Recent headlines are revealing just how challenging it is to send cross-border payments into emerging markets. Nowhere is this more apparent than in the case of sending low-value mass payouts for business.
Consider the example of a job marketplace for freelancers such as Upwork, Fiverr and Innocentive, many of which have large percentages of freelancers based in emerging markets. With projects being completed by freelancers around the world and around the clock, these job platforms are responsible for processing and sending thousands of low-value payouts into developing nations, such as India, Bangladesh and Pakistan -- three of the top global receive markets for job marketplaces.
What stands in the way of completing these transactions is a costly and strenuous payments system that is riddled with country-specific licensing requirements, ever-changing FX and archaic funds flow.
Let’s examine a few of the challenges of paying into emerging markets:
This is particularly challenging for B-to-B and B-to-P payments, where businesses sending funds need to balance regulations for several markets while ensuring that it is not at the detriment of their business, as was the case with PayPal. This regulatory juggling is one of the key contributors to the high cost of sending international payments through wire transfers, as banks often pass those costs to the sending entity in the form of transaction fees.
Capital control markets like Brazil and Nigeria also add another level of complexity, as most of these countries influence funds movement with imposing licenses and restrictions to maintain FX reserves for commodity buying.
As global businesses continues to bring new opportunities to and from emerging markets, these latent payment hurdles stand in the way of the last mile, settling payouts to an end recipient. And while recent years have seen a boom in Fintech that rivals legacy wire transfers, what will truly solve emerging market payments is a solution that bridges the gap between the burgeoning digital economy and stable payment options.
This article was written by Nagarajan Rao from PaymentsSource and was legally licensed through the NewsCred publisher network.
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