You’d think that, in 2024, making your money go where it needs to should be the easiest thing in the world. And while in many ways it is, businesses face all kinds of challenges and complications when trying to optimise or decide on the best business account for international payments for their needs. Should you use one or another provider? How long do different types of payments take to settle? How about regulatory compliance – what steps are required?
That’s quite a lot! But don’t worry, this article will help get you started on the right track in no time.
Understanding different international payment methods
Efficient international payments are vital for today’s businesses – and this for many different reasons. For one, they can help you reduce transaction fees and get a competitive exchange rate. Moreover, efficient international payments are faster, safer, and more reliable, in addition to enabling quick, low-cost payment options for customers, and superior financial planning through the use of real-time data.
ConnectPay, our all-in-one financial platform, offers a wide range of international payment options, including euro-zone payments, large scale payments, cross-border payments, transfers in different currency, and more. All of our solutions have been designed with ease of use, security, and flexibility in mind – and come with assured regulatory compliance as part of the package.
What is an international payment?
An international payment is a financial transaction between two or more bank accounts in different countries. This includes the purchase of goods and services, making card payouts, settling international invoices, and countless other functions. Just think of it this way – without international payments, global trade and commerce would be simply impossible.
Since in most cases these payments feature different currencies, they require foreign exchange, which, in turns, means that more parties (e.g., intermediary financial institutions) become involved at specific points of the process. As a result, international payments are a bit more complicated and, depending on the provider – more expensive.
What are different types of international payments
International payments are broadly categorised into wholesale payments and retail payments. The former is geared towards large enterprises that regularly make substantial transactions, while the latter is mostly aimed at retail commerce which is typically characterised by high transaction volumes and smaller amounts of money per transaction. Both types of payments are essential for businesses operating internationally, each catering to different transaction scales and needs.
Wholesale payments
This refers to large-scale enterprise or merchant transactions, designed for high-value money transfers, often crossing borders. Wholesale payments are essential for businesses involved in global trade, supply chain management, or large corporate dealings. Wholesale payments are particularly suited for businesses that need to transfer significant sums of money, such as multinational corporations, import/export companies, or financial institutions managing liquidity across markets.
Real-life examples: a car manufacturer in Germany paying a supplier in Japan for a large shipment of automotive parts or a multinational corporation transferring funds between its subsidiaries in different countries. These transactions often involve foreign exchange, and their processing requires robust security and compliance with international regulations.
Retail payments
Retail payments, on the other hand, are intended for smaller, individual transactions, usually between a business and a consumer (B2C). These payments are common in e-commerce, retail, and other industries where customers make international purchases. Retail payments are designed for businesses that cater to a global customer base, ensuring smooth and secure transactions for everyday purchases.
Real-life examples: a customer purchasing a pair of shoes from an online retailer or ordering a meal delivery via app. In these scenarios, the payment is processed quickly through payment gateways or card acquiring, often involving credit cards, digital wallets, or bank transfers.
How do international payments work?
For cross-border payments, international bank transfers utilise systems like SWIFT and SEPA. The former system facilitates global transactions across 200+ countries by enabling secure messaging between banks. However, SWIFT payments usually take more time to be processed (1-5 business days) and have higher fees because of their complexity.
The latter system, on the other hand, is designed to streamline euro-denominated transfers across 36 European countries. It offers, among other things, faster and cheaper transactions, often with only minimal or no fees. This makes SEPA particularly well-suited to businesses operating within the eurozone.
While bank transfers via SWIFT and SEPA are generally reliable and used widely, potential delays can still occur due to factors like fraud prevention measures, bank holidays, and currency exchange processes. In terms of fees, they can be somewhat unpredictable – particularly with SWIFT – because of additional charges from intermediary banks.
What do I need to make an international business payment?
It’s quite straightforward, really:
- Get yourself a multi-currency bank account.
- Make sure your business is correctly submitting all the required information.
- Verify that your business is fully compliant with basic AML and KYC regulations.
That’s it! The last point might be a bit more complicated, though, so keep reading to learn more.
To get an idea for how this works, just imagine a European company paying a supplier in China via SWIFT. This will require it to provide accurate SWIFT codes and pay the required intermediary bank fees. Another example would be a UK business using SEPA for quick, low-cost payments to a eurozone partner. This highlights the importance of currency compatibility.
One last thing – before initiating any cross-border payments, consider foreign exchange rates and fees, as these can vary quite a bit depending on the payment method and providers used.
How long does it take to process international transfers?
Traditional international transfers, such as those processed via SWIFT, take 1-5 business days. This is mostly due to factors like procedures related to intermediary banks, and cross-border compliance checks. For instance, a business from France sending payments to a supplier in India might face delays if multiple intermediaries are involved, each adding to the overall processing time.
Meanwhile, we at ConnectPay can offer faster than the market average international transfers by leveraging modern digital banking platforms. And for eurozone transactions we’re using SEPA Instant – allowing payments to reach the beneficiary within seconds. This speed and reliability are particularly beneficial for businesses needing quick settlement times, reducing the risk of delays and minimising costs associated with longer transfer times.
Compliance and legal considerations
The international regulatory framework for cross-border payments includes stringent AML and KYC regulations. These require businesses to verify customer identities and monitor transactions to prevent illicit activities. One of the main difficulties when it comes to navigating these rules is dealing with varying requirements across jurisdictions.
ConnectPay simplifies this process by embedding robust compliance measures directly into its platform. This ensures that businesses meet AML and KYC obligations without doing the heavy lifting themselves. Our built-in compliance systems allow businesses to focus on growth while staying aligned with international regulations.
Real-world applications
ConnectPay handles international transactions by providing multi-currency accounts, foreign exchange solution, and seamless integrations with various payment networks, including SEPA and SWIFT. With our solutions, businesses are able to manage their cross-border payments more efficiently, as well as enjoy quick processing and out-of-the-box regulatory compliance.
Is your business leveraging the most efficient, cost-effective payment strategies? As always, we are here to help, so if you have questions, please don’t hesitate to contact ConnectPay specialists – and we’ll set up a meeting with you in no time.
