The traditional banking experience was a revolution upon discovery. However, the integration of technology in banking has resulted in the need to continuously innovate to make the entire transacting experience easier.&nbsp;

Imagine a financial world where you have the power to mix and match services from various providers, creating a truly personalised banking experience. Enter open banking – the current revolution in the financial industry where the talks around the utilities, possibilities, and risks associated with open banking are reaching a fever pitch.

Open banking attempts to break the monolithic structures of conventional banks and institutions and bring a ‘mix-and-match’ of services from multiple financial providers catered to the consumers. It is a system where customers can securely share their financial data with authorised third-party service providers through APIs to allow greater collaboration and foster the development of innovative, tailored financial solutions.&nbsp;

Open banking shifts the focus of financial services from a single-bank model to a collaborative approach. It helps securely and effectively <a href="https://www.skydo.com/blog/make-data-driven-business-decisions-with-customer-level-revenue-analysis?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">leverage consumer data</a> to foster an ecosystem based on data portability and interoperability.&nbsp;

This article aims to address some of these opportunities in the context of cross-border payments and international banking.&nbsp;&nbsp;

Open Banking and Global Payments: Bridging Distances

When expanding globally, businesses face major constraints while navigating payment cultures in different countries. For instance, corporate credit cards are most prevalent in the US, but most of Europe relies on wire transfers.&nbsp;

Payments through ACH (Automatic Clearing Houses) can take days to get authorised. The constant back-and-forth between multiple banks and clearing houses painfully limits and slows the process. There are also specific regulatory abidance for each country that businesses need to adhere to.&nbsp;&nbsp;

Open banking makes it possible for fintech services to serve customers at their homestead. It addresses the fundamental problems in traditional payment mechanisms and eases bank-to-bank payments. It automates manual processes to help customers authorise payments in a few clicks.&nbsp;

Open banking further cuts the fluff involved in <a href="https://www.skydo.com/blog/benefits-of-multi-currency-accounts?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">international banking transactions</a> to help businesses attain global growth.&nbsp;

For instance, assessment, interchange, and processing fees cost<a href="https://www.bankrate.com/finance/credit-cards/merchants-guide-to-credit-card-processing-fees/"> 1.5% to 3.5% of every credit card transaction</a> to merchants in 2020. Open banking cuts out the intermediaries and directly connects customer’s bank accounts. This arrangement saves considerable time and costs for businesses with slimmer margins.&nbsp;

Open Banking: A Pathway to Financial Innovation

Earlier, customers were at the mercy of the banks. Most of the banks provided similar services, often limited in nature. The open banking framework has turned the tide in favour of customers. Fintech service providers compete to build a wide range of products and services that deliver a stupendous experience, ease of use, transparency, and cost efficiency.&nbsp;

Stripe and Braintree have disrupted the payment scenario by granting access to the underserved. In China, WeChat and AliPay are the new digital finance ecosystems serving customers based on their needs.&nbsp;

UPI and mobile wallets are among India's biggest use cases for domestic payment solutions based on open banking. In the US, large banks have struck data-sharing deals with third-party providers. Chase partnering with Intuit and Wells Fargo with Xero and Finicity are a few examples.&nbsp;&nbsp;&nbsp;

Customer Empowerment Through Open Banking

Open banking further empowers customers through data ownership and control. Fintech startups, technology companies, and financial institutions are synergising their efforts to enhance the overall customer experience by leveraging banking data.&nbsp;&nbsp;

Customers can enjoy seamless transactions, personalised financial insights, and transparent pricing frameworks while fully controlling with whom they share their financial data and to what extent.&nbsp;

APIs allow seamless integration of financial services such that businesses get a personalised suite of services for international dealings and cross-border payments. Many fintech service providers provide the dual benefit of the ease and simplicity of bank transactions and cutting-edge services like e-wallets, easy remittances, and currency exchanges.&nbsp;

In fact, the focus of such services and platforms is to provide their customers with the best user experience and innovative financial solutions. Yet, the pressing question remains about the regulatory and security aspects of this revolutionary banking avenue.

