1. How do international payments work?
2. Steps of an international payment
3. How long do international payments take?
4. International credit card payments
5. International ACH payments
6. Can I wire money internationally?
7. How to accept international payments
8. How to make international payments

If you’re running a business, you’re likely making and accepting payments in some form. With e-Commerce on the rise, many businesses have made making and accepting payments to countries outside of their own country’s borders more of a norm than an exception. These types of payments are called international payments and they’re an enormous part of the global economy.

Though it seems a fairly basic concept, accepting and making payments between countries actually comes with a slew of possible complications that can cause problems within even the healthiest of businesses. When explaining international payments though, you have to start with the most basic of questions: What are international payments and how do they work?

How do international payments work?

An international payment is a transfer of money between a buyer and seller that jumps across at least one international border. Because the payment moves between two different countries there is, in most cases, a need to convert the money from one currency to another, while dealing with any differences in international monetary law that may exist. To manage these responsibilities, most companies that traffick heavily in making and accepting international payments use a money transfer company like Wise, OFX or Xoom to manage the transfer. Here’s the journey of an international payment from start to finish:

Steps of an International Payment

• Step 1: A payment is submitted by an ordering customer through some form of institution that has the necessary setup to make transfers (a bank, a transfer company, etc.).

• Step 2: The payment is then communicated to the ordering customer’s bank or what’s referred to as the “ordering institution”.

• Step 3: At some point in most international payment transactions, the transfer ends up going through an intermediary financial institution to convert currency and ensure that any regulations or laws are adhered to as the money crosses an international border.

• Step 4: The payment is then transferred to the bank of the person receiving the payment. 

• Step 5: The receiving customer is then able to withdraw and spend that money.

 

Every step of the process is kept track of by SWIFT gpi–a send and receive agent that helps to transfer nearly 5 trillion dollars in cash every single day.

How long do international payments take?

The length of time it takes to send and receive an international payment can differ depending on the sending location and the receiving location. For payments made within the United States, wire transfers usually take no longer than 24 hours. For payments made between the United States and most other countries, international payments take two days, but depending on the where the money is being sent to, or sent from, it can take anywhere up to five days.

 

What to know about international credit card payments?

 

International credit card payments aren’t terribly different than regular credit card payments. The majority of credit card payments are made using one of the major credit card brands–Visa, Mastercard, Discover, etc.–and all of these companies are set up to operate globally. When you make a payment using your credit card across international borders it should be no different than making a payment domestically. 

If you’re concerned about how the difference in currency will be calculated and/or affect your payment, there’s no need. The currency exchanges are automatically processed using the up-to-date currency exchange rate between the country where the payment originates and the country where the payment is being sent.

There usually will be some sort of small fee–1 to 3 percent of the transaction amount–added to the final purchase cost. These are basically just the credit card company receiving payment for the convenience of going through the extra steps required to process an international payment.

 

What to know about international ACH payments?

 

International ACH payments–or global ACHs–is an ACH that has a financial institution outside of the United States involved in some way. Like domestic ACHs, they are regulated by NACHA (National Automated Clearing House Network) and when you make an international ACH payment, at least when one of the parties involved is from the United States, all of NACHA’s information and regulatory requirements must be followed. In Europe, the clearing house is called Single Euro Payments (SEPA) and acts in a similar way to NACHA.

 

What should be taken into account before making an international ACH payment is that not every country has a clearing house to process ACH payments. And this means that businesses in some countries can’t be paid via ACH payments. 

 

Also, be aware that there is another financial concept called an international ACH transaction that is entirely different from the international ACH transfer. Where an international ACH transfer is a means to send money from bank account to bank account, a transaction is a way for banks in the United States to view and report international transactions. There’s more to it, but just know that international ACH transfers are a payment method and international ACH transactions are complicated means of reporting financial transactions.

 
<h3>Can I wire money internationally?

 

The answer is yes, most major financial institutions will allow you to wire money internationally. All you really need to do is log into your bank (or the financial institution you choose to use for 

money processing) and select the option from the “Transfers” section of the navigation bar. 

 

These wire transfers usually take one to two days to process and are very convenient and secure but expensive. An international wire transfer can cost up to 45 dollars depending on if you’re sending or receiving and where you are doing either. 

How to accept international payments for business

There are many ways to accept international payments for business, but the bottom line is that to do so businesses–large and small–need to find the payment method that is best suited for the company in which you’re doing business. Here’s a small selection of different payment international payment types:

 

Online international payments

There are lots of online service providers that will allow you to accept payments internationally without the fuss of having to deal with it yourself. Online international payments are easy, fast, and provide strong security. That said, not all countries accept online international payments and if they do there can be fees associated with them. 

 

Companies that allow users to make online international payments include:

 

• Amazon Payments
• Wise
• PayPal
• Stripe 

Letter of Credit

 

This is a document sent between banks in different countries that ensures payment will be made by a certain person before a certain time. Because of the direct connection to a bank, they’re low risk and very secure. They do come with fees and do expire after a certain period of time.

 

International Money Order

 

This is a payment method somewhat similar to a check. The payer prepays for the money order in advance and the money order is then sent to the vendor where it is cashed. Money orders can be great because there are no fees associated with them and because of the upfront payment, there’s no worry that the payer won’t have the cash to back up the purchase. But, like a check, they’re processing times are lengthy–ten days in some situations–and because of the ease of purchasing them and the physical nature of this payment method, they’re easy targets for fraud.

 

International Wire Transfer

 

The most common way to pass money internationally is, as we stated above, the International Wire Transfer. This is an electronic exchange of funds between two countries through a send and receive agent like SWIFT. These are very fast ways to send money internationally and like most primarily electronic payment methods, very secure. But that speed and security comes with extra processing fees. Also, international wire transfers can be difficult to trace, so if anything comes up in the payment process, the dispute can sometimes be difficult to resolve.

How to make international payments for business

There are a handful of options for businesses who want to make payments internationally.

 

Money transfer companies

These are specialized providers who streamline the process of sending money internationally. They are, almost to a tee, online providers so their cost is low and consequently, the cost of doing business with them is also low. The best of these businesses are regulated and this regulation makes for super fast processing times. A few of the companies that provide international money transfer services:

 

• TorFX
• VertoFX
• Xe

 

Multi-currency accounts

 

These are companies that allow for payments to be made and received in multiple currencies. This is helpful for businesses because they can then send and receive funds in either the currency they prefer or the currency that their customers prefer. If you are operating an international business you should definitely consider one of these multi-currency accounts:

 

• Wise
• VertoFx
• Xe

 

Online Payment Gateways

 

A simple, low-tech means to accept payments of all kinds–international or otherwise–via a checkout portal on an online store. Basically, an online payment gateway allows a business to quickly set up a variety of flexible payment acceptance types without the rigamarole often associated with setting up a complicated account. They should be inexpensive, fast and provide your customers with the payment options they want. A few examples are:

 

• PayPal
• Skrill

 

Banks

 

Banks are the traditional means of sending money from bank account to bank account internationally. The majority of countries are banks that are connected through the SWIFT network, so there is a level of security and regulation on hand. Banks can be slow to process international payments and come with high fees. Most major banks will work with their customers to provide international payments.

With globalization more and more the norm, international payments are a crucial part of running a business of any size. Knowing the basics of making and receiving international payments allows you better understand the basics, benefits, and pitfalls of this rapidly growing payment method.