Global Payments Landscape: Credit Card Surcharges, Cross Border Payment Options and Challenges

[0:00] Narrator:

Hi everyone. Thank you for joining us today for our global payment landscape. The matter of the discussion is posted above here. As a tech lover, Camila Durante believes there is always room to do better and be different every day. Process efficiency, automation, and teamwork are her strengths. Yeah, at L’Oreal before credit Camila worked as a commercial controller for the previous employer IBM, where she worked as pricier for outsourcing services. Elizabeth Chamorro is the credit manager at Yaskawa. America Incorporated, a leading manufacturer of industrial automation equipment. She has been with us for the last 23 years in various credit and collections roles within the organization. She’s an accomplished international credit manager with strong business acumen in-depth experience in all facets of domestic and international credit cash management, and accounts receivable and accounts payable. Order to cash coordinator Marianna, a unique combination of financial expertise and technical knowledge, has a letter to work with some projects and also for her passion. And for continuous improvement processes, she won seven awards in the previous stop. She is Brazilian but currently is living in Montevideo, Uruguay. And Ariana has lived in seven countries and four of them because of her last stop.

[1:29] Host:

All right, thank you so much. Can you hear me at the back? All right. Thank you so much for joining us. The wonderful panel today. We’re going to start with the first question that I have and it’s for all of you. You could go one by one. The question is for cross border trade and cross border payments, which are at an all-time high. So what according to you are some of the things that have driven this trend over the last couple of years?

[1:57] Camila Durante:

Well, I would say that of course business growth for sure. And the point of having to simplify like everything, so I want to go global, and I needed to make it easier. So I have to understand how the other countries would work and how the customers would work there. So we can process everything. So simplicity is very important for that. So it makes sense. Yeah.

[2:32] Mariana Rodriguez Costa:

And also because the business grows beyond countries, so it’s very easy to do business nowadays. So I can buy something from Brazil and in Brazil, from China, I can go travel to Vietnam and I can buy everything by myself. So I think things become easy and very accessible to everyone. So not just for big companies, but also for small companies and people. And also we can see a lot of changes occurring during the companies. So for example, my company Syngenta, creates financial centers, three financial centers are all over the world, and trying to optimize processes and try to look for similarities across the countries and make things easier. And we have banks as a partnership so they can support us. Like our Broken barriers account across the countries.

[3:32] Elizabeth Chamorro:

We’re seeing the trend of expanding its competition which is key. Globalization is key, the appetite for growth. For some companies, maybe the product is already saturated locally, and they have the opportunity. Maybe that product isn’t scarce in the country. So now they have the ability to trade with those countries. If you have a surplus of products, you can dispose of the product in other countries. Also, the ease of selling overseas, to me is a big thing because when we started transacting internationally, one of the things that I started looking at 25 years ago was credit insurance. Credit insurance 25 years ago was in no existence in the United States, but throughout Asia and other countries trading with credit insurance, it was the norm. So when we started trading outside the United States, I started talking with the friend, underwriters and the policy, the way I wrote my international credit policy is the only way national sales must be insured. So we have been able to expand transparency to the customers. They don’t know that we are insuring the receivables and yet we are able to offer them open terms. Also, due to competition and new markets for ourselves, we are able to even offer extended turns because we’re tapping into something new. So real-time remittance, depending on what country you’re dealing with, you can have funds available immediately to you, depending on MRM. You can either invest or pay down your loans. So it’s a win-win when you cross borders and you do business outside.

[5:30] Host:

As the world gets smaller businesses should get bigger. So move on to the next question. And again, for all of you- What are the biggest risks you see as a finance professional on the supplier side when accepting cross border payments?

[5:48] Mariana Rodriguez Costa:

Yeah, I think that it’s the fluctuation of exchange rates, mainly Latin America, that the currency is very volatile. And other government policies and regulations. Taxes, because it’s very different from one country to another one. And also bank security is very important. In Brazil, for example, we have a high risk of fraud. So our banks are becoming much better with this situation to try to become more secure and that’s it.

