Managing international payments business with Xflow

The international payments space is broken for Indian exporters. With long processing time, costs, and complex documentation, the setup is nowhere close to the ease of domestic payments. The scale of the challenge facing those trying to get the best of the international business can seem overwhelming. But, progress is being made across many areas—thanks to the emerging fintechs.

Technology has the potential to transform the way businesses can collect international payments. –fast, affordable and compliant. Traditional payment methods often fail to meet these demands, leaving businesses searching for alternatives that can streamline the process while reducing costs.

The Reserve Bank of India (RBI) has recognized the need for innovation in this space and is encouraging fintechs to bring the same level of efficiency and convenience to international payments that they have delivered for domestic transactions.

To make cross-border payments more efficient, fintech must address several pain points, including:

1. Timelines: Traditional payment methods can up to 2 to 4 days to process, leading to delays that affect cash flow. Businesses need faster settlement times to stay agile in a competitive market.
2. Security and compliance: Managing cross-border payments involves navigating complex security and regulatory requirements. Fintechs must ensure they have the expertise to address these risks while protecting their customers.
3. Financial Inclusivity: Accessibility and affordability are critical for successful cross-border payment solutions. Lower fees, faster transactions, and easy-to-use solutions are essential for driving adoption among businesses and individuals alike.
4. Transparency: Traditional payment systems often rely on correspondent banks, leading to hidden fees and complicated processes. Streamlining these procedures can reduce friction and make cross-border payments more efficient.

Cross-border payments is a highly regulated space, and businesses need to get the relevant licenses for smooth operations. Unless cross-border payments are the mainstay, it’s unlikely that the overheads of owning a license are worthwhile for fintechs. Further, owning a license involves a significant investment of capital and time, delaying your time-to-market. Fintechs can help their users bring funds into India using the following approaches:

• PA-CB (Payment Aggregator Cross-Border): The PA-CB framework enables fintechs licensed by the RBI to facilitate cross-border money movement for import and export transactions. So far, the RBI has issued the PA-CB license to 4 players who were also existing PA domestic license holders. Further, fintechs who were operating under the erstwhile OPGSP framework and specific collection approvals have been permitted to continue providing their services until their application for PA-CB license has been evaluated. Interestingly, AD1 banks can provide PA-CB, and many fintechs simply leverage the ‘Bank as PA-CB’ model instead of investing in their own license. 

Note: The PA-CB framework has replaced the OPGSP framework, which was in force until Oct '31 2023. You can read more about the PA-CB framework here.

• RDA (Rupee Drawing Arrangement): The RDA is a framework enabling Authorized Dealer Banks to facilitate the receipt and remittance of funds between India and other countries through exchange houses. Under this arrangement, exchange houses abroad maintain rupee-denominated accounts with Indian banks, allowing them to settle remittances efficiently. While RDA primarily supports personal remittances like family maintenance and savings, it also caters to trade-related transactions within regulatory limits. The framework simplifies cross-border money transfers, ensuring compliance with RBI guidelines while promoting smoother financial flows.

• Partner with an AD1 Bank: When it comes to cross-border payments, the capabilities of an AD1 bank are unparalleled. However, convincing a bank to provide their license for a technology stack is extremely arduous and time-consuming. Further, depending on the target market, fintechs will also need to understand and invest in overseas licensing. Fintechs must consider this only if you are looking to build an all-encompassing cross-border payment stack, and have a lead time of 9 - 12 months.

When businesses move funds internationally, they must understand the varied aspects of compliance and regulatory reporting. These requirements are updated from time to time. For instance, one must screen all transacting entities for AML (anti-money laundering) or understand all aspects of Indian regulation around cross-border money movement and invest in relevant technologies to ensure that your funds flow is compliant. Alternatively, fintechs can work with platforms that can handle all their aspects of cross-border compliance–with powerful APIs. Xflow’s solution provides out-of-the-box compliance and does not trigger any regulatory requirements for you. 

While the margins on cross-border money movement are significantly better than domestic money movement, the final cost of collecting payments is often determined by what the banking partner charges for currency conversion (FX) and for processing the transaction. These charges usually depend on the transaction volume. Xflow understands the complexity of setting up a business and provides a simple and affordable pricing structure that won’t strain your business. Xflow earns revenues only when you make money and you get complete control of your business model.