Regulatory Navigation in the Open Banking Era

Most apps and platforms based on open banking are built on robust security protocols and comply with their country's stringent data protection regulations. The General Data Protection Regulation (GDPR)&nbsp; is an important EU law that governs data sharing.&nbsp;

PSD2, another set of data protection rules in Europe, explicitly grants the authority to share data to account holders instead of banks. India also passed its new data protection bill in the recently concluded monsoon session. Many regional <a href="https://www.skydo.com/blog/mastering-compliance-a-step-by-step-guide-to-data-protection-payments-laws-and-industry-regulations-for-tech-exporters?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">regulatory frameworks</a> mandate consumer protection and privacy to the highest degree.&nbsp;

Third-party service providers need to ensure compliance at multiple levels as different data requires different levels of security. Data sharing is mostly risk- and permission-based in financial services. It must have proper audit trails per the regulations and risk management guidelines.&nbsp;

Fintech services can follow enhanced KYC procedures, identity validation, and fraud detection for compliance and regulatory adherence.&nbsp;

Addressing the Risks: Security in Open Banking

Open banking is based on data sharing of personal and sensitive information. Securing such information is the elephant in the room, which needs addressing. It poses risks in the form of increased exposure and vulnerability of data toward potential breaches, frauds, misuse, and hacks.&nbsp;&nbsp;

Fintech services and platforms must implement robust security measures and data protection guardrails such as encryption, monitoring, authorisation, and authentication. Measures like two-factor authentication, KYC norms, in-built security walls, etc., enhance data protection and eliminate manipulation or tampering.&nbsp;

The Horizon of Open Banking: Glimpse into the Future

<a href="https://assets.kpmg.com/content/dam/kpmg/ua/pdf/2019/09/future-of-digital-banking-in-2030-cba.pd.pdf">A KPMG report</a> states the banking industry will see more changes in the next decade than it has in the past 100 years.&nbsp;

The Integration of IoT (Internet of Things) and AI (Artificial Intelligence) with open banking will help customers embark on a journey of autonomous financial experiences. Fintech services and banks will have a greater insight into their customers’ lives, which calls for greater trust and robust security mechanisms. New business models and use cases for financial services will emerge to redefine the service provider-customer relationship.&nbsp;&nbsp;

Consolidation of services into a ‘super app’ will occur as AI and other emerging technologies interface with open banking solutions. AI will play a critical role in helping customers overcome their low levels of financial literacy. Technologies such as IoT and Distributed Ledger Technologies (DLT) will create trustless models of customer engagement and automation in financial services.&nbsp;

Businesses need to accept the change if they seek growth and relevance readily. Along with this technology adoption, IT exporters and international businesses need to be at the forefront of compliance and security to provide their customers with the best experience and smoothly functioning business processes.&nbsp;&nbsp;&nbsp;

Currently, the world relies on heterogeneous modes of payments, and abiding by all can get time-consuming and expensive for small-scale IT exporters and businesses. Open banking is revolutionising the banking sector and creating opportunities for businesses to grow globally.

Furthermore, cross-border payments are expected to reach<a href="https://www.bankofengland.co.uk/payment-and-settlement/cross-border-payments#:~:text=The%20value%20of%20cross%2Dborder,trillion%20in%20just%2010%20years."> $250 billion by 2027</a>. Consequently, the need to smoothen the creases and bumps in the international payments process is more pertinent than ever.&nbsp;

Fintech solutions like <a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Skydo</a>, driven by open banking, will be crucial in building and streamlining collaborative <a href="https://www.skydo.com/blog/seamlessly-accept-international-payments-in-india?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">international payments</a> infrastructure from scratch.

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India has witnessed an impressive surge in its startup ecosystem in recent years. Factors such as a large and diverse consumer base, a burgeoning middle class, access to talent, and increasing investor interest have contributed to this growth. Indian startups are making strides in various sectors, including technology, e-commerce, healthcare, and fintech.

As this ecosystem continues to evolve, Indian startups are poised to play a pivotal role in shaping the future of India and the global business landscape.

<a href="https://www.skydo.com/blog/what-are-capital-and-current-account-transactions?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Current accounts</a> play a pivotal role in the financial operations of businesses, including startups, for several reasons:

Now, imagine you're the founder of a promising startup in its early stages. Your venture is fueled by ambition, innovation, and a grand vision. However, in these initial phases, your resources are limited, and you're carefully managing every rupee going in and out of your company. By design, current accounts don't pay any interest and hence shouldn’t ideally charge any fee or have a mandatory Minimum Account Balance (MAB). However, some current accounts impose a high MAB.

In such a scenario, a Zero Balance Current Account (ZBA) becomes an invaluable asset and an indispensable financial tool.

