Transactions where the payer and the recipient are from different countries are known as cross border transactions. Such transactions can be made by companies or individuals who need to transfer money to some other country. Moreover, cross border transactions are meant to assist businesses in tailoring their global commerce strategy. By providing consumers across the …
Transactions where the payer and the recipient are from different countries are known as cross border transactions. Such transactions can be made by companies or individuals who need to transfer money to some other country. Moreover, cross border transactions are meant to assist businesses in tailoring their global commerce strategy. By providing consumers across the globe with payment alternatives they are accustomed to, businesses may improve the customer experience and tap into new revenue sources. Cross border transactions facilitate international trade and enable companies to sell or purchase goods, services and raw materials overseas. It further ensures that freelancers or remote workers receive pay for their work regardless of their geographical location. This blog will discuss some common types of cross border transactions and how international transactions work.
Cross border transactions include bank transfers, international wire transfers, credit card payments, debit card payments, digital currencies, cash-based payments, digital wallets or block-chain-based payments.
Bank transfers, often referred to as wire transfers, are a type of immediate exchange of funds using accounts held at each bank involved in a transaction. Wire transfers are more secure, protected, faster and generally have wide geographic coverage. Cons of using wire transfers include high transfer fees as compared to other methods; moreover, there might be additional costs associated with intermediate bank fees and currency conversion fees.
This international payment option is not ideal for transferring large payment volumes; hence not a very suitable and efficient option for business-to-business (B2B) payments.
Direct bank transfer is not possible in all cases; hence they need to complete the transactions with the help of an intermediary/correspondent banking network.
Credit and debit card transactions have become a popular method for cross border transactions, both online and offline. Payment processors and card networks facilitate these transactions by converting the payment into the recipient’s local currency. Many consumers prefer using credit/debit cards as your funds are automatically deducted from the account and transferred to the payee’s debit card account. Using a credit/debit card for the transaction costs both the payer and payee transaction fee.
Credit and debit cards are more convenient payment transfer method which is suitable for both payer and payee as it saves you from complicated transfer processes. Credit cards are accepted worldwide, can be used almost anywhere, and are secure from fraudulent activities. One of the significant drawbacks of using credit and debit cards for cross border transactions is the potential for foreign exchange fees. When a transaction involves converting currencies, card issuers often apply a fee or a less favourable exchange rate, making the overall cost of the payment higher.
Digital payment platforms/e-wallets like PayPal, Stripe, Amazon Pay and Payoneer offer cross-border payment solutions for businesses and individuals. These platforms are used worldwide and act as intermediaries, allowing users to send and receive funds in different currencies quickly. E-Wallets enable users to store and transfer money across countries in multiple currencies. Online payment platforms are designed to be user-friendly, making it easy for businesses and individuals to send and receive payments globally.
The platforms provide intuitive interfaces and streamline processes for faster and more efficient cross border transactions. Most digital payment platforms offer integration options with e-commerce platforms, websites, and accounting systems, allowing businesses to incorporate payment processing into their existing operations seamlessly. The drawback of using digital platforms for cross border transactions is that it often comes with a high transaction fee, and these fees can vary depending on factors such as the transaction amount, currency conversion, and the type of payment method used.
Another common cross border transaction method is by mailing the paper cheques, and for that, all you need is the payee’s name and address. This method only sometimes involves transaction fees, but that depends on the financial institutions involved and corresponding banks. Regardless, it is still an extremely economical method, but the drawback of using this as a payment transfer method is that it is a very time-taking process.
Paper cheques require manual processing, which can add the administrative burden of depositing and clearing for both the payer and payee. Also, this cross border payment method cannot be labelled are secure due to the risk of fraud, loss and theft during the mailing process
International Automated Clearing House (ACH), also known as Global ACH, is a simple payment method that enables businesses or individuals to send and receive payments. It has a low transaction fee; hence, it is a very cost-efficient and extremely convenient cross border payment method that takes a few days to process. International ACH is ideal for the transaction of large volumes of payments. It can be used for various payment types, including direct deposits, bill payments, recurring payments, and B2B transactions. It is also commonly used for payroll, vendor payments, and other regular cross border transactions.
While selecting the ideal cross border payment method, consider factors like the amount you have to transfer, currency, transfer cost, speed, security, compliance, and quality of customer support. Evaluate these factors carefully before opting for any method. For fast, convenient and cost-efficient international transfer, contact us, and our team will handle your cross border transactions for you.
