Small Businesses Navigate Complexities of Cross-Border Payment Options

Small Businesses Weigh Their Options

Cross-border payments, once reserved for large entities, now serve small firms. These companies buy goods internationally, pay subcontractors, and sell on global platforms. Yet, legacy banking systems make both outgoing and incoming payments expensive and complex. In the report „Small Business Cross-Border Payments Opportunity,”Ian Benton, a senior digital bank analyst at Javelin Strategy & Research, explores how entrepreneurs navigate this landscape. To address these challenges, owners turn to diverse solutions. These include international wire transfers, PayPal, dedicated platforms like Wise and Airwallex, and even remittance services such as MoneyGram and Western Union.

Demand for these services is rising as U. S. businesses interact more frequently with foreign partners. According to Javelin, twenty-six percent of small U. S. businesses now use cross-border payments. This percentage increases with company size. Over fifty percent of firms with revenues above $2.5 million send or receive international funds. Nevertheless, international payments represent a small portion of total activity. Among users, only about twenty percent of transactions are cross-border. „Even when cross-border payments are used, capacity is still limited,”says Benton. „This will evolve as costs drop and people feel more comfortable distributing labor and subcontractors abroad. But for now, it remains a small part.” Commercial Banking Options Banks have traditionally met these needs through international wire transfers.

The Growing Need

However, these can be costly and confusing for businesses without foreign exchange experience. „If you use cross-border payments, you usually need a commercial bank,”explains Benton. „That is a clear indicator that you are moving to the next level. It signals you are comfortable using international wires. Usually, you have a CFO or internal financial knowledge. These features are not typically offered to small business platforms, as those users have advanced further.”For companies sending only a few monthly international payments, a bank wire may suffice. These firms might benefit from banks serving both consumers and small businesses. Fintechs like Wise, Revolut, and PayPal have filled the gap. They offer a friendlier ways to send money abroad. They gained ground through accessibility, transparency, and lower costs. Clarity is their biggest advantage. These platforms show clients when funds arrive, exact transaction costs, and applicable exchange rates.

Incoming Versus Outgoing Payments

Receiving international payments is generally simple. Many businesses already use e-commerce platforms with integrated global payment features. Others bill clients via PayPal and receive funds through the same service. Accepting payments is often built into existing systems. Sending money abroad is different. Business-to-business payments are complex. Entrepreneurs often use wire transfers to pay foreign suppliers. While expensive, some costs can be passed to the receiving partner. „Sending a payment is a much bigger burden,”asserts Benton. „It requires determining the cost, arrival time, currency implications, and whether the partner can receive it.” The Role of Stablecoins With stablecoin-based infrastructure developing, small banks and credit unions gain new tools. By reducing reliance on traditional correspondent banking networks, stablecoins can lower costs and accelerate settlement.

Access through digital banking providers makes it easier for small institutions to offer cross-border services. „In the past, they had to connect with correspondent banking networks and interact with something like Chase,”says Benton. „Now they can connect with their digital banking provider, like Jack Henry or FIS, and benefit from stablecoin-enabled infrastructure. It is cheaper than traditional international wire transfer infrastructure.” Conclusion and Outlook Currently, most small businesses rely on familiar consumer-oriented services. These include MoneyGram, Western Union, or consumer PayPal accounts. For owners who are not payment experts, these options provide a simple way to move money abroad. „I do not know how good such a practice is from a compliance standpoint,”notes Benton. Yet, these familiar tools remain popular for their ease of use.