August 6, 2019
International payments, especially in the B2B space, can be incredibly cumbersome. Legacy systems are handling an increasing number of payments and remittance transfers, but are often overburdened. Consumer and business expectations have changed, and these systems are failing to deliver. There’s an urgent need for smoother transactions across borders. Total cross-border payments amount to more than $127 trillion worldwide. Are older systems, including ones that most banks depend on even today, capable of handling the massive demand?
The global cross-border payment landscape is driving trends that could fundamentally alter competitive dynamics:
Additionally, new firms in the cross-border market are putting pressure on incumbents. It is important to note how cryptocurrency is slowly gaining traction and how it’s rapidly transcending geographical and currency-limited boundaries.
With shifting economic trends, migration, and the rise of international commerce, the size of the cross-border payments market is growing. Despite banks currently dominating cross-border payments with a significant market share, their transfers still lack transparency, have high fees, and encounter delays. Due to such long-standing inefficiencies, customers are actively exploring alternatives. Fortunately, Bill.com, a leader in financial process automation, or players like Ripple, a FinTech blockchain startup, are ready to solve for these challenges. Finablr is also a company to watch, as they are reshaping the B2B cross-border payments space. They have developed an agile and scalable B2B and payments technology, with licensing and distribution capabilities for payments and foreign exchange markets.
Some key challenges when it comes to paying and receiving international payments include:
To better understand international payments platforms, we conducted a practical experiment led by comparative analysis between two large players: Bill.com, an emerging leader in B2B international payments space, and a large international bank that many businesses traditionally use to send money abroad. During the study, we explored the effectiveness of these platforms objectively and independently.
When we transferred $1000 from the US to Singapore, it was observed that it took Bill.com a day longer to process than the transfer done by the bank.
However, while the bank charges in both cases were zero, we noticed that Bill.com charged zero fees for the transfer, while the bank charged a fee of $35 on top of the $1000 to be transferred for its service. Additionally, the bank also charged a higher FX Margin on the conversion (approximately 20 pip). We can see that the total amount received is also slightly larger as compared with the amount received after the transfer through the bank.
Ultimately, Bill.com turned out to be the better solution for the international transfer in this instance.
In this instance, while the bank charge for the Bill.com wire transfer was zero, an additional fee of $5 was applied by the bank. We noted that as with the previous transfer, Bill.com didn’t charge any fee for the transfer, while the large bank charged $45, on top of the $1000 that was transferred. The total transaction of the bank transfer was $1050, whereas Bill.com was just $1000 – a difference of $50.
At first glance, it appears that Bill.com's exchange rate is slightly higher as compared to banks. However, it should be noted that overall, in our transaction, we saved more on the payment thanks to no wire transfer fees charged by Bill.com. Once again, the transfer made through Bill.com proved to be the superior option.
In this case, a wire transfer of $1000 was sent from the US to Italy. Again, Bill.com didn’t charge any fee for the transfer, while the large bank charged $35. Here, the amount received in the local currency against the $1000 sent was higher in the case of Bill.com and a little lower in the case of the bank transfer.
Once again, Bill.com emerged as the clear winner, with zero transfer fees, along with a notably lower margin of 2.12% compared to the bank’s margin of 6.01%.
In the case of the US-India wire transfer, and a host of countries where Bill.com supports payments in local currencies, the bank charge transfers are reduced to zero. Furthermore, with respect to India – where the large bank conducted a standard SWIFT transfer to process our remittance – there was an additional bank charge of $5 that we had not previously anticipated. We found that Bill.com was more transparent about hidden fees.
Bill.com eclipsed the large bank’s platform in terms of its zero-fee approach to wire transfers, while the bank charged an additional fee on top of the amount to be transferred. In the case of India, that fee was $45, while for US-Singapore and US-Italy transfers, the fee charged was $35 per transaction.
In all cases noted above, it took under 24 hours to set up a Bill.com account. The bank experience, on the other hand, varied from over 24 hours up to 7 days. This illustrates the time-saving advantage provided by Bill.com, which was absent when it came to making international money transfers via the bank.
Unlike a bank, Bill.com is a leader in financial process automation, designed for small businesses and mid-size companies. It’s a great option for businesses to conduct domestic and cross-border payments all from one place, with features like end-to-end workflow automation and integration with leading accounting software. In addition to the zero transfer fee, Bill.com is optimized for bulk B2B payments due to lower exchange rate costs. It is also a better solution with respect to its provision of an MIS-like interface, which lets users track their transactions over periods of time in a far more efficient manner than the statement-style visualization provided by a traditional bank.
As a cloud-based business payments solution, Bill.com is designed to work in harmony with a host of accounting software solutions including Xero, QuickBooks, QuickBooks Online, NetSuite, and Intacct. It streamlines companies’ accounts payable process and provides support for making electronic ACH/EFT payments. The advantage Bill.com offers is complete sync. Changes made in one system (Xero, for example) will be automatically updated in another
(QuickBooks, for instance), which eliminates the problem of double entry. Additionally, Bill.com’s solution offers automated approval workflows.
Bill.com stands out as the preferable alternative when it comes to international payment transfers. Here are a few testimonials about Bill.com from five customers who have successfully used the platform to transact:
“Bill.com International Payments enables us, at Tamara Mellon, to pay our factories in local currencies with all documentation stored on one platform. With dozens of payments a month, the process is simple and efficient. There are no wire transfer fees, and the exchange rates are competitive, so we also save time and money.” – Tamara Mellon
“We prefer to make payments to our international vendors in their local currency. Bill.com offers a competitive exchange rate and no wire transfer fee, making it much cheaper for us to pay on the platform, rather than from our bank. Our vendors are happy, and we are happy. It’s a win-win situation.” – CUJO AI
"Our clients and their vendors appreciate Bill.com International Business Payments because the payment process is tracked, quicker, and easier than a bank wire transfer, and incredibly efficient. It doesn't get better than this for our team, honestly." – Armanino
“We have one international CAS client that has an aggressive time frame for closing at month’s end. Before the company came to EisnerAmper, it struggled with converting and reconciling global payments from the parent organization in Europe. After we started and put in a tech stack that includes Bill.com, we were able to achieve the goal of closed financials within one day.” – EisnerAmper Cloud Accounting
“Before Bill.com, the cost for international transfers was $45 each, and that gets pricey when you’re sending five international payments a week – around $10,000 in fees alone in a year. Bill.com brought down that cost for us efficiently and securely.” – Good & Co (A client of EisnerAmper)
All in all, based on the transactions we studied in comparison with those made through the large bank’s payments platform, in conjunction with customer reviews, it’s evident that a platform like Bill.com outmatches the international bank across the observed parameters and is better suited for business needs.