What is cross-border payment regulation?

cross border payment regulation

A growing market welcomes customers from various countries around the world. Because of the need to allow trade between different countries, the regulation of cross-border payments has been introduced. This is one way to optimize international market conditions.

At PayRetailers, we believe that this is a way to ensure a transparent agreement can be reached in international or foreign transactions. Let’s take a closer look at this.

What is CBPR?

CBPR was devised to combat the mistrust surrounding data and its misuse. This is a system of cross-border privacy rules created by the Asia Pacific Economic Cooperation (APEC). 

This greatly benefits companies and consumers who make sales and purchases of products with foreign individuals. With it, the privacy and personal data protection policies and practices are accepted by both parties involved, and an unwavering commitment is made.

This lays the foundation for safer and more reliable transactions in the world, thus improving each country’s global economy. On the other hand, those who don’t have full knowledge of the EU cross-border payment regulation receive technical assistance, as it is a legally required document.

Modifications have also been made to these regulations, since these laws regulate payments. This is because a great disadvantage was detected for countries that are not part of the European Economic Area, in which the euro is the legitimate currency. 

These moves have been made with the purpose of improving procedures and the world economy. Let’s take a look at the changes and the benefits obtained as a result worldwide.

What is CBPR1?

The creation of the CBPR1 or  regulation of cross-border payments led to a drastic reduction in fees for travel paid in euros. Costs for countries that are not included in the European Economic Area (EEA) have been very high.

Many of the countries that participated in these payments did not benefit because their official currency was different from what the EEA required. Additionally, payments were excessively high, and it was difficult to make them in full. 

This way, there was a barrier that prevented an equitable payment service from being used without devaluing the currency of the country in question.

​​Cross-border payments and football – a perfect duo to expand businesses in LATAM

What is CBPR2?

On the other hand, the CBPR2 refers to all matters related to the transparency requirements for currency conversion transactions and the requirements in force for permitted negotiations. It is also related to the awareness of the fees associated with cross-border transactions in euros to any current currency. 

Additionally, as sufficient transparency had not been achieved to carry out the exchange of information, a second system was devised. That is why the CBPR2 goes further and promotes new requirements for these types of international transactions.

A revision of the previous regulation was made in order to provide a source where payments made in euros would not be too costly, especially when the transaction is not being made in euros. Online credit transfers and card transactions can be initiated based on the following principles:

  • Expansion: Due to the unequal pricing that existed previously, the regulation was revised and it was specified that the fees and charges involved in a cross-border payment converted into euros must be the same for all countries. Regardless of where in the world it is executed, a very similar value to that of the EEA must be paid.
  • Transparency in transactions and transfers: Since 2020, these market movements have been deemed to involve currency conversion. For this purpose, the customer shall be provided with all relevant information regarding its performance, which includes the total costs for the conversion, together with a profit margin. The total amount to be paid must also be converted into the currency handled by those completing the transfer, as well as the fees to be applied to the transfer, and the final amount to be transferred.
  • Electronic messages: For the 2021 cross-border payment regulation, it was concluded that the card provider must issue a message applying the margin produced with the payment. This must be provided free of charge and be easy to understand, in order to avoid misunderstandings and disagreements between both parties.

What are cross-border payments?

How does it impact cardholders?

This FCA cross-border payment regulation has a positive impact, as it has been designed with both parties in mind and is intended to be fairly enforced. The benefits reported are:

  • Increased confidence and business growth, since sending payments to any part of the world is not a problem, and we have the essential resources to do this.
  • Increase in the number of clients in different countries, since this is not an impediment to completing transactions in which both are benefited.
  • Greater visibility in the global market and high probability of increasing purchases and sales through various communication channels.

However, the main objective is to improve the flow of transactions in the world and overcome all those challenges that could slow down the expansion of the economy. On the other hand, all payments are becoming more and more secure, which creates a greater awareness of the transaction to be carried out.

At PayRetailers, we believe that cross-border payments are a great help to the economy, not only nationally but globally. To this end, we are ready to assist you whenever you need advice on payment-related platforms. Contact us!

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