How cross border payments work

International transactions are far more complex than transferring funds in a domestic payments situation. Often, multiple banks are involved in the transfer of funds from one country to another, attracting significant bank fees at each payment gateway. Also, exchange rates between different currencies and local taxes for each country are big considerations.

Some of the most common cross border payment methods include bank transfers, credit card payments and alternative payment methods such as previously mentioned, eWallets and mobile payments.

- Bank transfers

Also referred to as wire transfers, a simple cross border transaction using accounts held at each bank would involve a payment message sending an instruction to debit an account in Bank A and credit an account in Bank B. However, not all banks have a direct relationship with each other, so sometimes they need to transact via an intermediary, or a correspondent banking network. A correspondent bank provides accounts for Bank A and Bank B, enabling the transaction. The correspondent bank is an essential component of the global payment system for cross border transactions.

- Credit card payments

Credit cards play a significant role in cross border payments, and are a preferred option for many consumers. From the consumer’s perspective, they simply enter their card details and wait for the transaction to be verified. Behind the scenes, there is more going on. Cross border payments require more work from the involved credit card networks and acquiring banks as they need to convert between two different currencies. This additional workload results in extra fees that are passed down through the payment chain.

- eWallets

Commonly available through apps for smart devices, eWallets like PayPal, Neteller, Alipay, Apple Pay and Google Pay allow users to safely store their payment cards of choice so they can pay for goods and services. Some eWallets support multiple currencies and the ability to place orders across borders. Although wallet to wallet transactions do not technically count as cross border transactions, they do help facilitate the transaction.

For example, transaction fees from bank accounts held in France to bank accounts in Senegal could be more than 100€, depending on the transaction value - and could take up to seven days to settle. And even then, the sender would often not receive a confirmation of the transaction’s success.

Whatever your needs are, Agathis is your specialist partner is cross border payments. Contact us today and together we’ll come up with the best and most cost-effective plan for your business!