Introducing Zero Balance Current Accounts

In the nascent stages of a startup, every penny counts. A ZBA allows you to operate your business with minimal financial constraints. You don't need to maintain a substantial minimum balance, which means you can invest your limited funds in growing your business rather than locking them in a bank account.

It removes the financial burden, provides flexibility, and enables financial inclusion.

A Chartered Accountant of a fintech startup with such an account explained, “Most startups keep their money in an overnight fund which earns them ~6% interest and conveniently transfer the funds from it to a zero balance account just when they need to disburse them.”

Steps for Zero Balance Current Account Opening Online

Follow these steps to open a zero-balance current account.

The specific steps would differ depending on the financial institution.

Documents Needed to Open Zero-Balance Current Account Online

The specific documents required to open a zero-balance current account online may vary depending on the bank or the financial institution. However, here is a list of common documents that are typically requested when opening a zero-balance current account online:

Does your business need a Zero Balance Current account?

It is not compulsory to have a zero-balance current account because the monthly average balance requirement is not very high in non-zero-balance accounts. For instance, a <a href="https://www.hdfcbank.com/content/bbp/repositories/723fb80a-2dde-42a3-9793-7ae1be57c87f/?path=/Personal/Save/Accounts/Current%20Account/Premium%20Current%20Account/Non-Managed-Plus-Premium-Regular-Leaflet.pdf">regular current account</a> in the HDFC Bank requires you to keep an average quarterly balance of ₹10,000 on non-metro locations and its non-maintenance can cost ₹1,500.&nbsp;

But any money saved is equivalent to money earned. This part is vital for the following reasons.

Advantages of Zero-Balance Current Account

While zero-balance current accounts offer several advantages, they also come with certain challenges and considerations that businesses should know.

Zero-balance current accounts offer a compelling array of advantages that can significantly boost businesses' financial accessibility, cost efficiency, effective cash flow management, financial inclusivity, and streamlined operations.

You must choose a correct business account that helps you smoothen your daily operations with utmost efficiencies, and the least cost and zero balance current account can be a great starting point.

Q1. Can zero-balance current accounts support high transaction volumes for growing businesses?

Ans: Yes, one of the strong suits of a zero-balance current account is its ability to support high transaction volumes for growing businesses.

Q2. Are there any limitations or fees associated with zero-balance current accounts that businesses should be aware of?

Ans: Some zero-balance current accounts can impose limits on the number of free transactions or the total transaction amount within a specific period. Exceeding these limits can result in additional charges. While monthly maintenance fees for zero-balance current accounts are often lower than traditional accounts, there may still be fees for certain additional services.

Q3. How can businesses ensure they choose the right bank for their zero-balance current account needs?

Ans: One of the best ways to ensure the right bank for their zero-balance current account needs is to seek recommendations from their business networks and do your research, feature comparison, assess fees, and review customer support.

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Several businesses attempting to tap into the global market face obstacles with cross-border payments such as high transaction fees, long processing times, and a lack of transparency. Despite the challenges, the potential is undeniably vast.&nbsp;

A <a href="https://home.bluesnap.com/cross-border-payments-guide/">survey</a> has projected that the value of all global payments will reach an astounding $250 trillion by 2027.&nbsp;

But how can businesses navigate these major complexities of cross-border transactions and tap into this potential? The experts behind the architecture of <a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Skydo</a> have considered these challenges and built a platform that can make your life easier.

Let’s say you secured a deal with a US-based client. You’re excited about the new opportunity, completed the work, and now it’s time to <a href="https://www.skydo.com/blog/transforming-your-invoicing-experience-with-skydo?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">raise that invoice</a>. However, when the amount reaches your account, a major chunk of it is deducted from the fees associated with international transactions.&nbsp;

<a href="https://www.skydo.com/blog/get-the-most-out-of-your-forex-savings-with-skydo?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Currency conversion</a>, wire transfer, and other transaction fees can add up quickly.&nbsp;

They can even become a significant expense at the business’s bottom lines. Moreover, with a payment gateway, there are further charges, such as commission fees for each transaction. It’s like trying to fill up a leaky bucket - no matter how much money he pours in, Sanjay can’t seem to make it stay.

According to a <a href="https://home.bluesnap.com/cross-border-payments-guide/">survey</a>, 68% of business owners potentially pay unnecessary high transaction fees.

