Managing cross-border payments has always been a complex responsibility for treasurers. Ensuring timely, cost-effective, and compliant transactions across multiple currencies and regulatory landscapes is no small feat. Now, with the possibility of new tariffs on the horizon, global payments could become even more challenging. As governments adjust trade policies, treasury teams must be prepared to navigate these changes while keeping cash flowing smoothly across borders.
Without the right strategies, organizations risk higher costs, payment delays, compliance issues, and strained supplier relationships. Without the right strategies, organizations risk higher costs, payment delays, compliance issues, and strained supplier relationships. Payment inefficiencies can erode profit margins, disrupt cash flow, and create unnecessary friction with key global partners.
Additionally, failure to comply with evolving commerce regulations can result in hefty fines, reputational damage, and even blocked transactions, putting critical business operations at risk.
This article explores the biggest challenges in cross-border payments, how tariffs complicate global transactions, and best practices for managing international payments effectively.
The Most Common Challenges in Cross-Border Payments
Cross-border payments present treasury teams with a unique set of challenges, including:
- Exchange rate volatility. Currency values fluctuate daily based on market conditions, geopolitical events, central bank policies, and economic data. This unpredictability makes it difficult for businesses to forecast costs accurately. A payment that seemed reasonable at the time of invoicing may become significantly more expensive by the time it’s processed, creating budget misalignments, cash flow disruptions, and potential profit erosion.
- Regulatory compliance. Each country has its own financial regulations governing cross-border payments, including anti-money laundering (AML) laws, know-your-customer (KYC) requirements, data protection laws, and tax reporting obligations. Treasury teams must ensure that all payments comply with local laws, or they risk penalties, fines, reputational damage, and even blocked transactions. The challenge becomes even greater when dealing with multiple jurisdictions with different, complex, and sometimes conflicting requirements.
- Payment processing delays. Unlike domestic payments, which are often settled within the same day, international payments typically involve multiple banks, financial intermediaries, currency conversions, and regulatory checkpoints. A simple supplier payment can take days or even weeks to clear, causing cash flow disruptions and supplier dissatisfaction. Delays also increase the risk of penalties for late payments, further straining vendor relationships.
- Lack of transparency. One of the most frustrating aspects of cross-border payments is the difficulty in tracking payment status and understanding associated costs. Many treasury teams struggle to determine when funds have been sent, when they will arrive, and whether deductions or hidden fees were taken along the way. Intermediary banks sometimes charge unexpected fees, reducing the final payment amount received by the beneficiary and creating reconciliation challenges. Without full visibility into payment flows and transaction details, treasury teams have limited control over the process and face operational inefficiencies.
- High transaction costs. Cross-border transactions come with a host of fees, including:
- Foreign exchange (FX) margins, which can add up quickly, especially for companies dealing in multiple currencies.
- Intermediary bank charges, where each bank in the payment chain may deduct a portion of the payment.
- Transaction processing fees, which vary based on the payment method and the banks involve
Without a cost-efficient strategy, these fees can significantly impact profitability.
Navigating the complexities of cross-border payments requires treasury teams to balance cost efficiency, compliance, speed, and transparency. Without the right strategy and tools in place, these challenges can disrupt cash flow, strain vendor relationships, and increase operational risks.
How Tariffs Complicate Cross-Border Payments
As global trade dynamics continue to evolve, tariffs have become a significant factor impacting cross-border transactions. For treasury leaders, the imposition of new tariffs or changes to existing ones can create unforeseen challenges, affecting the cost, timing, and overall efficiency of international payments. Here are some of the challenges that treasurers must prepare for:
- Higher costs. Tariffs are essentially taxes imposed on imported goods, increasing the overall cost of doing business with international suppliers. Procurement costs and payment amounts may fluctuate based on changing tariff rates. Treasury teams must factor in tariff-related expenses when planning payment schedules and budgeting for foreign transactions.
- Shifting trade routes. To minimize tariff exposure, many companies seek alternative suppliers in countries with more favorable trade agreements and lower import costs. This shift may introduce new currencies, banking relationships, and regulatory requirements that treasury teams must quickly adapt to. Establishing new payment workflows in unfamiliar territories adds operational complexity and may require additional compliance measures.
- Regulatory uncertainty. Tariff policies are subject to change based on political and economic conditions. A trade agreement that reduces tariffs today may be renegotiated tomorrow, leading to sudden cost fluctuations. Treasury teams need to stay informed about global trade policies and remain agile enough to adjust payment strategies as needed.
