The continued globalization of our economy and ease of connectivity mean you’re not limited to only the vendors, suppliers, and service providers located in your country.
It’s not only the large, multinational companies that work with international partners or customers, either. A growing portion of US businesses of all sizes are forging partnerships with foreign vendors and growing international market share to strengthen their competitive edge.
Regardless of the reason for engaging in international business, domestic companies need a way to pay or be paid by foreign entities for products or services rendered.That said, international payment processing comes with some additional considerations and fees that don’t come into play for domestic payments, which we’ll cover in more detail below.
What is international payment processing?
International payment processing refers to the transfer of funds across borders between individuals, businesses, or financial institutions, often involving currency conversion. It plays an importantrole for companies operating globally, requiring careful management of regulations, fees, and transaction times. To streamline these cross-border payments, international payment gateways enable businesses to accept payments in various currencies and languages.
Understanding international payments
International payments allow domestic businesses to send and receive payments from foreign contractors, suppliers, vendors, or customers. There are a few payment options available, including:
- International wire transfers
- International ACH transfers
- International credit card processing
- Foreign exchange brokers
- Online payment platforms
- Mobile payment apps
- Cryptocurrency transactions
- International money orders
- Physical checks
Regardless of how a domestic business chooses to make an international payment, using a secure and efficient method is crucial for businesses looking to expand beyond the domestic market.
By nature, international payments are more complex than domestic payments. Here are some of the key ways that the two types of payments differ:
Processing speed
Given the additional steps and banking procedures required for international payments, domestic payments tend to be processed more quickly.
Currency exchange rates
Payments between two parties in the same country typically occur in the same currency, with no exchange or conversion required.
On the other hand, international payments are subject to exchange rates, which constantly fluctuate and can impact the overall value of the transaction.
Banking regulations
Domestic payments must adhere to the regulatory guidelines of just one country, while international payments must consider the differing banking and financial regulations of two countries.
Fees
Domestic payments typically incur lower fees than international payments since there are fewer intermediaries involved.
Thus, international payment processing can be more expensive for businesses, weighing on the overall profitability of the transaction.
Risk
In general, there are fewer risks associated with domestic payment processing since both the payer and the recipient are subject to similar banking guidelines and rely on the same financial infrastructure.
International payments may face additional risks from geopolitical policies or complex regulations, heightening the risk of non-compliance.
How international payment processing works
As mentioned above, there are a few extra steps involved in getting funds from the sender to the recipient when they reside in different countries.
Though there can be some variations depending on the specific payment method used, here is a general overview of the process:
- Payment initiation: The sender initiates the payment by telling their bank to send money to a person or business entity in another country. Depending on the exact payment method, this might be done online, on an app, or in person.
- Payer’s bank: The payer’s bank will verify the request and initiate the conversion to the recipient’s local currency, often incurring fees.
- International payment network: The payment will be facilitated by an international payment network or clearing systems, like SWIFT.
- Intermediary institution: The transaction may pass through one or more intermediary banks or payment processors between the payer’s and the recipient’s institution.
- Recipient’s bank: The payee’s bank receives the payment and verifies it before depositing the amount into the recipient’s account.
The benefits of international payment processing solutions
International payments aren’t always as straightforward as transferring funds between two domestic entities.
Thus, the right international payment processing solution can help streamline global transactions, allowing domestic businesses to hire and pay professionals in other countries, serve international customers, invest in foreign ventures, travel abroad on business, or purchase goods from global vendors or suppliers.
These systems help to automate some of the technical and legal complexities associated with foreign transactions, including currency conversions and compliance checks with varying banking regulations.
As a result, domestic businesses and their foreign partners or customers can save valuable time and money when processing international payments with these solutions. Plus, they can send and receive payments in familiar currencies, helping to streamline the user experience.
Overall, the best platforms work efficiently to offer a favorable exchange rate, lower transaction fees, and enhanced security against fraud.
Tailored payment processing solutions for different industries
Certain industries have different payment processing needs depending on the transaction type, volume, and amount they need to support.
Because of this, some industries may seek dedicated payment processing solutions to meet their unique requirements and challenges and ensure smooth transactions.
Some of the industries with unique needs include:
- E-commerce
- Freelancers and remote workers
- Healthcare
- Travel
- Education
Choosing the right payment gateway
When it comes time to select a payment gateway for international payment processing, there are a few important factors to consider.
Continue reading below for some of the important features and characteristics to look for in an international payment processor:
Consider the currencies/countries supported
Not all payment gateways can facilitate transactions in every country. So, one of the most important factors is to evaluate the currencies or geographical areas that the platform supports.
This is especially crucial for businesses that tend to work with partners or customers in a given region.
Evaluate supported integrations
It can also be useful to consider the integrations the platform supports. Does it easily integrate with the company’s e-commerce platform? Its ERP? The invoicing system?
Seamless integrations help support efficient operations, reducing the amount of manual work and effort the team needs to put in to facilitate international transactions.
Understand the pricing structure
One of the most important factors is to understand the fee and pricing structure of the payment gateway. This includes any setup fees, transaction fees, international fees, and more.
Businesses need to evaluate and compare the pricing of various platforms to find the option that’s the most cost-effective for their needs.
Assess scalability
Find a platform that can support current transaction volumes as well as future growth projections.
If a business anticipates outgrowing a payment gateway, it may not be worth the time and effort of implementing it initially.
Verify compliance and security practices
Businesses should choose a payment gateway that utilizes strong security features and simplifies compliance with global banking standards.
This is one of the more challenging aspects of making international payments, so using a platform that helps to automate compliance checks and uphold sensitive payment data is non-negotiable.
Review company reputation
Check the reviews from past users to get a firsthand experience of what it’s like to use the platform. This helps to verify the credibility of what the platform claims to do.
Specifically, look for reviews that mention how reliable the platform is, the customer support offered, and the overall user experience.
Getting started with international payments
With careful planning and platform selection, businesses of all sizes can expand their global reach and start making international payments.
Here are some of the basic steps to get started:
Step 1: Assess your needs
First, note any industry-specific requirements the business needs, such as high volume transactions, support for a certain currency, or accessibility considerations.
Also, consider what the international payments are for, whether paying freelancers, purchasing assets, receiving customer payments, or another purpose.
These factors can influence the specific international payment method and platform that’s best for the business.
Step 2: Choose a payment method
The next step is to choose a payment method, including the options listed above, like wire transfers, money orders, cryptocurrency, and online payment platforms.
Each payment method offers certain advantages and drawbacks, with online payment platforms like BILL being highly versatile and quick with a favorable fee structure.
Step 3: Select a trusted provider
Using the previously mentioned guidance, select a payment platform to facilitate international transactions.
Again, some of the most important factors to consider include fee structures, exchange rates, and processing times that platforms offer.
Implementing the platform may require an initial setup fee or software download to initiate and monitor payment status.
Step 4: Send and receive payments
Once the platform is chosen and all set up, businesses can start making and receiving international payments.
To send a payment to a foreign recipient, the sender likely needs the person’s full name, address, bank name, and account number.
Always review the fees and exchange rates that apply at the time of the transaction to avoid surprises.
Automate international payments with BILL
BILL is proud to offer better control and transparency in payment processing for global businesses.
With BILL, you can make both domestic and international payments to recipients in more than 130 countries and a growing list of currencies.
BILL Local Transfer allows you to pay international vendors in their local currency up to four days quicker than wire, with a $0 wire transfer fee and competitive exchange rates.
Get started with your free trial of BILL today!