#Solution 1: A Flat Fee for every transaction

Payment method like Skydo simplifies and streamlines business payments with a flat fee structure for all transactions, eliminating unexpected fees and allowing for easy cost calculations and budgeting. This means you will pay the same price, regardless of the transaction size, which can help you save time and money.&nbsp;

If you’re providing services to a US-based client, and the exchange rate between USD to INR is unfavourable, your client will have to pay more to buy the same goods or services from your business. This can make your services less competitive, and the US client may look for cheaper alternatives.&nbsp;

But, let’s say, the client does pay the amount to you for the work done. You will need to negotiate with a financial institution for the best exchange rate despite the benchmark rate being higher.

Skydo offers businesses competitive <a href="https://www.skydo.com/blog/forex-and-its-impact?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">FX rates</a> with zero margins for cross-border transactions, helping you save money and avoid hidden costs. Instead of negotiating with banks or FX providers, businesses can conveniently make transactions on the platform at favourable rates. This eliminates time-consuming negotiations and ensures efficient and cost-effective foreign exchange transactions.

#Problem 3: Complex Regulatory Requirements

International payments involve a range of challenges related to tax and regulatory compliance.&nbsp;

<a href="https://www.skydo.com/blog/how-can-the-right-chartered-accountant-help-your-tech-export-business?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Finding the right CA</a> and utilising an effective payment channel can be helpful to avoid penalties or fines related to tax and to address these regulatory compliance challenges.

Skydo automates FIRA generation, eliminating the need for manual document creation and management. Our platform ensures compliance with Indian tax laws and you can conveniently download all FIRAs with just one click from our dashboards, saving time and reducing the risk of errors.

Higher commission for quicker disbursement

Some payment channels charge businesses higher commission fees for expedited payment disbursement. This can be particularly challenging for small businesses that rely on timely cash flow to maintain operations.&nbsp;

<a href="https://www.linkedin.com/in/dianarajkumari/">Diana Rajkumari</a>, Director at <a href="https://www.linkedin.com/company/dimarkus/">Dimarkus</a>, explains, “Finding the perfect balance between speed and cost-effectiveness has been a major challenge for us as we seek to receive payments from our global clients for a small company like ours. While traditional banks are slow and expensive, some fintech providers offer quicker transfers but at the cost of poor exchange rates.

Compare that to other companies such as Skydo provide a convenient way to transfer money to India from other countries. They offer flat transaction fees at competitive exchange rates and speedy transfers.”

Traditional <a href="https://www.skydo.com/blog/eefc-account-vs-payment-platforms?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">payment gateways</a> involve multiple intermediaries, which can cause transparency issues in foreign payments. Businesses often face unclear costs and difficulty tracking the process due to the involvement of various intermediaries. As a result, hidden costs may arise, negatively impacting the business's profits.

Cross-border payments with Skydo will hit your bank account instantly. There are no commission fees or hidden charges in any way.

We help streamline payments by creating local bank accounts in various countries, making transfers quick and effortless.&nbsp;

Here are the steps to streamline payments for businesses:

#Problem 5:&nbsp; Fragmented Payment Solutions

A <a href="https://home.bluesnap.com/cross-border-payments-guide/">survey</a> found that 31% of organisations work with four or more payment processors to meet their cross-border needs. It's time-consuming, requires much manual effort, and can be error-prone. This process includes:

#Solution 5: Single Source of Truth for All Your Global Payments

Skydo offers a real-time dashboard view to simplify foreign payment processes. This one-stop solution makes it easy to track payments and access transaction histories for each transaction. This eliminates tedious and time-consuming reconciliation between invoices and payments.

Working with global clients can be rewarding if a business owner is aware of the challenges of global payments. However, these challenges can be overcome with the right tools and solutions, like Skydo.

With Skydo, you can enjoy various features that streamline your payment experience, including instant payment processing, <a href="https://www.skydo.com/blog/benefits-of-multi-currency-accounts?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">multi-currency support</a>, and <a href="https://www.skydo.com/blog/real-time-tracking-of-international-payments?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">real-time payment tracking</a>. And with its robust security measures, you can rest assured that your transactions are protected at every step.

Moreover, you can save money and lead to a smoother and more successful global business experience.&nbsp;

<a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Get in touch</a> with our expert panel to discover more about Skydo and how it can assist your organisation in overcoming international payment difficulties!

Ans: Cross-border payment refers to financial transactions involving parties from different countries, often requiring the transfer of money or assets across international borders.

Q2. What are the risks associated with cross-border transactions?

