The Power of Cross-Border Unification
Reach is a Business Reporter client.
Reach has consolidated a complicated payments ecosystem into a comprehensive solution that saves money for cross-border businesses.
Doing business in a market outside of a company’s jurisdiction of origin is not as simple as setting up an e-commerce website and establishing shipping logistics. This method may suffice for domestic transactions, but it presents challenges and the potential for significant costs if adopted for international sales. This can eliminate already thin margins and render global market access unfeasible, particularly when the risks of foreign exchange are factored into the mix.
Sam Ranieri is the CEO of Reach, a global financial services firm that has developed a unique technology solution that specifically addresses the challenges companies must confront when conducting cross-border business—and it can save them money.
“Current cross-border transactions generally have three banks between the seller and the buyer: an acquiring bank, an issuing bank and a processor in the middle,” says Ranieri. “For businesses, you have to understand that as soon as you put a border between you and your customer, you’re going through a default and very expensive and complex way of paying for things.”
The reason for this expense, as Ranieri explains, is that each bank takes a spread fee on foreign exchange that could be as high as 2.5% of the transaction value. That foreign exchange spread is in addition to processing fees, which can add an additional 2% to 3% per transaction. While large multinational organizations with their own comprehensive treasury departments and a corporate network of international subsidiaries can offset these costs to a certain degree, most businesses can’t afford to lose 5% or more of revenue and remain viable as an international seller.
Reach claims it can dramatically reduce these fees and empower businesses of any size, and in any industry, to not only optimize their revenue streams in existing cross-border markets, but also enable them to easily enter new ones. The solution, according to Ranieri, is to remove the border in cross-border transactions.
“We do this through our merchant of record [MOR] model, which is a network of local entities that are able to transact on behalf of the seller to the buyer,” he says. “This localizes the transaction in the jurisdiction of the buyer and eliminates the need for intermediaries.”
These local entities are legally compliant, registered and incorporated in the world’s most lucrative markets, and act as domestic storefronts for sellers in their international markets. This enables Reach to use a local bank to secure local interchange rates, resulting in significant cost savings on the foreign exchange spread. According to Ranieri, this intelligent method of routing transactions also provides additional benefits, such as reducing the risks and costs of fraud and increasing authorization rates and conversions.
“With our model, financial transactions are localized through one of Reach’s local entities, and we act as MOR in the payment flow,” says Ranieri. “That gives us the ability to use a local bank, through our local entity, and get local interchange rates. This drops costs substantially.”
While the e-commerce ecosystem may seem saturated by firms that claim to provide a similar solution, Reach is unique, as its model unifies all the constituent pieces of the transaction into a single package.
Ranieri says that while many tech companies are trying to solve one small piece of the problem with technology, Reach is different. “We consider ourselves more of a financial company that is solving those problems with technology,” he says. “That’s an important distinction between us and other fintechs in the space. We combine an FX solution, local interchange and local acquiring—all of the features that are required globally to access international users—and we’ve bundled them up into one platform that is accessible to all merchants through one integration.”
This integration can be fully built and customized through Reach’s Checkout API, which is designed for large, complex businesses that require a bespoke solution, or it can be deployed quickly through its Drop-In integration. The latter solution, launched in mid-2022, was expressly engineered to overcome the challenges that the current macroeconomic environment is forcing on e-commerce merchants.
“With resources thin in the e-commerce space right now, businesses are looking for a fast and easy way to access global markets,” says Ranieri. “With Drop-In, we’ve done all the heavy lifting on our end so that the end user can spend less time integrating our solution. These businesses can scale and geographically diversify their revenue streams quickly, without committing to staffing and payroll expenses that would traditionally be required to implement and execute a system such as ours.”
These solutions, with complete end-to-end unification of cross-border payments, sets Reach apart from competing firms, says Ranieri. The company has not only developed a robust technological architecture to process international payments, it has also invested in an extensive international infrastructure designed to leverage the power of that architecture.
For Ranieri, what Reach does is about more than simply facilitating international transactions. “Reach is guided by a mission to not only save our customers money, but to reduce or eliminate every point of friction that deters businesses from accessing international markets and selling to their full potential,” he says.
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This article originally appeared in Business Reporter.
Image: iStock id1154857334
