Enhancing Cross-Border Trade: Leveraging the Green Channel Facility for Faster Transactions

Broadly, there are two types of cross-border transactions:

Typically, these are processed between financial institutions, either to support the customer activities of the institution or for its own cross-border transactions such as foreign exchange, borrowing and lending, trading equity and debt, derivative securities, and commodities. 

Larger non-financial institutions and Governments incorporate wholesale cross-border payments for large transactions initiated by the import and export of goods and services as well as for trade in the marketplace.

Generally, these are carried out between businesses and individuals. The major types are person-to-person, business-to-business, and person-to-business. These incorporate remittances, most significantly money that migrants send to their homes.

Here are four substantial cross-border payment experiences that are competing in the age of technology as a result of continued innovation.

Businesses tend to carry forth transactions across borders to various countries, having different currencies. The department of treasury in these international companies regularly analyses and tests digital technological solutions for optimising the cross-currency workflow without disturbing the already existing operations. Hence, this is the reason behind Application Programming Interfaces (APIs) gaining a prominent position in this field. 

APIs are simple, plug-and-play solutions that readily integrate with current financial infrastructure and interfaces. As an outcome of knowing FX rates early in the process, treasurers are able to get real-time visibility into FX rates from their existing systems, allowing them to efficiently handle currency exposure, minimise risk across their international accounts, and streamline reconciliation.

Corporate treasurers may additionally lock in FX rates for specific amounts of time using API connectivity, allowing them to fix a price of their goods that best suit their customers while still properly managing finances on the backend.

Businesses now have better access to a broader range of settlement mechanisms with international reach, and suppliers can offer payment solutions without the expense of complex, technological overhead. 

For instance, For example, instead of using wire transfers, providers can enter into collaboration with banks in order to utilise local clearing rails for processing cross-border payments. As the sector progresses, it is looking beyond typical clearing rail developments and embracing technology such as SWIFT GPI, virtual account management, and API access to improve the recipient and sender experience.

API access provides the recipient and sender with enhanced visibility and transparency with regard to their payment status. The sender can view FX rates before initiating the payment. When an issue emerges during a payment, recipients can track it and receive updates at all times. Both beneficiaries and senders can monitor their cash holdings wherever they have a bank account after it is introduced, which can lead to increased predictability.

As the sector progresses, it is moving beyond typical clearing rail developments and embracing technology such as SWIFT GPI, virtual account management, and API connectivity to provide an enhanced experience to the beneficiaries as well as the sender.

Many companies maintain Direct Deposit Accounts (DDA) in those nations where their customers reside. Because of this configuration, firms’ money is scattered over multiple countries, user accounts, and currencies, which can result in confusing reporting, inactive financial balances, and unnecessary exposure to cross-currency risk. It is in these situations where virtual account management is sort to for solutions.

Having virtual accounts grants the clients access to a flexible cash flow across currencies with a centralised account structure. Thus, through a centralised account structure, virtual accounts enable clients to monitor cash flow between currencies.

As a result, companies no longer need to manage numerous local accounts for the same markets. Using centralised account structures helps organisations improve payment sequencing and manage precise reporting all under one roof.

Furthermore, utilising this arrangement, businesses can conveniently transfer and/or consolidate their balances kept in one currency account to the other currency account or they can even fund local payments through a centralised account.

This allows businesses to optimise liquidity, limit risk exposure, and function in the currencies that are most suitable for their operations.

In the cross-currency, cross-border transactions market, real-time payments are highly preferred and appreciated. Through globalised relationships, suppliers may provide senders with more options for making real-time FX payments. Rather than a lengthy settlement time, clients are able to pay their consumers and vendors immediately, with minimal disruption irrespective of the country they are located in.

Furthermore, with the help of distributed ledger technology, cross-border transactions will be managed quicker, cheaper, and more securely in the near future. This shared digitised, irreversible ledger technology, referred to as blockchain, enhances cross-border wire transfers while reducing the time taken for clearance. It will also ease the sharing of data regarding trade and transactions across borders, increasing payment visibility across the payment continuum.

The payment industry is constantly striving to provide enhanced user experience with the objective of making end-to-end transactions quicker, safer, and transparent across borders. One example is incorporating technological advancements into traditional clearing rails that will enhance existing technology; another is developing new solutions such as real-time payments and wallets. This is driving current digital trends and will keep setting the agenda in the years to come, resulting in new technology and payment methods, as well as the rise of a diverse range of non-bank payment providers.

Collaborating with a reliable partner who can offer an extensive suite of connectivity will be essential for integrating cross-currency solutions into existing workflows and ensuring organisations keep pace with the worldwide growth and rising customer expectations.

The Green Channel is a unique clearance of commodities that does not require regular physical examination. This applies to hauls that are minimal to no risk in nature. Taxpayers from these industries receive priority treatment in order to expedite refund processing. 

The taxpayers who fulfil the conditions listed below are eligible to participate in the green channel:

• A regular taxpayer having a solid compliance history and no skepticism
• A taxpayer who has no prior involvement in fraud or unethical activities
• A taxpayer with no previous record of exporting prohibited commodities that are restricted from being transported to non-government-approved destinations
• A taxpayer who always follows all tax laws, regulations, policies, and guidelines at all times
• A taxpayer who complies with all KRA criteria
• A taxpayer who is willing to produce documents or records whenever required
• A taxpayer who is prepared for any post-audit issues that may arise
• A taxpayer who follows all Green Channel conditions and is dedicated to continual improvement of the Green Channel’s operations and standards

The procedure of enrolling into green channel is finalised after the taxpayer agrees to the specified terms and conditions, and the commissioner’s approval of the application.

The green channel reduces clearance limits and speeds up processing, resulting in ease of conducting business and speedy refund processing for green channel claims.

Exporters and importers who are interested in broadening their markets internationally must be familiar with cross-border payments. Keeping up with the latest advancements can provide your consumers with the greatest possible payment experience and encourage repeat business. International payment procedures can be tricky, therefore it’s worth collaborating with an experienced PSP who will assist you in overcoming any obstacles. As the global economy grows more interconnected, there is a growing demand for rapid, efficient, and accessible payments on a worldwide scale.

Cross-border transactions are increasing for businesses as well as consumers with developments in eCommerce, migration, and global trade, from people sending money to their family members residing in their native countries to the growing online marketplaces. Many projects are currently underway in collaboration with central banks, international organisations, and the corporate sector, all of which are improvising to solve chronic hurdles and gaps. However, the most enduring obstacles in cross-border payments will be compliance with anti-money laundering and anti-terrorism funding regulations.