Ans: Risks associated with cross-border transactions include currency exchange rate fluctuations, regulatory compliance challenges, and the potential for delays or errors in payment processing.

Ans: Cross-border payments may fail due to issues such as technical glitches, incorrect recipient information, regulatory restrictions, or insufficient funds in the sender's account.

Ans: A cross-border payment fee is a charge imposed by financial institutions or payment service providers for facilitating the transfer of funds between individuals or businesses across international borders.

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<a href="https://www.bbva.com/en/everything-need-know-psd2/">It all began in 2007 </a>when the European Union launched a directive that majorly streamlined cross-border transactions within the European Economic Area (EEA). The directive called the Payment Service Providers Directive (PSD), aimed to develop a single payment market in the EU and improve the current competition and transactional efficiency.&nbsp;

Before the Payment Service Providers Directive (PSD) was introduced in 2007, conducting cross-border transactions within the European Economic Area (EEA) was a complex and costly process.

You had to deal with multiple banks, various currencies, and high transaction fees, making it challenging to expand your business to international customers. The lack of a unified payment system created inefficiencies, making it difficult to compete with larger businesses.

However, with the implementation of the PSD, the process became much simpler. Now, you can use a single payment service provider to manage transactions in multiple EEA countries, reducing transaction costs and currency exchange hassles. This streamlined approach has opened up new opportunities for your small business to expand across borders, compete more effectively, and serve customers across the EEA with ease.

Although the directive was a huge success, the EU felt that there was room for more innovation.The EU amended PSD in 2009 to create the PSD1 framework, which was again amended in <a href="https://www.ecb.europa.eu/paym/intro/mip-online/2018/html/1803_revisedpsd.en.html">2013 to its current form of PSD2. </a>The current form, PSD2, is widely considered to have ushered in a new era of consumer-centric financial services in the EEA.&nbsp;

You decide to use a budgeting app that provides valuable insights into your spending habits. Using the PSD2 framework, you can now securely link this app to your bank account. This means the app can access your account data with your consent and provide you with more accurate financial advice and budgeting tools.

Consumers now enjoy increased choice, security, transparency, and convenience in their financial transactions.

Yes, PSD2 must sound intriguing to you, but a proper understanding of what PSD2 is is vital in the current scenario when most countries are looking to create a framework similar to PSD2 for international payments.

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The PSD2 (Payment Services Directive 2) is a directive released and managed by the European Union to regulate international <a href="https://www.skydo.com/blog/eefc-account-vs-payment-platforms?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">payment services</a> within the European Economic Area (EEA). The European Union introduced PSD2 to ensure healthy competition, innovation and secure payment process in the European payment industry. PSD2 builds upon the original Payment Services Directive (PSD) and was adopted in 2015, becoming effective on January 13, 2018.

Through the PSD2, the European Union has introduced the Strong Customer Authentication (SCA). SCA completes the transactions by including at least two of the three levels of authorisation: something they know, something they own, and something they are. The transactions require a password or a PIN, a mobile number for OTP and additional security in the form of facial recognition or fingerprint.&nbsp;

PSD2, along with increasing transactional security, has resulted in increased healthy competition by opening up payment services to fintech startups and prompted traditional banks to enhance their offerings. As a result, consumers now enjoy a more user-friendly and cost-effective financial experience.

With a broader range of payment services, consumers can <a href="https://www.skydo.com/blog/top-paypal-india-alternatives-for-international-payment">choose a payment service provider</a> with higher customer protection measures and lower transaction fees, further establishing the need for innovation to sustain.

How is PSD2 relevant to Stop Hidden Fees?

PSD2's relevance to stop hidden fees lies in its potential to address opaque pricing practices in international payments. Set to be incorporated into UK law, these regulations prohibit non-transparent pricing methods. Currently, banks and brokers often conceal costs within unfavourable exchange rates, catching customers off guard with undisclosed fees.&nbsp;

PSD2 emphasises the need for consumers to know the 'real costs and charges' associated with cross-border money transfers, echoing the initial Payment Services Directive (PSD). The crucial aspect is whether the government will uphold this commitment, considering past instances of non-compliance. PSD2 presents an opportunity to combat hidden fees and enhance transparency in financial transactions.