[6:21] Elizabeth Chamorro:

Also, with the increase of international transactions, payment errors have also increased at the same rate. You know, it’s been said that it’s contributed to the lack of consistency, and customers are still used to doing things manually. So it’s open for a lot, as the volume increases, we definitely need to start looking into automation. And some other countries still rely on manual processes.

[6:53] Camila Durante:

Taxes are really high in Brazil. And if you don’t do a very good business case to the government, not the government but with your supplier, for example. It might not be a good business so you don’t just have to pay taxes for the government. You have to pay taxes for the bank, for example. And it can be even cheaper. So you have to put everything on the table and see, with all those taxes, it’s still worth it. Can we make money and also payment terms? So, depending on the payment terms, it’s not like in the country when you have like “Are you paying for 30 days?”, not like this, you have the timing processes from one country to another. For example, for Brazil to the US, it would take four business days in addition. So I don’t know how to be with companies if a fiscal person visits. And you have to add it to this view. I received my money in time to continue to deliver the services. So taxes and payment terms are very important, something that you have to consider when doing the business case. Makes sense?

[8:21] Elizabeth Chamorro:

Yeah. Also the exchange of information through the internet. How many fraudulent transactions do we see? And we are in a global economy. I think the risk of transferring that information through the internet. You know, there are hackers out there trying to steal your bank information, so they can take money out of your accounts. And as she said, taxes are a big thing to just be in compliance with the particular country. It’s tough and something that we as creative professionals have to be aware of all-in and how are we going to kind of police what sales are doing to make sure that the transaction is truly in order to cash, you know, you ship your product and you collect your funds.

[9:13] Host:

It makes sense, and I don’t like sales guys either. Okay, so the next question is then to you, Liz. So let’s switch to a payment format that you know, everyone is familiar with these days. Credit cards. So what are some of the risks and concerns you know, including surcharges and convenience fees when accepting international credit cards?

[9:36] Elizabeth Chamorro:

Well, I think we’re transacting with credit cards. Here in the United States, we all hear the stories of compromising customers with our credit card information. People are stealing the data, sharing with other people within companies like Seagate, man lost millions and millions of dollars in transactions like that. So one of the things that I think we have to be careful of when we transact, we are offering this additional payment method internationally. It is making sure that you have a good relationship with everybody that is involved in the process, which is the supplier, the gateway, the processor in back to your bank. We need to have PCI compliant, and make sure that the people that are involved in the process are also PCI compliant, in order to, you know, to protect, protect all that data. I don’t think accepting credit cards overseas. We don’t have to worry about convenience fees because convenience fees are something that is for convenience. It’s the privilege of allowing you to pay using an alternative method of payment. Let’s take, for example, the big example is utilities. Utilities, the standard terms is a check.

You know, they haven’t gotten away from that. But now they’re giving you the privilege of using a credit card to pay your utility bills in a set amount. It can be a percentage of your credit card, a percentage of your transaction. So I’ve been dealing internationally, that term would not even though people use it, interchangeably. Whereas surcharge is to help you offset your interchange fees. So your customer is asking for the convenience of letting you use your credit card and for the fees that incur that convenience. I want you to help me offset some of that cause and he could be again in, “It’s up to you. It depends on the strategy you’re using.” I use a percentage of the transaction, as long as you don’t go above and beyond what the credit cards are charging you. You can pass that fee to make money. It’s just to help you offset not all the charges, but some of it.

So I think as we continue to expand as we continue to do business overseas, the use of credit cards is going to become even higher than it is today. It’s the new evolution as well as when you first was it was no business to the consumers and the use of credit cards, but it just in the last maybe 10 years or so is what corporations are starting to offer that payment method. And we’ve gotten smarter. We do a surcharge. We’ve gotten smarter because we just feel that the cost is so high and it’s right from the bottom line. When sales offer this avenue, they don’t take into account. Do we need to increase the prices? What do we do? You can’t just say, “Oh, I’m paying three and a half percent for a surcharge. I can just do a price increase.” So the way we do it, you have to be smart. You have to work with sales, you’ll have to get the buy-in from management and implement a process of the program or surcharging your customers. It’s in as long as you stay where you are settling the payments is a surcharge to stay. You can charge a fee or surcharge for the use of credit cards throughout the world. I learned that through my legal department.

