Finadvant discusses compliance of SMB X-Border payments

Small and medium-sized enterprises (SMEs) are enjoying their time in the spotlight of innovation in financial services.

Whether it’s 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 issues facing SMEs.

But there are still a lot of barriers that hinder the growth of SMEs, especially when it comes to companies that operate globally.

In recent years, efforts to solve cross-border business-to-business payment problems have largely focused on efforts to speed up transactions, reduce costs, and mitigate foreign exchange (FX) risks. However, Finadvant co-founder and CEO Katya Dorofejeva said end service providers continued to lack broad frictions for SMEs that need to send or receive funds overseas.

Speaking to PYMNTS, she highlighted the importance of end service providers supporting global SMEs beyond cross-border payment speed and affordability, and embracing a balance between technology and human connection.

The conundrum of compliance

For SMEs operating around the world, efficient cross-border B2B payments are essential to their survival. Whether it’s sending funds to international vendors or receiving funds from clients, ensuring that global transactions can go smoothly is key to healthy cash flow.

While finserv’s efforts to reduce the cost of cross-border transactions and the efficiency of support are valuable in today’s market, Dorofejeva said that finserv providers often lack the capacity to solve one of the biggest problems. that remain: conformity.

“A lot of [SMBs] have a hard time solving this problem with their banks as international payments are considered, in most cases, to be high risk – even if not with a high risk country, ”she explained. “Sometimes you will have questions about why this payment was sent or received, and for providing documentation.”

These compliance checks often cause delays that can seriously damage the financial health of an SME. Additionally, noted Dorofejeva, business owners can quickly become frustrated when faced with requests for information and documentation about a cross-border transaction, as they do not understand why such compliance checks are needed.

The banking common ground

One of the biggest frustrations with these compliance checks is that many SMBs actually share key information at the time of onboarding, but end service providers will require these companies to send the same data over and over again every time. such checks are necessary.

“Their frustration is that this information has already been passed on during the integration process,” noted Dorofejeva. “It has been adopted several times in other transactions, but the banks don’t keep that memory.”

This problem can often be attributed to an imbalance in the SME banking arena which, according to Dorofejeva, has failed to position FIs and their SME clients to effectively manage this workflow.

Larger banks that serve SMEs, for example, may initiate a strong customer onboarding process but fail to maintain a deep relationship with that customer throughout the lifecycle, creating a disconnect between onboarding and customer. when a cross-border payment – and possible compliance check – occurs.

“[High street banks] may forget about you right away, so there is no way to pass information from the people doing the integration to the stage where the account is working, ”Dorofejeva explained.

Neobanks and FinTechs, on the other hand, may have the reverse problem of less robust compliance controls at the time of onboarding, a result of the focus on customer acquisition, Dorofejeva said. Finserv players who focus on solopreneurs and microenterprises may prioritize companies that only operate nationally or, if they incorporate global SMEs, may often not understand how the business works and with whom.

Responding to the compliance issues of cross-border SMEs requires a balance between robust integration workflows and a continually close relationship with SMEs in order to understand the international business partners they work with and the cross-border transactions they will conduct.

Deepen the relationship

This month, Finadvant tackled this problem with the introduction of its small business banking platform designed for businesses operating across borders. The key to alleviating the burden of compliance is to ensure robust compliance controls at the time of onboarding, while maintaining close relationships to keep all of that information close at hand.

White labeling of business partners and suppliers of SMB customers, for example, can eliminate the need for repetitive data collection. As the solution develops, Dorofejeva said that Finadvant will seek to foster an ecosystem of SMEs and their business partners that can enable the company to integrate businesses from all sides of B2B transactions to further strengthen transparency and compliance when these companies transact.

Technology is an essential part of efficiency and safety. But as Dorofejeva explained, deepening the bank-SME relationship can be an equally important strategy for maintaining transparency and understanding of a company’s operations across borders.

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

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