Open banking is a broader concept that refers to the practice of banks and other financial institutions opening up access to their customer’s financial data, with their consent, to third-party providers (TPPs) through secure APIs (Application Programming Interfaces). This data sharing allows TPPs to develop new financial products and services.&nbsp;

The concept of open banking started in 2007, with the EU introducing the PSD (Payment Service Providers Directive) to ensure a single payment market in the EU. However, in 2013, the EU proposed an amendment, giving rise to the PSD2. The amended directive introduced the concept of TPPs to give a much-needed push to the opening banking spectrum.&nbsp;

PSD2 serves as the legal framework within the EU that enables open banking practices. It sets the regulatory foundation for secure financial data sharing between banks and third-party providers. Under the PSD2 regulation, the banks are required to provide customers' account information (after their consent) to third-party service providers, allowing customers to:&nbsp;

With PSD2’s push to open banking, the practice allows customers to access a broader spectrum of financial services, including payment initiation, account aggregation and personal financial management. Now, the customer can choose from a host of third-party providers (TPPs) and applications to execute international payments effectively.&nbsp;

Several fintech companies have leveraged the regulatory framework provided by PSD2 to develop efficient and cost-effective <a href="https://www.skydo.com/blog/real-time-tracking-of-international-payments">international payment services.</a> These companies have utilised access to bank APIs and customer account data to create innovative solutions. Some examples include <a href="https://www.skydo.com/blog/top_5_wise_alternatives_for_international_payment">Wise</a>, <a href="https://www.skydo.com/blog/top-paypal-india-alternatives-for-international-payment">PayPal</a>, <a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Skydo</a>, TransferGo etc.&nbsp;

Here is the impact of PSD2 on international payments: 

The main motive behind amending PSD and PSD1 to create PSD2 or even introducing such a directive has always been targeted towards the end consumers making <a href="https://www.skydo.com/blog/cut-international-transaction-costs?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">international transactions</a>. With PSD2 and open banking, they have experienced several benefits in terms of competition, transparency, cost and security.&nbsp;

Global Implications and Future Trends&nbsp;

The introduction of PSD2 by the EU has been a motivating step for global economies as they look to revolutionise their payment industry. Since the EU introduced PSD2, financial experts, policymakers and regulators in other countries are working towards creating a similar framework to promote competition, innovation, and security in financial services. Currently, countries outside the EEA are exploring open banking and how they can leverage it to create a more interconnected global financial ecosystem.&nbsp;

PSD2 has also raised the bar for other countries to ensure better cybersecurity standards and ensure quick processing speed for international payments. Fintech companies that have leveraged PSD2 in EEA are expanding their business to offer other countries better payment solutions with lower transactional fees.&nbsp;

Countries such as Australia, Canada, and Singapore have already introduced or are considering open banking regulations. This chain reaction may continue and expand to countries like India, launching an official directive similar to PSD2.&nbsp;

The increased adaptation of advanced open technologies such as blockchain and digital currencies may play a vital role in the future expansion of PSD2 and open banking. Such technologies, along with international banking partnerships, will play a prominent role in streamlining international payments and cross-border transactions, further transforming the financial landscape.

International payments will only rise in volume as more individuals and businesses establish their global presence. The introduction of PSD2 by the EU and the resulting push to open banking and other customer-protecting measures have positively impacted cross-border transactions and have called for the launching of similar directives in other countries.PSD2’s influence is seen in the proliferation of open banking initiatives, enhanced cybersecurity measures, and improved consumer experiences worldwide. As the financial industry continues to evolve, the principles and trends set in motion by PSD2 will shape the future of banking and payment services on a global scale.

Ans: The PSD2 directive, or Payment Services Directive 2, is a European Union regulation designed to enhance and regulate electronic payment services. It aims to promote innovation, competition, and security in the financial industry by allowing third-party access to banking data through open banking APIs.

Ans: PSD2 in open banking refers to integrating Payment Services Directive 2 into the open banking framework. It mandates banks to provide secure access to customer account information to third-party providers, fostering competition and innovation in the financial sector.

Q3. What is PSD2 regulation and what is the impact?

Ans: PSD2 regulation is a set of rules governing payment services within the European Union. Its impact includes increased security measures, open banking initiatives, and enhanced competition as third-party providers gain access to customer data, fostering innovation in the financial sector.

Q4. What is the difference between open banking and PSD2?

Ans: Open banking is a broader concept, while PSD2 is a specific regulation within the European Union. PSD2 mandates open banking practices, requiring banks to share customer data securely with third-party providers. Open banking, in a global context, encompasses various initiatives that promote similar data-sharing practices for innovation and competition.

