Top 4 Things To Keep In Mind While Collecting International B2B Payments
To address and help gig workers in India understand the intricacies of global payments, it is important to throw light on the hurdles faced by the gig workers
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Globally, businesses have been reset to the new normal and it has become imperative for their survival. In almost all instances, Digital has become a significant, if not the only mode to conduct business. Interactions and engagement with colleagues and customers have firmly moved online and million-dollar deals are being signed without having to ever meet offline.
Global gig economy is projected to grow to $455 billion by 2023, which is a growth of over 50 per cent from the market sized at $296 billion in 2020. Growing digitization has already impacted the composition of workforce across industries with a heightened preference for remote workforce. With severe restrictions on mobility, remote working has seen more demand with a commensurate increase in supply in key markets such as India. Traditionally, India has been the largest remote workforce/gig workers for the world with over 15 million participating in this form of employment. In the past year, there is a significant increase in gig workers across the country including tier II cities. With projected growth, this is a massive opportunity for the country to generate new employment opportunities and become a workforce for the world.
Success in a global context requires new skills and capabilities from these gig workers. Critical success factors include functional expertise, interpersonal skills, financial skills, and cultural awareness. A survey among gig economy workers revealed that 45 per cent of full-time gig workers have high economic anxiety. This needs to be addressed immediately for future success.
To address and help gig workers in India understand the intricacies of global payments, it is important to throw light on the hurdles faced by the gig workers in closing the loop via easy payment options. While bigger organizations have strong leverage, through wide financial setup, individual gig worker struggles with the complexities of the system including access to international bank accounts, varying bank protocols, divergent modes of payments, thus making global B2B payment a tiresome task for payroll management.
Understanding cross-border payment needs of gig economy workers
Let's begin with the definition of cross-border payments. Cross-border payments are transactions where the payee and the transaction recipient are based in separate countries. The transactions can be between customers and merchants, enterprises and its vendors who are looking to transfer funds across territories. If you are an Indian business making products for global consumers or serving SMB and enterprise across the world, looking to expand globally, it is pivotal to have the ability to accept payments in a fast and seamless way across all countries and in multiple currencies you are targeting.
There are various feature spokes in the cross-border payments wheel. Each one of them provides an independent benefit in the long chain of money transfers to the Indian exporter. There are several terms that are used almost interchangeably when describing online payments:
Payment gateway: A service that helps a direct buyer purchase on your website using a check out solution. To have a payment gateway a merchant can approach a payment acquirer, a payment processor, or a payment service provider. Each of them serves different sizes of customer volume and come with additional or custom functionalities. The challenge for a small business really is to be able to forecast his need and choose the best suited payment gateway solution. It is a complex process when selection goes wrong it could lead to either high cost or a below par customer experience.
Payment service or payment system: Where a payment provider offers multiple types of payment gateways – with different features and pricing – each type is referred to as a payment service or payment system.
Merchant account: When an online transaction is successfully completed, the funds are transferred from the purchaser's account to your merchant account, a special kind of bank account used exclusively to hold funds received from credit and debit card transactions. To accept online payments, you usually need to set up a merchant account with your payment provider. Funds accumulating in your merchant account are transferred to your organization's bank account on a regular basis.
It is important for the business to take note and select the appropriate Payment services provider (PSP) effectively as per the needs of the business.
Top 4 aspects
Understanding payment formats to receive foreign funds: International payments come with its own nuances of payment collections. Like in domestic payment, your cross-border client may also be comfortable in paying through multiple payment routes like credit card, debit card, ACH Bank transfer or wire transfer. Normally, the mode of payment collection is decided by payment volume, comfort of the customer and local regulations. For an individual or a SMB, it is important to understand that each of these payment vehicles would have different fees breakup and delivery timelines.
Also, not all banking providers would provide you the ability to collect payment through these different routes. Therefore, it becomes essential to understand the format of payment being collected for an international assignment and choosing the payment provider accordingly.
Payment security: No one wants to be in a situation where payment was made but the receiver does not receive the funds. To ensure that payments made reach the desired destination, it is important to verify payment recipients and use a secure method for electronic payment processing. Make sure your payment provider meets payment card Industry security standards (PCI DSS). There are also elaborate guidelines of RBI for ensuring a legitimate international payment process. As a best practice, the payment provider should also be approved by RBI under Online payment gateway service provider (OPGSP) and Rupee Drawing Arrangement (RDA) guidelines. These guidelines sets the benchmark for all cross border eCommerce payments being received in India
Cost transparency: It's imperative for an individual or an SMB to understand the commission structure in receipt of any cross-border payment transaction. All cross-border transactions can have multiple fees components including: application fee, setup fee, monthly fee, per-transaction fee, statement fee, monthly minimums, non-qualified fees, FX conversion commission, gateway fee, minimum term contracts that you cannot cancel without penalties, chargebacks and rolling reserves.
You should make sure that you are aligned with all fixed fees (including sign up fees) and variable fees (including FX conversion charges and cancellation fees) before selecting the right payment partner for your business. Also, the transaction fees also depend on the country of origin and the modes of payments being used by the customer. A business should understand the overall transaction fees in any cross-border transaction.
Export documentation: Unlike a domestic translation, an international transaction does not end at the receipt of the payment. Government provides multiple tax benefits on receipt of international payments, therefore it is important for the SMB to travel the last mile to receive export related documentation for each of these transactions in order to avail these benefits. To access this benefit, it's necessary for a business to have relevant documentation like Foreign Inward Remittance Certificate (FIRC). Recently, some of the payment providers have also started enabling automated Digital FIRC for the international transactions thus making the process of export documentation simple and seamless.
With abundant opportunities available globally, adding a reliable cross-border payments solution is an important step to succeed in a global world. This will enable the Indian SMBs to make in India for the world and succeed on a grand scale.