[13:49] Host:

Yeah. Because a lot of people use surcharge and convenience fees very loosely and interchangeably.

[13:57] Elizabeth Chamorro:

It’s two different things.

[14:00] Host:

That’s good. And it’s nice to be brought up. I got a little quiz a little later in the session where I’m going to ask you timelines on how the global payment history has gone from where we’ve reached this point. We’re using this. So, the general knowledge quiz at the end, stay tuned. The next question is for all of you. We can start with Camila. So what role do your accepted set of payment formats play in giving you a competitive edge in a global market? Maybe you have some examples you’d like to share from experience?

[14:36] Camila Durante:

Well, we don’t use credit cards just yet. But Brazil has a method of payment with a barcode and that you just scan that into your bank and it can be very easy and the reconciliations automatic also with my accounts receivable but then we’re not going competitive because most of my competitors are already working with credit cards. And we want to go to the same level now. But we had a problem with the credit cards. Like I said before, it’s Texas. So we didn’t use it before because we had a very simple system, which is the Boleto. And for credit cards, you need reconciliation along with taxes. When I received the money from the credit processor, I didn’t receive the money. I have my IRB with very detailed information. So I need the same kind of information to do the reconciliation when I received the money from the card processor. I receive it in bulk. So they don’t tell me which invoice they’re paying. And also they already take out their fee. So it ends up that I have to ask for an additional package that will help me do this reconciliation and I have to have an API link with the card processor so I can have that unless your business is really small you can do it manually. But how can you do that manually? It’s terrible. So this is a must-do and that specific disordinal part of the business that goes with working with a credit card, it’s also expensive. And one also thinks that because we are so behind, we are looking into other methods of payment. Okay, you know, that a lot is going on in Brazil right now. We are a little behind but digital payments are something that is growing in Brazil. And I think we’re gonna get there to begin to come back being competitive.

[17:10] Elizabeth Chamorro:

Can I offer you some products that can help you with what you ever use? The use of a credit card to me was a game-changer when we implemented the credit card solution we integrated with SAP. You get rid of that cash application, you know, the nightmares that you’ll have manually posted those transactions, easy to reconcile with the banks. So if you ever think about accepting credit cards, take a look in contact radios, they have an excellent product and I would recommend that to anyone that is accepting credit cards. One of the things that stayed in my head yesterday when Sasha was speaking is to be the number one, we have to be innovators. We have to adjust to change and we have to be able to change rapidly, right? So competition, Think about it. Price is part of the contract. When we’re dealing internationally, we want to win customers. So payment terms are part of that pricing back and forth between the buyer and the seller. So the more options you have to offer, the more you can win against your competition because you are giving them a good price probably for the product. If you’re new to the industry, it could be that you again, in my case with credit insurance, we are able to stay longer terms and you can offer a credit card, because everybody, the partners in your process, we are all PCI compliance, you work again. So those are the things that give you a competitive advantage of offering different payment methods. Flexible. It’s definitely flexibility.

[19:07] Host:

Marianna, you want to add something?

[19:08] Mariana Rodriguez Costa:

Yeah, I want to add something related to compare it when compared to Brazil to other countries in Latin America. Even when you see that Brazil is a high-risk country, we have among the best big systems compared to other countries. So we can identify five payments on the same day or the next day using wire transfer and Boletos. And which doesn’t happen in other countries. Other countries in Latin America used to take around three or five days to then find the payment. And another challenge that we have in our business is most of the customers don’t like to use digital payments. Some of them used to take the cash in hand, go to the bank and make the deposit to Syngenta. Even when we offer a lot of tools for them and etc. So when we start to use Boleto in Syngenta, less than 10 percent of our customers used to pay through Boleto, which is very easy for us and very, very fast to identify the payment. Now we can reach around 50%. But there are some customers who avoid using internet banking or Boleto, etc. So it’s not just a matter of how much digital tools we can offer to the customer and how to convince them to use these tools. Because it’s a win-win. It’s good for everyone.

[20:28] Host:

Yeah, absolutely. So then the next question is a little more Latin specific. So I’ll direct it towards Camilla and Mariana. So how do you see the Lat Am in comparison to the rest of the world, or even compared to North America in terms of e-payment majority? We hear a lot about the e-invoicing majority in Lat Am, but I’m just curious to understand how things look like on the payment side. So maybe you could tell us some of the challenges you’re facing and some of the opportunities.