Q5. According to the PSD2 mandate, what is the maximum number of days to refund the disputed amount?

Ans: The PSD2 mandate stipulates that in case of a disputed transaction, the maximum number of days for a refund is 15 business days from the day the payment service provider receives the complaint.

Q6. How does PSD2 and open banking affect the financial industry?

Ans: PSD2 and open banking positively impact the financial industry by fostering innovation, competition, and improved security. These regulations encourage the development of new financial services and products, driven by collaboration between traditional banks and third-party providers, ultimately benefiting consumers with more choices and enhanced user experiences.

Ans: PSD2 came into effect on January 13, 2018, within the European Union. However, individual countries may have slightly different timelines for implementing specific aspects of the directive.

Ans: Yes, PSD2 is a regulation specific to the European Union. It aims to standardise and enhance payment services within EU member states.

Ans: PSD2 has a transformative impact on banking by promoting competition, innovation, and security. Banks are required to open up their customer data to third-party providers, fostering the development of new services and ensuring enhanced security measures for electronic payments.

Ans: PSD2 applies to all European Union member states. Therefore, the PSD2 countries include those within the EU, as the regulation is designed to create a standardised framework for electronic payment services across the entire union.

PSD2 and its Impact on International Payments

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"The current state of cross-border payments is not fit for the 21st century."&nbsp;

Mr. Ravi Menon, the Managing Director of the Monetary Authority of Singapore, said this in his speech at the <a href="https://www.bis.org/review/r221011b.htm">Annual SWIFT International Banking Operations Seminar</a>, 2022.

The <a href="https://www.pwc.in/assets/pdfs/the-indian-payments-handbook-2022-2027.pdf">Indian Payments Handbook 2022-07</a> explains two prevalent challenges with cross border payment solutions –high transaction cost and the long duration for end-to-end settlement of cross-border payments. The average price of receiving inward remittance is 6% at present. The United Nations is working on reducing this cost to 3% by 2030. In fact, it is one of their Sustainable Development Goals (SDG).

Furthermore, according to the Handbook, India is the largest market for inward remittance flow, making seamless cross-border transactions crucial for the economy.&nbsp;

However, these challenges serve as the biggest threats to the business landscape. It means letting go of a significant sum in every transaction and delays in receiving payments. These factors trigger critical issues such as cash flow, reduced profit margin and increased debt.

Payment platforms, like Skydo, aim to revolutionise the sector by making cross-border payments more efficient and cost-effective. Let's understand the pros and cons of cross border payment solutions in detail and how to choose the right payment gateway.

Currently, the most common ways to send money across borders are through banks, credit cards, e-money wallets, and mobile payments. These methods often depend on systems like SWIFT or the related payment platform. As a result, international transactions are usually slower, more expensive, and less transparent than domestic ones.

Hence, cross border payment solutions are fundamental for business growth and expansion. Here is how they help businesses receive global payments seamlessly by tackling regulatory challenges.

Many businesses are sceptical of offering their services or products to international clients because of payment delays. However, cross border payment solutions like Skydo help receive cross-border payments quickly by incurring low costs.

This enables entrepreneurs to expand their business globally, get access to a large client base, and boost revenue.

Cross border payment solutions can accelerate transactions and optimise cash flow. The processing time for global payments through banks is around 5-10 days. However, it can take up to a month if the transaction gets stuck due to regulatory challenges or inadequate details.&nbsp;

Digital payment gateways like Skydo significantly reduce the processing time for cross-border payments by opening a virtual bank account for your business in another country.&nbsp;

This way, the client can remit the money to your virtual bank account in the respective country, which will pass through the Skydo platform and into your bank account maximum within T+2 days. You can further track this whole journey through the tracker available against each invoice.

3. Currency Conversion and Risk Management

In tech service exports, businesses often lose money due to currency conversion fees and additional hidden charges. Skydo’s cross border payment solution offers transparent currency conversion by displaying real-time exchange rates.

They also offer competitive exchange rates and help businesses calculate the accurate currency cost compared to traditional banks.

Some payment gateways also help manage currency conversion risk by offering hedging options. It allows businesses to hold their payments securely in case the value of the foreign currency depreciates.