Each framework and or provider/banking partner may enforce restrictions on the product capability. For instance,  the PA-CB framework allows exporters to bring INR 25L per unit into this country. This restriction can be interpreted in multiple ways, and often, banks will take a conservative line of allowing INR 25L per invoice which may exclude some of your users. Furthermore, some frameworks/providers might put additional restrictions around withdrawal timelines. Understanding these restrictions and assessing them against your customers' requirements is important. With Xflow, there is no limit on transaction size in a single invoice. For instance, users can collect funds of over $10,000 in a single invoice–without breaking up the invoice.

After experiencing the blazingly fast speed with domestic payments, businesses in India expect cross-border payments to be as quick. While in theory, RDA does allow for instant settlement through pre-funding (you pre-fund the INR with your money), it comes with several restrictions. With Xflow, users can collect payments in 1 business day settlement—which is a significant improvement over SWIFT payments. 

Xflow provides payment infrastructure that is exclusively designed to enable seamless cross-border payments in the India corridor. Many businesses leverage Xflow’s API infrastructure to delight users on their platform with faster and affordable international payments, and in doing so are building new revenue streams for themselves.

Fintechs often operate with optimized resources focused on scaling the business. In these scenarios, scoping and building out international payment offerings from scratch can take away a large chunk of their bandwidth. 

A no-code solution like the one provided by Xflow enables teams to prototype and deploy new payment offerings much faster than traditional coding frameworks, ensuring quicker market entry. This approach reduces financial outlay and frees up resources for other critical business needs. Furthermore, no-code solutions allow fintechs to customize features for different customer segments and easily refine or add capabilities on the go, helping firms stay responsive to customer needs and market changes.

Built on a RESTful API structure, Xflow for Platforms provides fintechs extensive flexibility and control over payment workflows through dedicated endpoints.

The integration process is supported by comprehensive step-by-step guides tailored for different types of users, ensuring successful implementation and launch.

Key technical advantages include:

• Robust authentication and security measures protecting sensitive data. Using API keys, secure connections (HTTPS), and authentication methods, only authorized users can access the API and make requests, ensuring trust
• Scalable infrastructure designed to handle high transaction volumes. Fintechs can confidently ensure their international payment offering is stable, secure, and reliable at all times
• Seamless integration with existing IT systems
• Flexible endpoint customization for specific operational needs

Xflow for Platforms enables fintechs to achieve tailored and simplified cross-border payment management through:

• Deployment in weeks, not months - Xflow for Platforms provides tools for rapidly deploying international payment solutions, which can significantly streamline development and GTM timelines.

One fintech startup was able to launch its cross-border remittance product in under a month by leveraging Xflow’s powerful, flexible APIs. This quick turnaround and startup-friendly support allowed them to meet market demands swiftly.

1. Personalized pricing plans - With Xflow, fintechs can tailor transaction fees for each user, enhancing revenue potential while adapting pricing strategies to suit various markets and customer needs.
2. Best-in-class FX rate – Fintechs can offer FX rates linked to inter-bank or mid-market levels, ensuring transparency and competitive pricing. 
3. Guaranteed real-time FX rate – Minimize risks associated with currency fluctuations. Fintechs can enable their customers to secure favourable rates during transactions, reducing uncertainty and enhancing their confidence in the platform.
4. Faster settlements - Xflow guarantees next-business-day settlements, enabling fintechs to promise customers quicker access to funds. 
5. White-labelled solution – Maintain your brand identity as Xflow works seamlessly behind the scenes, ensuring all engagement is only between the fintech and their customer
6. Integrated security and compliance - Xflow collaborates with RBI-authorized banks and leading technology partners to ensure secure, compliant transactions. Built-in fraud monitoring further reduces risks for users and businesses

Take the next step

Ready to expand into international payments? Schedule a demo to discover how Xflow can power your growth while enabling seamless cross-border transactions for your customers.

More articles:

1. 4 signs you need to rethink the way you collect international payments
2. How does cross-border payment work in India?
3. How to master efficient transfer pricing with Xflow