Transferring funds internationally is a significant part of any business these days – deciding how to pay the international suppliers, global employee payroll, and receiving payments from clients outside the country. Thus, methods of international payments have to be understood. Below is a comprehensive guide to the primary methods available, their advantages and setbacks.
Traditional Payment Method
International Bank Transfer Who can forget OT’s most impressive feature, once it opens an OTT solicitors UK bank account, OT can invest in an international bank strategy using about 53 jurisdictions across the globe. Also, by using OT’s services, a foreign business person will be able to open an international bank courtesy of OT in about 53 countries. International bank transfers can be done smoothly via the international SWIFT system, but that does not mean that such a system is flawless, this kind of transaction is ideal, secure, and reliable, for transferring large amounts of money; however, they can be rather costly and slow in some instances, payment waits can take up to several days due to the vast coverage provided, however, many institutions have hidden fees such as exchange rate margins or intermediary banks causing additional charges for performing such transfers of funds.
Example: an UK company purchasing supplies from Japan might transfer money from the UK via a SWIFT transfer. But they have to pay transaction fees along with longer than expected delays and currency conversion costs, naturally such payments were never meant to be urgent and would be sent in much smaller amounts making them a more reasonable form of payment.
Wire Transfers Wire transfers are also a widely used method of making cross-border payments in the past for making payments to suppliers who are situated in a different country. Most transfers via wire do tend to share many similarities to swift transfers, unfortunately as these are also wire transfers they tend to be costly and take rather long periods to complete. One of the practical advantages of this type of transfer is that they do provide a good amount of security making them one of the top choices for high value transactions albeit being some what tedious. These however do reach a limit for the operations and work best on one off payments where time is not of the essence.
Checks and Money Orders
Although on the verge of irrelevance, checks and money orders are occasionally utilized in some parts of the world. Such approaches are cumbersome and are often time-consuming, incurring high costs of handling due to a high degree of manual processing. For present day business requirements, they are mostly impractical.
Modern Payment Solutions
Online Payment Systems
International payments have been eased with the use of PayPal, Wise or Stripe as they are able to do prompt transactions, have user-friendly interfaces and charge reasonable fees. Businesses have the advantage of automated invoicing alongside, tracking payments and dealing with multiple currencies.
Example: A tiny e-commerce business in Germany has PayPal as a means of receiving payment for sales made to customers based in the US. These customers enjoy the ease of using one currency for many transactions.
Business accounts on the other hand often come with high transaction fees and limits on amount that can be transferred, contrary to what is expected.
Mobile Payment Solutions
Businesses are able to send and receive payments through services like Payoneer and Revolut which allow for international payment transactions. Such services offer flexibility and ease of access, such as paying in real-time and allowing accounts for multiple currencies. They may however, be ineffective for bigger corporations which require stronger security measures.
Example: A freelance graphic designer in India gets paid through Payoneer by clients in the EU, which takes comparatively less time and money to process than other traditional methods.
P2P Payment Platforms
These platforms only link payers and recipients to eliminate middlemen, and are therefore a cost-effective solution but only for individuals. In addition, they are not customized for large corporations and have little or no regulations.
Disruptive and Emerging Technologies
Payment by Blockchain
The integration of innovative technologies such as blockchain or cryptocurrencies such as Bitcoin and Ethereum have completely altered the view of traditional payment systems. They are less expensive, safer, and process faster. The only problem is that the blockchain payments do not require intermediates which makes it particularly appealing to businesses whose goal is cost reduction.
Example: A tech company in the United States pays a software development company in Ukraine with crypto currencies which saves them from incurring high transfer processing fees and waiting for long hours.
Still the legal frameworks are unregulated and the market remains volatile for business which makes it hard to use it in their solutions. GTP solutions need to be evaluated for their risks before implementation.
RTP Solution Considerations
Real times solutions are finding more popularity among businesses extending their market to other countries since payments can be made on instant basis. These systems have the capability to enhance cross country fund transferred instantly. RTP solutions are very important during activities that time is an constraint, for example payments to suppliers during emergency situations.
For example A Canadian construction firm pays a supplier in Mexico using an RTP platform to avoid delays in delivery of materials.
RTP networks has its share of and is not readily available in most markets although its promising the costs associated with setting it up range from high to average.
Business Payment Solutions that are Tailored for You
International Multi Currency Accounts
Accounts that hold multi currencies allow business to make payments to different accounts in different currencies minimizing the conversion costs and easing the complication of cross border transactions.
Global Payment Service Providers
With global payment integrators like Adyen and Stripe, businesses can directly accept payments online, around the globe through their e-commerce sites. In addition to the analytics provided for business strategising, these tools also smooth the payment collection process.
Example: Using Stripe, the website of a worldwide-retailing company can efficiently meet customers from over 100 different countries enhancing their shopping experience through a streamlined process.
Paying globally is reputed to be slow due to the mix of currencies involved, and the transfer fees that make it expensive for the user. However, services like Collect&Pay take care of the payment pain points by filling in the gaps for the international payment. For instance, the platform of Collect&Pay assists businesses in transactions by combining automation, reasonable currency exchange rates and removing quite a few intermediate layers which speeds everything up while providing reasonable rates.
Choosing the Right Payment Method
Depending on the size of currency that is going to be wired, hire professionals, the urgency and geography of both the sender and recipient, payment method varies. Businesses should give preference to these supported options as they prioritize transparency, security and cost. Using a mix of these payment methods can also reduce any undue risks, making the operational aspects of the business more smooth.