Trade Credit
7.2.2024

The Top Challenges of Offering Cross-Border Payment Terms

Hokodo

If you read our last blog post, you’ll already know that cross-border payment terms are crucial for marketplace growth in 2024. In fact, it’s not just about marketplaces – the ability to offer all buyers flexible lines of credit at the point of need is essential for growth of B2B sellers of every kind.

But as with all the best things in life, it’s easier said than done. In fact, just 16% of respondents to our recent survey said they found it ‘very easy’ to offer payment terms to global buyers. And it’s easy to see why.

How do you approve buyers in other regions for payment terms at scale? How do you do so without introducing friction? Not to mention the inherent costs and operational overheads associated with underwriting and supporting a high volume of online transactions. And that’s not all! There's also the intricate task of managing the buyer experience, from the application process and approval right through to collection of payment.

But there’s no use in glaring enviously at the lucky 16%. Ok, maybe a few minutes of envious glaring. But after that it’d be more productive to learn more about the challenges that sellers like yourself face when it comes to offering cross-border payment terms.

We asked 200+ B2B sellers about their top pain points when it comes to global trade credit. Let’s see what they had to say.

Challenge #1: It’s difficult to manage compliance

Managing payment compliance across 44 countries in Europe or 50 US states, each with their own laws and regulations, is undeniably complex. In fact, just 3 or 4 different regions is enough to leave some sellers pulling out their hair. 

Survey respondents, regardless of their location, expressed a common concern about navigating the regional regulations and compliance of offering payment terms to buyers in other countries. It’s a formidable challenge that could end up costing you a lot of time and money that would be better spent on product development, customer acquisition and other growth initiatives.

Challenge #2: Payment terms can negatively impact the buyer experience

It’s essential for B2B sellers to continuously improve and optimise the buyer experience – and nowhere is this more important than at the checkout. It directly impacts customer satisfaction and the likelihood of repeat business, making it crucial for high growth businesses.

But it shouldn’t have to come at the expense of payment terms. In fact, offering payment terms is a big part of creating the best possible buyer experience. However, respondents to our survey indicated that adding payment terms is a challenge because it creates unnecessary friction for buyers.

We get it. Getting buyers to fill out extra forms and then asking them to wait to find out if they can access credit is not conducive to a good experience.

Challenge #3: Buyers in other regions have different preferences

Respondents identified the challenge of catering to regional payment preferences. Naturally, this includes the specific types of credit that buyers in different countries opt for – for example, 30-days payment terms, instalment payments or the option to open a trade account.

But payment terms are no good to anyone if buyers can’t eventually settle their payment in a way that is quick and convenient for them. And here’s the kicker: “quick and convenient” means different things to buyers in different regions. For example, iDEAL processed over 1.2 billion transactions in the Netherlands in 2022, but outside of this country, it’s not a widely used settlement method. 

Other nuances include navigating legal frameworks and market practices. In short, there’s a lot of regional differences to consider when it comes to trade credit and it poses a big challenge for sellers.

Challenge #4: Annual revenue impacts the challenges of cross-border payment terms

Responses indicated that annual revenue influences the ease or difficulty of offering trade credit to buyers.

When respondents were broken down by annual revenue, the ease of offering B2B payment terms in new countries exhibited significant variation. Among companies with revenues of up to $8 million, only 8% found offering cross-border payment terms to be ‘very easy’.

In contrast, the highest percentage, reaching 21%, was observed among companies in the revenue range of $80 million to $400 million. This disparity reflects how revenue size directly impacts the challenges and opportunities associated with global payment terms. 

Unsurprisingly, having more money to throw around makes it easier for businesses to offer payment terms. But it shouldn’t – and doesn’t – have to be this way. Sellers of every shape and size should have the ability to offer buyers the payment terms they expect.

So, how do you overcome these challenges?

It’s more important than ever for B2B sellers to be able to offer the payment terms that buyers demand and deserve – no matter where in the world they’re based. But with all these challenges, it’s ok to need some help.

You’re invited to an upcoming webinar where we’ll be exploring how to overcome the challenges of offering payment terms. Join us on Wednesday, 28th February 2024 at 16:00 GMT / 17:00 CET / 11:00 EST to learn how to:

  • Manage compliance and regulation
  • Optimise the buyer experience
  • Meet regional buyer preferences
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