Visa Direct Targets Cross-Border Trade’s SMB Payment Gap

A small business can find a customer, supplier or contractor halfway around the world in minutes, then may spend several days trying to determine where the payment went.

For a small or mid-sized business (SMB), sending funds abroad can still mean a bank wire traveling through correspondent institutions, uncertain settlement timing, little visibility into the payment’s location and fees that aren’t always clear when the transaction begins. Problems that a multinational can hand to a treasury team can land on the desk of an owner whose principal concern is running the business.

Justin Zhao, head of Visa Direct North America, said the infrastructure itself accounts for much of that disparity.

“The vast majority of transactions today are still delivered on legacy rails like Swift and also through legacy providers,” Zhao told PYMNTS during a recent roundtable discussion.

The shortcomings extend well beyond speed. Zhao cited transparency, traceability, service and cost as interconnected problems, with each becoming more difficult for smaller companies because they lack the banking relationships and negotiating leverage, not to mention treasury resources, of large enterprises.

Consider a small business sending $1,000 from the United States to Europe. Zhao said a payment moving through the correspondent banking system can take one, two, three, four or five days and sometimes longer to reach its beneficiary. During that interval, the SMB may not know which correspondent has the payment or when it will arrive.

“The payment disappears,” Zhao said.

He called the broader expense the “capital-C cost” of scaling internationally, including understanding the different charges and foreign exchange costs that can accumulate before the beneficiary receives the funds.

Ran Grushkowsky, co-founder and CEO of MassPay, said the persistence of traditional bank wires reflects one advantage that shouldn’t be overlooked: resilience. Businesses generally expect a properly addressed payment to reach its destination and, when payment instructions are wrong, for the funds eventually to return.

The price for that assurance can be time and trapped working capital.

If an overseas invoice is due in a week, Grushkowsky said, a business may send the money immediately because it can’t count on precisely when the transfer will arrive.

“You just locked money for a week’s time,” he said. With a faster rail and more predictable delivery, “you can free that money for another few days because you know the money gets there and it’s going to get there on time.”

For an SMB operating with a relatively small cash cushion, several extra days of access to its own money can matter.

Platforms Take On the Cross-Border Work

The companies encountering these problems aren’t necessarily businesses that would have been considered international enterprises a decade ago.

Zhao pointed to the creator economy, eCommerce and other digitally built businesses whose customers, suppliers and workers can be dispersed across countries from the start. Even a sole proprietor can therefore develop cross-border payment requirements.

What hasn’t changed is the SMB owner’s appetite for becoming a payments specialist.

“If you have to think about payments, and deal with payments … as it relates to a wire internationally and ‘Where is it?’ that immediately takes you away from your core business,” Zhao said.

That creates an opening for the platforms already serving those businesses.

Zhao cited creator platforms, eCommerce platforms, cloud accounting providers, accounts-receivable and general-ledger platforms, and payments businesses among the companies competing for SMB relationships. He said venture investors that concentrated on consumer FinTech several years ago are also paying attention to small business platforms.

Cross-border money movement remains underserved enough, he said, that adding it can still distinguish one platform from another.

MassPay has seen the problem from the implementation side. Grushkowsky said companies have approached it because they wanted to enter a country their existing provider didn’t cover, had high payment failure rates, were encountering problems with a provider or considered their existing costs too high.

Adding more payout methods compounds the problem. A recipient may want money delivered to a bank account, card or digital wallet, and each destination can involve different credentials, routing and compliance requirements.

Visa Direct provides connectivity across those endpoints. Zhao said the network supports payouts to bank accounts through international real-time payment and ACH networks, debit and prepaid cards, and 60+ card and wallet networks.

MassPay provides the integration layer between those capabilities and the platform, including routing, orchestration and elements of the operational and compliance work. Its single application programming interface (API) is intended to spare a platform from separately integrating and maintaining each destination.

“The technology is not necessarily the long pole in the tent. It’s not the hard part,” Zhao told PYMNTS. “The challenge is the licensing, it’s the compliance, it’s the risk management, it’s the policies.” Grushkowsky said MassPay’s own client implementation time has fallen from roughly three or four months three years ago to about a week today.

An SMB collecting euros, for example, could hold the funds in euros and use them for euro-denominated obligations rather than immediately converting them into dollars and potentially paying to convert money again later.

Grushkowsky also sees local collections and stablecoins becoming part of the infrastructure available to businesses operating across borders.

The next platform advantage may therefore depend less on adding another payment button than on removing work that SMBs were never equipped to perform. Global trade has become accessible to very small companies. The financial operations required to support it are still catching up.

Watch the full interview with Justin Zhao and Ran Grushkowsky to learn more about:

• Why Zhao expects cross-border money movement to become standard functionality across more SMB platforms within the next several years.
• How payment failures, exception management and regulatory requirements complicate the decision to build cross-border infrastructure internally.
• Where local collections, multicurrency balances and stablecoins could extend platform services beyond payouts.

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This article contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 that relate to, among other things, future operations, prospects, developments, strategies, business growth and financial outlook.