Most domestic bank transactions are processed immediately or at least in an hour or two, but that is not the case with cross-border payments. Cross-border payments are much slower and more frustrating, causing disruptions in business processing, strain in business relations and increased transaction costs. Cross-border payments can take up to weeks for the transfer, …
Most domestic bank transactions are processed immediately or at least in an hour or two, but that is not the case with cross-border payments. Cross-border payments are much slower and more frustrating, causing disruptions in business processing, strain in business relations and increased transaction costs. Cross-border payments can take up to weeks for the transfer, depending on factors such as currency conversions, time-zone differences, bank holidays, compliance checks etc. This blog will discuss such factors that contribute to delays in cross-border transactions.
Currency conversion impedes the flow of cross-border payments causing delays in the process. When transacting between different currencies, banks must convert the funds at prevailing exchange rates and fluctuations in the market result in further delays. This is because banks may not have the currency you want or to reconcile the differences according to the latest exchange rate for the precise transfer of funds.
Another factor impacting international payments is time-zone difference, as cross-border transactions occur between regions. While you send payment during business hours in your country, it may arrive at the destination after their banking hours, so this also impacts the speed of cross-border transactions. For example, a payment initiated in Asia may have to wait until the following business day in North America to begin processing, causing an unavoidable delay in the transfer.
Many countries share bank holidays like New Year’s Day and Christmas. Still, every county and nation has its specific holidays, which can significantly impact the processing and settlement of cross-border payments. In every country, banks operate according to their working hours, but this causes interruptions in smooth payment processing. Whether a non-business day comes in the payer or payee’s country, it causes disruption; hence the delay in cross-border transactions occurs. This can be avoided by always checking the bank holidays of your and the receiver’s country so they don’t have to wait till the resumption of normal business operations to process your payment transfer.
Incomplete documentation or discrepancies in the payment details can significantly disrupt the cross-border payment transfer. Inaccurate beneficiary information, missing reference numbers or incorrect details can cause further delays as banks or financial institutions will be compelled to verify and reconcile the data manually. And even if your payment is processed with incorrect or incomplete information, it will be returned. To avoid such disruption in your payment processing, always double-check all the details prior to processing any international remittance.
Another significant factor contributing to delays in cross-border payments is the intricate web of compliance and regulatory requirements governing international financial transactions to mitigate fraudulent activities. These processes often involve verification of the identities of both the payer and payee, confirming the legitimacy of funds, and ensuring compliance with international sanctions. All these fraud prevention procedures are very time-taking, which delays the payment even further.
Corresponding banking facilitates cross-border transactions, but the more corresponding banks involved, the more delay will occur in the processing. The extensive verification process of each intermediary involved can cause delays as all the correspondent banks meticulously examine the payment instructions and associated documentation. Each correspondent bank in the chain adds an additional layer of processing and verification, potentially leading to delays.
Delays in payments can arise by various factors, but these can be avoided by staying informed, planning ahead by adopting proactive strategies and leveraging fintech solutions. If you don’t want unnecessary delays in your cross-border payments, then contact Linea Global. We connect the world mitigating all the hindrances in the procedure, making your cross-border transactions efficient and seamless.