- Supplier negotiations. Suppliers affected by tariffs may seek to renegotiate payment terms, demand pre-payments, or request payments in alternative currencies to avoid fees. Treasury teams must work with procurement and supplier management teams to establish flexible payment agreements that benefit both parties while ensuring uninterrupted operations.
Managing cross-border payments in a shifting tariff environment requires treasurers to be proactive, agile, and well-informed. Unexpected cost increases, evolving regulations, and shifting supplier relationships add layers of complexity that can impact financial planning and operational efficiency.
Best Practices for Managing Global Payments
Here are some best practices to mitigate risks and streamline cross-border payment processes:
- Use multi-currency accounts. Maintaining bank accounts in multiple currencies allows businesses to make and receive payments without unnecessary currency conversions or exchange rate markups. This reduces foreign exchange exposure, lowers transaction costs, minimizes delays, and improves cash flow predictability. For organizations with regular transactions in specific currencies, multi-currency accounts can be a strategic advantage.
- Leverage automated FX risk management. Currency fluctuations can lead to unexpected cost increases and profit margin erosion. Treasury teams should implement FX hedging strategies, such as forward contracts, swaps, and options, to lock in favorable exchange rates and reduce exposure to market volatility. Automating FX risk management helps businesses execute trade at optimal rates, improve forecasting, and avoid last-minute fluctuations.
- Optimize payment routing. Not all payment routes are created equal. Some involve multiple intermediaries, increasing costs and delays. Treasury teams should work with their banking partners or payment providers to find the most efficient routes, such as SWIFT gpi or real-time payment networks, to reduce transaction fees and speed up settlements.
- Ensure regulatory compliance. Global payments require strict adherence to compliance regulations, including AML checks, sanctions screenings, and tax reporting. Automating these processes through a payment solution can help ensure compliance without manual intervention, reducing the risk of penalties and improving processing efficiency.
- Strengthen supplier relationships. Proactive communication with international suppliers helps mitigate payment-related issues. Establishing clear payment terms, agreeing on preferred payment methods, ensuring that suppliers have transparency into payment timelines, and discussing the implications of tariffs foster trust and minimizes disputes.
- Monitor payment performance. Using analytics to track cross-border payment performance allows treasury and finance teams to identify inefficiencies, spot excessive transaction fees, and optimize workflows. Visibility into transaction speed, success rates, and cost breakdowns helps organizations fine-tune their global payment strategy.
Effectively managing global payments requires a proactive approach that balances efficiency, cost control, compliance, and strong supplier relationships. By implementing best practices such as multi-currency accounts, automated FX risk management, and real-time monitoring, treasury teams can mitigate risks, improve cash flow predictability, and streamline international transactions.
Key Considerations When Evaluating Cross-Border Payment Solutions
The right technology can transform how treasury teams manage global payments, even in a shifting tariff environment. When selecting an automated cross-border payment solution, consider:
- Real-time payment capabilities. Traditional cross-border payments can take days to settle. Look for solutions that support real-time or same-day payments, especially in markets with advanced payment networks. Faster payments improve cash flow and supplier satisfaction.
- Currency and FX management features. A strong payment solution should provide access to competitive exchange rates, multi-currency wallets, and FX hedging tools. These capabilities help reduce costs and mitigate the risks associated with currency fluctuations.
- Global compliance support. Regulatory compliance is a major challenge in cross-border payments. A good payment solution should include built-in compliance features, such as AML screenings, sanctions list monitoring, and tax reporting tools, to simplify the process.
- Cost transparency. Hidden fees can erode profitability. Choose a cross-border payment solution that provides full transparency into all costs, including FX margins, intermediary bank charges, and transaction fees, so treasury teams can make informed decisions.
- Integration with treasury systems. Seamless integration with your ERP, treasury management system (TMS), and banking partners is critical. A well-integrated solution ensures end-to-end visibility into global payment workflows and reduces manual effort.
- Supplier payment flexibility. Suppliers prefer different payment methods. A robust payment solution should support multiple options, to accommodate supplier preferences.
Selecting the right cross-border payment solution is essential for optimizing global transactions, reducing costs, and ensuring regulatory compliance, especially in an environment of shifting tariffs and evolving trade policies. By prioritizing real-time payments, FX management, regulatory support, cost transparency, seamless system integration, and supplier payment flexibility, treasury and finance teams can navigate these uncertainties while streamlining operations and mitigating financial risks.
Conclusion
Cross-border payments are a critical function for treasury leaders, and the growing complexity of tariffs and trade regulations only raises the stakes. Without a proactive approach, organizations risk higher costs, delays, and compliance pitfalls. By leveraging best practices, and adopting the right payment solutions, treasury teams can navigate this shifting landscape with confidence.
