How SMB Finserv Missed The Compliance Headache Of Cross-Border Payments

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Small- to medium-sized businesses (SMBs) are enjoying their moment in the spotlight of financial services innovation.

Be it large financial institutions (FIs), neobanks or FinTechs, the finserv ecosystem is accelerating the emergence of digital-first solutions that target some of the most ingrained challenges and pain points of SMBs.

But there are still plenty of hurdles that stand in the way of SMB growth, particularly when it comes to firms that operate on a global scale.

In recent years, efforts to address cross-border B2B payment issues have largely focused on efforts to accelerate transactions, lower costs and mitigate foreign exchange (FX) risks. However, Finadvant Co-Founder and CEO Katya Dorofejeva said finserv providers continue to miss large swaths of friction for SMBs that must send or receive funds abroad.

Speaking with PYMNTS, she highlighted the importance of finserv providers supporting global SMBs beyond cross-border payment speed and affordability, and embracing a balance between technology and the human connection.

The Compliance Conundrum

For SMBs operating globally, efficient cross-border B2B payments are vital to survival. Whether sending funds to international suppliers, or receiving funds from clients, ensuring that global transactions can occur without a hitch is key to healthy cash flow.

Although finserv efforts to lower the cost of cross-border transactions and support efficiency are valuable in today’s market, Dorofejeva said finserv providers often lack the ability to address one of the biggest pain points that remains: compliance.

“A lot of [SMBs] are struggling to address this issue with their banks because international payments are considered, in most cases, as high risk — even if not with a high-risk country,” she explained. “You will occasionally get questions as to why this payment was sent or received, and to supply documents.”

Those compliance checks often lead to delays that can severely damage an SMB’s financial health. What’s more, noted Dorofejeva, business owners can quickly grow frustrated when faced with requests for information and documentation about a cross-border transaction because they do not understand why such compliance checks are necessary.

The Banking Middle Ground

One of the biggest frustrations of such compliance checks is that many SMBs actually share key information at the moment of onboarding, yet finserv providers will require that these companies send the same data over and over again whenever such checks are required.

“Their frustration is that this information has been passed already during the onboarding process,” Dorofejeva noted. “It’s been passed many times during other transactions, but banks are not keeping that memory.”

This pain point can often be traced back to an imbalance in the SMB banking arena that Dorofejeva said has failed to position FIs and their SMB clients to efficiently manage this workflow.

The largest banks that service SMBs, for instance, may initiate a robust client onboarding process but fail to maintain a deep relationship with that client throughout the lifecycle, creating a disconnect between onboarding and the moment that a cross-border payment — and possible compliance check — occurs.

“[High street banks] may forget about you straight away, so there is no way of passing information from the people who are dealing with onboarding to the stage where the account is operating,” Dorofejeva explained.

Neobanks and FinTechs, meanwhile, may have the opposite problem of less robust compliance checks at the moment of onboarding, the result of an emphasis on client acquisition, said Dorofejeva. Finserv players that focus on solopreneurs and micro-businesses may prioritize businesses that only operate on a national scale, or, if onboarding global SMBs, can often fail to dig into how the business operates and with whom.

Addressing the compliance pains of cross-border SMBs requires a balance between robust onboarding workflows and a continuously close relationship with the SMB in order to understand the international business partners they’re working with, and the cross-border transactions they’ll be making.

Deepening The Relationship

Finadvant this month moved to address this pain point with the introduction of its small business banking platform designed for firms operating across borders. Key to easing the compliance burden is to ensure robust compliance checks at the moment of onboarding, while also maintaining close relationships to keep all of that information at hand.

White labeling an SMB clients’ business partners and suppliers, for example, can negate the need for repetitive data collection. As the solution expands, Dorofejeva said Finadvant will be looking to foster an ecosystem of SMBs and their business partners that can allow the company to onboard businesses on all sides of B2B transactions to further boost transparency and compliance when these firms transact.

Technology is a vital component to efficiency and security. But as Dorofejeva explained, deepening the bank-SMB relationship can be an equally important strategy to maintaining transparency and insight into a businesses’ operations across borders.

“Small businesses always need that communication,” she said. “If they talk to an account manager who actually knows that business, it’s more important than just having customer support who is answering your questions but has no idea about your business.”



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