The digital shift in U.S. consumers’ shopping habits has created new opportunities for Brazilian businesses. However, companies attempting to expand overseas and reach new customers must face numerous barriers to establishing and growing their commercial interests — especially when it comes to sending and receiving payments in the U.S.
The complexity of establishing banking services abroad is a significant pain point for Brazilian companies, according to Banco do Brasil, the largest financial institution in Latin America. Brazilian and American banking environments have developed differently over the last few decades, and this means businesses must contend with many complications, including security and compliance requirements and the often-extended time frame required to process a simple peer-to-peer (P2P) payment.
In addition to differences in the ways Brazilian and American banks operate and regulate commercial transactions, specific areas of knowledge are challenging to acquire — even for large, well-established companies. This can create unnecessary risk for businesses already tasked with a resource-intensive effort to expand abroad.
“Companies usually have a hard time understanding the complexity of the global payments system, which has several different and interconnected actors [that] operate under both a global set of rules and [their] local specificities and relationship[s] with their own customers. Currency exchange rates play an important part of the equation,” a Banco do Brasil spokesperson told PYMNTS. “When expanding [their] operations abroad, the companies will be exposed to the local currency, in both its revenues [and] in its costs. Creating a strategy to mitigate the risks of … FX rates’ volatility is very important, especially when the country operates under a soft currency.”
Cross-border payments require entities to manage issues like FX risk while maintaining alignment with a patchwork of sometimes conflicting banking regulations.
“Compliance is also a key part of the equation. To prevent money laundering, terrorism financing and fraudulent activities, governments worldwide impose a very strict set of rules which evolve daily — to follow the development of newly created ways by [which] perpetrators … circumvent them — and must be strictly followed by the financial institutions.”
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Even after businesses align their cross-border payments strategies with regulations at their respective banks, a transaction may fail due to other rules on transfers that are not specific to certain banks but instead exist under regional restrictions.
“Another point to notice is the impact of restrictions imposed by some countries, especially in the U.S. and the European Union, to transfer funds to a set of blocked or controlled countries or regions,” the spokesperson said. “As these restrictions are not universal, a company may not be able to fulfill [its] USD financial obligations with partners located in blocked [or] restricted countries, even if there are no restrictions between the countries involved [in] the transaction.”
Reliable banking services are essential for business growth, especially across international borders, where several issues may cause payment delays or outright blocks on vital transactions. Other challenges Brazilian businesses face include finding credit lines in the U.S. and developing or finding a frictionless cross-border payments option.
“Banking in another country always requires learning the specificities, products and services that the foreign environment offers and how they practically work. … While the companies are used to working in Brazil with a specific set of products and services [that] do not vary much from different providers, … using these apparently — same products and services in other environments often require[s] adaptations and customizations of systems and processes, both local and in … companies’ headquarters,” the spokesperson said.
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As Brazilian businesses expand globally, their need for banking partners that understand the needs of merchants and entrepreneurs and the challenges that they face in developing seamless payment processes will undoubtedly remain.