-border payments just as easily as their local transfers.

No hidden fees: Large cross-border transactions often come with hidden fees, especially when passing through multiple banks or intermediaries. With Airwallex, wholesalers won’t be charged with unexpected fees that eat into their profit margins.

Market-beating exchange rates: Airwallex offers competitive exchange rates that are often better than those provided by traditional banks. This means wholesalers can save money on currency conversion fees. 

Fast transaction times: Using Airwallex, wholesalers can complete any cross-border payments as quickly as one business day. This ensures that their payments will reach suppliers in a timely manner to ensure smooth supply chain management.

How to get started with Airwallex to pay overseas quickly and safely

Sign up for a free Airwallex Global Multi-currency Account today. The process only takes 5 minutes: submit the required documents, such as your ID and business certificate.

Follow these steps to start paying your overseas suppliers with Airwallex: 

  1. Top up your account with your preferred currencies to ensure it has sufficient funds.

  2. Create a new recipient and fill in their details (name, country, address, bank account information).

  3. To start a new transfer, select your payment currency and enter the amount.

  4. Once you’ve confirmed the transfer, you’ll receive an email notification for your records.

Case study: B2B wholesaler in the machinery, equipment and suppliers segment streamlines international payments with Airwallex’s one-stop global account

Wholesalers in Singapore often import their products from overseas. Let’s consider this example: A wholesaler purchases equipment from various countries, including Japan, Korea, and Europe, in USD, then ships the equipment to local dealers and business buyers in Singapore as well as those in other countries like the Philippines.

The pain point they encountered was the reliance on money changers. While these money changers offer competitive FX fees, this method requires the wholesaler to initiate TT bank transfers to the money changer, which incurs an additional step.

Using Airwallex, the wholesaler can streamline their cross-border payment process and transfer funds directly from their global business accounts. This provides a one-stop solution that eliminates the need for multiple intermediaries, such as banks and FX providers.

Moreover, when the wholesaler receives payments in USD from their overseas clients, they can hold the USD funds in their Airwallex account without having to convert them into SGD. This enables them to save on currency conversion fees by avoiding double conversions.

As the wholesaler explores opportunities for further international expansion, they have to respond to overseas customer requests for payments in local currencies via local payment methods. Airwallex can help them fuel their growth by setting up global payment links to broaden the range of currencies they can seamlessly collect from customers around the world.

Case study: Meat wholesaler saves on cross-border transaction costs with Airwallex

Imagine a Singapore-based meat wholesaler who sources their high-quality meat from overseas exporters in Australia and Japan. Having to manage frequent cross-border payments, it faces the challenge of maintaining cost-effectiveness in their international transfers.

Through traditional banks, the meat wholesaler would have faced considerably higher costs in their international payment transfers. Traditional banks often impose substantial fees for cross-border transactions, including transfer fees, intermediary bank charges, and unfavorable exchange rates. Additionally, the process through traditional banks tends to be slower, potentially causing delays in supplier payments and disrupting the supply chain. 

By choosing Airwallex, the wholesaler can seamlessly transfer AUD to Australia and JPY to Japan like free local transfers, bypassing the complexities of the SWIFT network. They can also leverage Airwallex's services to convert SGD to AUD and JPY at favorable exchange rates, optimizing their FX potential.

Airwallex not only helps the wholesaler save on transaction fees but allows them to benefit from more competitive exchange rates, ultimately enhancing their cost-effectiveness in the global food wholesaling market.

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