[21:02] Mariana Rodriguez Costa:

So let me first explain what the invoice is. Invoices, that text document that we registered the purchase. It’s not a payment method. So it’s very good in Brazil and in Latin America in general. But it’s good for the government to register all the business that is going on in the country, all the taxes we have to pay and etc. So it’s very difficult to not pay your tax in Brazil, because they couldn’t find it very fast. And talking about payment methods, we have a lot of new Fintechs in Brazil trying to bring some new solutions. But most of the business use this Boleto, because it’s very simple, easy and fast within finding the payment and request, relate the account receivables and, but it’s something that just we just have in Brazil, not in other countries in Latin America. There are some countries in Latin America. They like to use credit cards, but they are very high, so less than 10 or 15% of the customers use them. And most of the customers used to pay wire transfer.

In Brazil when we do a wire transfer, we can identify the payment from the customer due to this text number or code that he can put in this process to identify very quickly. In other countries, it doesn’t happen so we have to check one by one. Normally they have to deduct the tax. So it’s not easy like the customer needs to pay $1,000 and we can add $5,000 more, it will be $915 and we have to call the customer to make sure that he’s paying this amount, etc. When we’re talking about a small country, it’s easy to do that. But when we are talking about Brazil lets for example in Syngenta we have more than 3000 customers. It’s impossible to call everyone to name five payments that receive almost every day. So I think that it’s good when you are in a multinational company that you can share information across countries. And you can try to identify solutions or try to improve your process using experience from others and etc. So I think in terms of technology, Brazil is doing good to identify payments and reconstitute account receivables, other countries not so much. And we have a challenger for example in Argentina, related to exchange rates. So the fluctuation of the currency is very high. So sometimes they took around two or three days to identify the payment which generates a lot of stress if the customer sometimes has deductions and disputes with them, which make our process more complex. In our business. I don’t know if it’s happened in our business but in agribusiness, it’s the way it works.

[23:58] Camila Durante:

I have to say that in Brazil the payments, the digital payments have grown exponentially in the last five years. In 2018, it was like two times bigger than normal payments, go to the bank and everything. And now we have digital banks, a lot of digital banks are coming. Starting in Brazil also with the QR code payments and paying with mobile phones. This is very new. And it’s also too much for most of the B2C, not B2B. But we have a space for B2B there. So I’m sure often taxes are working right now to solve this and personally one of my end of the year goals. Thank you.

My bonus depends on that. And I need to find a different payment method for my B2B for a specific division, the division that for professional hair products. They are business like a company, but they’re also so informal that it’s like an individual person, a consumer. Right. And the way they work, it’s like a B2C. So I have to think about different ways to do that with them. And it’s, I read that Bob Central, the Central Bank of Brazil is working for 2020 for instant payment. And if we have this instant payment in Brazil, then the central bank is going to manage it directly with very few intermediaries. It will lower our taxes a lot. So if I have a challenge today to pay too much taxes for my card processors, and that increases my difficulty to start working with credit cards when I have this instant payment, not only will it be cheaper, but also 24/7. Because, for example, if I do a transaction in Brazil, on Friday, nine o’clock, it will only appear in the bank for the person or the company like on Monday. Instant payment. It will work Saturday and Sunday. So, we’re getting there.

[26:24] Host:

I think it makes a big difference. Okay, so time for the quiz. general knowledge quiz. Okay. So how many of you know or does anyone know when the first checks were issued in the United States? Take a wild guess. Did I? Oh, that was an accident. Okay, I’ll just bring it.

[26:43] Elizabeth Chamorro:

Okay. So everybody knows the answer.

[26:45] Host:

Yes. In 1681. It was really long back. 1850. Yeah. 1850 American Express launched as a fast snail mail delivery service. That’s 170 years ago. 1872, Western Union added wire transfers to the existing telegraph network. I didn’t know that. Western Union is that old. 1974 ACH deposits were launched four years later. All locally ACH were connected in 2011. Credit card credit cards accounted for just 3% of all B2B payments to the point you were making. 2014 credit cards accounted for 10% of all B2B payments. And I just heard you say in the last two years, it’s gone up five times. It’s definitely.