4. Enhanced Security and Fraud Prevention:

According to a <a href="https://www.pymnts.com/news/b2b-payments/2022/56-percent-businesses-are-concerned-about-cross-border-payments-fraud/">survey</a>, fraud in global payments is a concern for 56% of businesses. Moreover, 52% of them also consider data theft during payment transactions as one of the significant risks in international payments.

cross border payment solutions mitigate this risk by offering enhanced security measures. Payment gateways use artificial intelligence systems to detect and stop fraudulent activities.



Learn more: <a href="https://www.skydo.com/blog/how-skydo-increased-success-rate-on-international-payments?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Breaking Barriers, Bridging Borders: How Skydo Increased Success Rate on International Payments</a>

While cross border payment solutions have been a game changer for businesses in expanding their services to international markets, there are four significant challenges - cost, speed, access and transparency.&nbsp;

High transaction cost is a significant roadblock to receiving global payments. The complexities arise primarily because a) multiple currencies are involved and b) various channels or levels in payment flow, such as banks, payment facilitators and payment operators exist.

The <a href="https://www.google.com/amp/s/www.livemint.com/brand-stories/how-to-save-on-international-money-transfer-rates-fees/amp-11687963871859.html">average cost of international wire transfers</a> is between $15-$75 per transaction. Therefore, before you choose a payment gateway, research and compare the transaction value in-depth, currency conversion, and processing fees charged by cross border payment solutions. Moreover, you must be aware of any hidden costs levied by the payment service provider.

Regulatory challenges and adherence to international financial compliances are massive obstacles while dealing with cross border payment solutions. Businesses have to navigate through anti-money laundering laws in foreign countries. Global payments often get stuck in regulatory processes, leading to unnecessary delays.

<a href="https://fbj.springeropen.com/articles/10.1186/s43093-020-00013-0">Studies</a> suggest that foreign exchange rate volatility harms cross-border imports and exports. Multiple currencies are involved, and the value can change at the time of the payment. If the value of the foreign currency decreases, your earnings in Indian currency might take a direct hit.

The best way to avoid exchange rate risk and receive accurate payments is to quote proposals in INR.

Learn more: <a href="https://www.skydo.com/blog/how-much-forex-fees-do-you-pay-on-your-international-transactions?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">How Much Forex Fees Do You Pay on Your International Transactions</a>

"The biggest issue is when I receive a wire: What does it relate to? What invoice specifically or a combination of invoices does it relate to?” — A large company in Chicago during the <a href="https://www.frbservices.org/binaries/content/assets/crsocms/news/research/wire-transfer-research.pdf">B2B Wire Transfer Payments Study</a> commented.

Receiving global payments through wire transfer does not provide much remittance information, making it difficult to reconcile payments with invoices, especially if multiple invoices are sent to a single client.

According to a <a href="https://www.frbservices.org/binaries/content/assets/crsocms/news/research/wire-transfer-research.pdf">study</a>, 94% of people consider remittance information valuable. However, cross border payment solutions often fail to provide this information, leading to extra manual efforts.

A seamless customer experience is the backbone of an efficient global payment system. However, business owners and account managers are forced to spend time choosing the suitable currency, dealing with currency exchange rates and resolving language barriers on cross-border payment platforms.

Moreover, businesses often have to worry about data security, facing regulatory challenges, payment delays and hidden charges, making the whole process cumbersome.

Learn more: <a href="https://www.skydo.com/blog/don't-stay-in-the-dark-anymore-monitor-your-international-payments-from-sender-account-to-your-account?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Don’t Stay in the Dark Anymore: Monitor Your International Payments From Sender Account to Your Account</a>

Another issue with cross border payment solutions is the disruption of digital payments through technical glitches, downtime, or software failures. This can lead to delays or failure in receiving global payments. It further results in loss of revenue, extra transaction charges, operational inefficiencies, and customer dissatisfaction.

However, you can mitigate the risk caused by downtime by creating a contingency fund that they can use in emergencies. You must also recommend negotiating the payment terms with the customers and vendors to receive advance payments.

The world is witnessing an <a href="https://www.mckinsey.com/~/media/mckinsey/industries/financial%20services/our%20insights/the%202022%20mckinsey%20global%20payments%20report/the-2022-mckinsey-global-payments-report.pdf">embedded finance revolution</a> where individual consumers and businesses are not relying solely on banks for their financing needs. Finding the most suitable payment gateway becomes more stressful. Here is a quick and simple guide to help you shortlist the ideal cross border payment solutions for your business.

When onboarding vendors, it's crucial to assess if they can effectively address your unique business challenges and contribute to your growth.

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