Small-and-medium-sized enterprises (SMEs) are increasingly looking to global markets to fuel their growth. According to Mastercard’s 2023 Borderless Payments Report, 50% are now conducting more international business than they did in 2021, contributing to over $17 trillion in annual cross-border payments.
Despite this momentum, growth remains capped due to the constraints of slow, cumbersome and expensive global payment processing and outdated financial services. A more streamlined, modern payments stack that affords greater payment options could be the solution, benefitting SMEs and the international supply chains that have increasingly come to rely on them.
A new report from Ripple, Big Opportunity in Small Business Payments, highlights an enormous business opportunity for local banks to offer an improved payment method. With blockchain-powered global payment solutions, these financial institutions can improve agility and outmaneuver larger incumbents to capture this underserved, white-hot market and turbocharge business revenue.
The Problem with Global B2B Payments
SMEs are seeking new revenue streams as they work to counter inflation, geopolitical tensions, supply chain disruptions and rising interest rates. For many, international markets offer a chance to tap into new customer bases and supplier relationships. However, outdated global payment systems can complicate business expansion with extended settlement times, high costs, hidden fees, and a lack of transparency—each contributing to crushing operational overhead.
On average, cross-border payments settlement time is 3–5 business days which can strain vendor and supplier relationships and disrupt cash flow management, frustrating customers and ultimately leading to lost revenue. This is compounded by a long menu of international payment fees that are tacked on after a payment is made, and can bring additional costs to around 2–3% of the transaction.
Traditional payment methods also lack transparency as businesses relying on large banks or their payment processor are often left in the dark on the status of their transactions, especially after hours, during weekends and on holidays. This uncertainty only adds to the already burdensome management of global payments by SMEs with limited resources.
It’s estimated that nearly one third of SMEs are negatively impacted by compliance demands, managing capital flows and juggling multiple currencies throughout the payment.
The Opportunity for Local Banks
These challenges can be addressed by modern payment solutions that offer increased speed, cost savings, efficiency and transparency. Yet, larger financial providers often reserve preferred service and pricing for higher revenue-generating customers, leaving SMEs to feel the pain of correspondent banking to a much higher degree.
This creates an opening for local banks to integrate alternative payment methods with trusted, compliant solutions within their existing infrastructure to offer SMEs faster, more reliable payments that are grounded in affordability and transparency. Those that do could fuel the “almost biblical migration” away from large financial institutions that cannot serve SME’s cross-border payment needs.
Supporting SMEs with Streamlined Cross Border Payments
Ripple Payments offers a turnkey, real-time solution for those smaller banks looking to capitalize on global payments. By eliminating the complexities of the traditional payment system, Ripple Payments increases settlement speed and reduces costs, benefitting both providers and SMEs.
Ripple Payments also complies with international regulatory mandates, including Anti-Money Laundering (AML) and counter-financing of terrorism (CFT) regulations. This compliance fosters trust and ensures secure, efficient global transactions, enabling client satisfaction and retention. The result is a dependable, secure payment solution that facilitates growth for both SMEs and their banking partners.
While the B2B payments market is expected to reach $174.2 trillion by 2030, there is no certainty about which financial providers will capitalize on this growth opportunity. Large financial providers have left the door wide open for local banks to capture the market by offering modern payment options.
By integrating with Ripple Payments, local banks can offer superior cross border payments to the SMEs that desperately need them, attracting new business and accelerating their own growth in the process.
Download the full report to dive deeper into this exciting opportunity in small business payments.