[27:40] Camila Durante:

3 times in the last year. In 2018 was three times more.

[27:43] Host:

Wow. So you could just imagine, it probably is close to 30%, maybe more. And now with the last question of this discussion. So what do you think is the next big thing that’s going to take the payment space by a storm and how do you Think technologies like cryptocurrency would bring the shift in the payment mode.

[28:09] Mariana Rodriguez Costa:

So I think that QR codes will be started. I think there are some countries where they’re using QR codes to do this payment. For me, it’s like new Boleto for all countries, like could be the same for everyone. It’s going to be easy to identify and very fast identification and reconstitute the account receivables and cryptocurrency real-time, same-day daily learning how to deal with that and how to control the exchange rates and the fluctuation, and etc. But I think it will be the future to do global business and to improve the process and do it fast. So, but I think we’re still learning how to do that. We figured it out. Yeah.

[28:53] Camila Durante:

Working with this, you need to first need to learn how to work with that. So we need to know what our weaknesses are, so we can focus on that. So at the moment that we see each country that I’m working with, I need to go to the weakness and attack that. When we do that, we have fewer problems or troubles in the future.

[29:19] Elizabeth Chamorro:

What about ACH? You know when we talk about ACH, that everyone chooses locally here in the United States, and but we transact like Canada, even though we are neighbors still, another country, all of the transactions practically happen in ACH. 90, probably close to 100% of our customers pay us via ACH especially now with real-time ACH, a same-day ACH. I think it can be another revolution in the payment space. Doing international definitely is more cost-effective than wires. wires are very expensive for the seller and for the buyer, I mean for the buyer more than the seller, but we get hit with them. Because my customers are sending me wires and they are also paying for you know in their own local place whatever they transact in that. So I think ACH is something that we should start looking at also and see if we can expand to other countries.

[30:25] Questioner:

Okay, then, everyone, Thank you so much. That was a really nice and great session. A couple of quick things. So we have a lot of partners, banks who are partners with us, Commerce Bank, PNC, Bank of America, Citi. So if you want to meet any of them, you could probably go on the field. If you cannot find someone you want to reach out to, you can reach out to me. And before we end, maybe we have a couple of minutes left for questions. One or two questions.

[31:18] Elizabeth Chamorro:

You know how I was a little bit creative when I implemented the program surcharge, the way we do and it’s sort of offering a discount for paying with a credit card. Discount in the sense of, you would not be surcharged if you pay me within five days of the date of the invoice. But you will pay if it goes past the five days, so it’s a win-win. If the customer doesn’t want to encourage them they still get the 30 days because credit cards usually offer 30 days to pay up all right. So they are still taking advantage of those terms that you offer. And it’s a win-win for me. Because offering that, you know a competitive advantage over my competition, I’m offering those terms and I’m getting the cash faster rather than waiting 30-60 days. Also what we do is if we allow the customers to pay past dues, but the surcharge rate, it’s a little bit higher. So we have three different rates as either zero if you pay me X amount of days from invoice day. It’s a surcharge if you pay me between now and the due day, and an additional charge if you pay me past due.

[32:42] Unknown Speaker:

(Audience inaudible)

[32:46] Elizabeth Chamorro:

Internationally no because I don’t think ACH exists yet during international shipping, Canada. They are but can you translate outside the country? Okay, because we don’t. Maybe something to talk about. But I know there are other countries that don’t do cross border ACH.

[33:22] Host:

Yeah. One last question. Does anyone have any questions? Okay, before I end I just remembered. So Simon here is from Citibank. And they just recently launched a product called Global Collect. And if you have any points you want to talk, if you want to have any discussions around the Global Collector product that they have launched, it’s going to help enable this initiative of you to know, global payments being made easier, the whole experience. So feel free to reach out to Simon from Citibank or me or anyone from HighRadius can lead you to the partnership team. Thank you so much. Ladies, thank you audience. You guys have been great.

[34:02] Elizabeth Chamorro:

Thank you, everyone, for attending.