With the increasing popularity of cross-border fashion purchases and operations, many retailers and suppliers are looking for ways to enhance profitability and efficiency by streamlining cross-border payments. This can be achieved by leveraging technology and dedicated payment partners.

Globalisation has long been a reality, particularly in the fashion industry. According to the IPC Cross-border E-commerce Shopper Survey 2023, which surveyed 32,510 consumers worldwide, clothing and footwear are the leading categories for cross-border purchases, with nearly 40 per cent of respondents buying apparel from outside their home country. While fashion retailers and suppliers welcome the growing business opportunities globally, cross-border transactions can significantly impact business efficiency and profitability if they are not handled properly.

Modern fashion houses, regardless of retailers and textile suppliers, often operate across many borders. For instance, an outfit designed in the U.S. could be manufactured by contractors in China or India and sold to customers in the U.K. This type of supply chain requires multiple payments in various currencies.

For many, managing foreign currency conversion, international transaction fees, and exchange rates could consume considerable time and incur significant costs. This highlights the importance of partnering with a fintech and payment solution provider to streamline these processes and reduce costs by facilitating local currency payments.

The Benefits of Paying in Local Currencies

This process of paying partners or vendors in other countries can be more complicated than it seems, even when it involves paying them in USD. The transaction cost of sending a USD wire transfer can range from $10 to $50 per transfer, not including lifting fees charged by an intermediary or receiving bank, which can result in the payment not landing at full value.

When sending USD to a foreign vendor, more intermediaries are typically involved, especially if the payment needs to be converted to the local currency because the vendor does not hold a USD account.

As a result, foreign vendors issuing bills in USD typically incorporate exchange rate risk into the total invoice, potentially adding a surcharge ranging from 5 per cent to more than 15 per cent, depending on the volatility of the local currency.

Alternatively, paying vendors in local currency can be beneficial for all parties involved. It avoids potential additional fees, such as conversion costs and lifting fees, and provides transparency, as both the vendor and the paying company know their costs and can ensure they are stable over time. This streamlined process may increase transaction speed and lower costs by eliminating some intermediaries and thus the number of entities taking a portion of the transaction.

A payments partner with a wide currency offering can ensure suppliers operate more efficiently without the added costs and delays of currency conversion by local banks.

The Importance of Working with a Technology Partner

Leveraging technology in cross-border payments can streamline the process efficiently and effectively. For instance, Corpay’s bank search and IBAN validation tools can help validate banking information and reduce manual entry errors by prepopulating the banking information. These features can be tailored to fit each business's unique needs. Additionally, using a payment provider that offers in-country payment rails can lessen charges, ensuring the full value of the payment reaches the supplier. If suppliers receive less than expected, it can strain the relationship. Further, Corpay offers flexible integration methods, ranging from manual entry to file uploads or API connections, allowing businesses to process payments in a way that best suits their operational needs.

To further mitigate risks, businesses can consider hedging their FX exposure. By locking in exchange rates, companies can protect themselves from market volatility, ensuring more predictable costs and safeguarding profit margins.

Moreover, having a payments partner that provides white-glove service is crucial for handling post-transaction enquiries, ensuring suppliers receive timely responses whenever there are payment-related questions. A dedicated account management team providing around-the-clock support offers personalised service and support for global clients, enhancing the relationships between different suppliers and stakeholders.

If you are currenting in the fashion or textile industries and are working with banks or other providers, it is essential to evaluate whether the service is timely and if you can access information on demand. Continuously improving supplier relationships by alleviating their burdens and offering a personalised level of service they might not be receiving from other providers can set your fashion business apart. An integrated payments partner can take on the complexities of FX management, reducing risks and allowing you to focus on growth and efficiency. By managing FX risk effectively and ensuring smooth transactions, you can foster stronger supplier relationships and streamline your global operations.