How Wire Transfers Meet Your Commercial Clients’ International Money-Movement Needs

Revenues from international payments are growing; financial institutions can satisfy their clients and lift their own bottom line

With so much attention focused on new and evolving forms of digital payments, it can be easy to overlook the tried-and-true wire transfer. Wires have notable strengths, however, that have made them an enduring and valuable tool in the money-transfer ecosystem:

• Wires are highly secure
• Wires carry comprehensive information about the beneficiary, ensuring they’ll hit the right account – often as part of “straight-through processing” without manual intervention 
• Wires support high-dollar amounts
• Wires have global reach

The wire transfer’s strengths are even more important in the context of international money movement, where it can be challenging to meet exacting regulatory requirements; convert currency transparently; charge consistent and transparent fees; and track every step of the transfer. 

But what about the need for international wire transfers? Is there a strong demand for cross-border payments from commercial customers of financial institutions? What do financial institutions stand to gain from offering cross-border-payments capabilities? We’ll address these questions in this article. 

Cross-border payment growth

There has been a notable rise in cross-border payments among North American businesses over the past few years. 

In March 2024, Datos Insights released the results of a survey of midsize and large North American businesses. A key finding was that among those businesses that had made cross-border payments between 2021 and 2023, nearly 80% reported an increase in the number of international payments made. 

What’s more, a growing number of North American companies are expanding into international operations. They now serve global customers, work with international suppliers or both. This growth is driven by increased global investment and the surge in international e-commerce. 

Businesses will increasingly seek financial institutions that can provide the necessary products and services to support their international expansion.

A growing opportunity for financial institutions

International wires can be a necessity for commercial clients. The revenues from cross-border payments can also become a strong revenue stream for financial institutions (this is especially true for commercial clients that make recurring international transfers). Indeed, revenues from international payments add up to more than $200 billion globally and are rising at a high single-digit annual growth rate, according to a September 2023 report from Citi GPS. 

Most financial institutions already have customers that need to make international transactions. These customers might already be using a third party to do so, and they might even be using the financial institution’s own systems to send funds internationally through intermediaries. 

There’s an opportunity to give customers better service, provide them cost savings and generate income for the financial institutions. It all comes down to making cross-border payments faster, cheaper and more transparent while maintaining their safety and security.

Friction points in cross-border payments

The competition for revenues tied to cross-border payments is heating up, but financial institutions have an advantage over new entrants to the field: Businesses tend to look first to their financial institutions for international money transfer. 

It’s important for financial institutions to know, however, that expectations around international wire transfers are changing. Businesses today expect streamlined, transparent and less-costly cross-border transfers. 

These are the key friction points for businesses when it comes to international wire transfers: 

• Highly variable currency conversion rates: Senders often don’t know what the final payment amount is (in the beneficiary’s currency) until after the payment has settled. 
• Slow and/or unpredictable settlement: Lack of information about the status of cross-border payments and the timing of funds received can inhibit the corporate customer’s cash forecasting and impede cash flow.
• Opaque fees: Senders and beneficiaries alike often do not know their final costs until after the payment has settled.
• Uncertainty around regulatory compliance: International wire transfers often involve numerous intermediaries, sowing doubt about regulatory compliance.
• Managing complexity: Inefficiencies in processing international transfers can put a strain on corporate back offices that are using manual processes to interact with their financial institutions. 

Meeting today’s expectations around money movement

Despite the growing competition for cross-border payments, financial institutions are still the primary providers for this service. And yet, many financial institutions haven’t addressed the friction points outlined above. 

Let’s first consider the root of the problem: Many, if not most, financial institutions send funds in U.S. dollars by international wire transfer. More parties are involved when transactions are managed this way, leading to numerous issues: 

• Payments are more likely to be delayed
• Each party involved in a transaction charges its own fees
• Beneficiary banks often convert the U.S. dollars into local currency, frequently charging higher fees and providing a less-favorable exchange rate than if the conversion is made earlier in the process
• Originators have little to no control or visibility over the exchange rate

The answer to this problem is to send the funds in local currencies. With this approach, financial institutions and their clients benefit from lower fees, reduced risk of delivery delays and greater control over foreign exchange fees and conversion rates (since senders can now shop around for the best deal for their clients).

A foreign exchange (FX) partner plays a crucial role in an optimized, friction-free cross-border wire transfer. Solutions such as Payments Exchange: Foreign Exchange Services from Fiserv integrate the services of multiple FX partners, enabling financial institutions to choose the service that best fits their needs. 

Go for the win-win

When it comes to cross-border wires, financial institutions should look to simplify the process, lower costs for their clients, manage the risks, ensure compliance and enhance overall efficiency. 

Beyond improving the experience for clients, there’s a strong business case for financial institutions to get into international wire transfers coupled with foreign exchange services. Clients may enjoy a more transparent, less costly money-transfer experience, while financial institutions may gain the revenue stream from facilitating international money movement. 

If your financial institution doesn’t already offer international wire transfers, or if your offerings need an upgrade, it could be worthwhile to consider today’s state-of-the-art money-movement solutions.