Disclaimer
Understanding international payment methods is vital for any business looking to thrive in the global marketplace.
Navigating cross-border transactions can seem daunting, but the opportunities for growth and expansion are immense. It unlocks access to new customer bases and enables international selling.
Learn more about how to overcome the challenges of global expansion and improve sales with a global payments solution that can help streamline the payment process.
Table of contents
What are international payments?
What are international payments used for?
Types of international payments
Common challenges of international expansion
How to accept international payments
International payments are any transactions that cross country borders, subjecting them to currency exchanges and different regulations based on where users send and receive funds. These payments are common, as online marketplaces have made global trade easy for small businesses.
Some of the common international payment types include wire and international Automated Clearing House (ACH) transfers. With global and online payment solutions, there are many ways to participate in borderless commerce.
With international payments, funds transfer between two or more countries. Domestic payments just occur within one country.
There are some key differences to know for global expansion, which can help businesses with international payments:
International | Domestic | |
|---|---|---|
Currency exchange | Fluctuating exchange rates and conversion fees may reduce the funds businesses receive | Typically doesn't require currency exchange |
Regulatory issues | Subject to regulations from multiple countries, which can include anti-money laundering laws, tariffs, sanctions, and taxes | Typically only subject to the regulations of one country |
Transaction speed | May face significant delays, as they undergo scrutiny to reduce fraud | Can often be sent instantly |
Fees | Subject to fees, like sending fees, receiving fees, and conversion fees | Not subject to cross-border fees |
Third-party involvement | May require third-party services to send, access, receive, or exchange payments | Typically a direct process |
Businesses can use international payments for any activities that occur across borders, including:
Buying goods or services: Payments can be sent to suppliers or vendors overseas. This could be paying consultants abroad or purchasing wholesale shipping supplies.
Paying international employees or freelancers: Cross-border payouts can be used to pay freelancers or employees who live in other countries.
Paying dividends or interest: Some businesses use international payments to distribute profits or fulfill financial obligations to foreign investors, shareholders, or creditors.
Investments: International payments can facilitate cross-border investments in foreign markets, companies, or real estate.
Purchasing assets: Businesses may use international payments to acquire assets in other countries, such as machinery, equipment, or property. This enables companies to expand their operations or globally diversify their holdings.
Financial market trading: International payments can be used for trading in the financial market, helping traders to buy and sell currencies, commodities, and securities across borders.
Travel: When traveling abroad, international payments may be necessary for expenses like accommodations, transportation, meals, and activities. These payments may involve currency exchange and different payment methods depending on the destination.
Charitable donations: International payments can allow businesses to make charitable donations to causes and organizations in other countries.
Alternative payment methods may be becoming more popular as customers seek convenient and efficient ways to pay both online and in person. In fact, alternative payment methods are expected to grow faster than credit and debit card payments between 2022 and 2027.1
Here are the most common types.
Online payment service providers facilitate transactions between buyers and sellers. They often offer features like multi-currency support, fraud protection, and simplified checkout processes. These platforms can streamline international payments, making them fast and accessible.
Benefits:
Challenges:
Wire transfers involve electronically transferring funds directly from one bank account to another. Due to their security and reliability, businesses often use them for large international transactions. However, they can typically be slower and more expensive than other methods.
Benefits:
Typically higher transaction limits
Typically secure and traceable
Direct bank transfer
Challenges:
Typically higher fees
Typically slower processing times
Typically irreversible transactions
Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a network that enables financial institutions to send and receive information about financial transactions securely. SWIFT isn't a type of payment, but a network institutions use to send payments. International wire transfers commonly use SWIFT to facilitate communication between banks globally.
Benefits:
Global bank network
Typically secure messaging system
Widely recognized
Challenges:
Can involve multiple banks
May incur additional processing fees
Can be slower than some alternatives
International checks are paper checks drawn on a foreign bank. While it may be less common today, many businesses use checks for certain transactions. However, they can be slow to process and subject to various fees and delays.
Benefits:
Physical payment record
No electronic setup
Widely recognized
Challenges:
Slow clearing times
May have a higher risk of loss or fraud
International Automated Clearing House (ACH) allows electronic transfers between bank accounts in different countries. Domestic ACH transfers use the ACH network, while international ACH payments use another region's version of the ACH network, such as Single Euro Payments Area (SEPA) for European transfers. It's often a cost-effective option for recurring payments or smaller transactions.
Benefits:
Typically lower fees than a wire transfer
May have recurring payment option
Electronic record-keeping
Challenges:
Limited country availability
Processing times can vary
Requires bank support
Foreign exchange (forex) brokers are firms or individuals that act as intermediaries between buyers and sellers of foreign currencies. They specialize in currency exchange and can facilitate international payments by converting funds into the desired currency. They may offer competitive exchange rates and additional services like hedging.
Benefits:
Competitive rates
Typically has hedging options
Typically currency expertise
Challenges:
Market volatility risk
Broker selection is key
Typically fees and commissions apply
International money orders are prepaid certificates that payers can send internationally and the recipient can cash in their local currency. They provide a secure and traceable way to send funds.
Benefits:
Typically secure and traceable
No bank account needed
Prepaid amount
Challenges:
Often limited availability
Typically time-consuming to process
Debit or credit cards are widely accepted for international payments, especially online. They typically offer convenience and purchase protection but may involve foreign transaction fees and currency conversion costs.
Benefits:
Widely accepted
Convenient
Typically purchase protection
Challenges:
Typically foreign transaction fees
Typically exchange rate costs
Potential security risks
Cross-border payments are on the rise as more consumers shop from international merchants. Looking ahead, they could account for one-third of all e-commerce spend by 2028.2
Before setting up shop around the world, it’s important for businesses to be aware of certain challenges when expanding globally and to develop a solid cross-border strategy.
The global payment landscape can be increasingly complex because countries operate under their own unique regulations. As a result, businesses may face regulatory issues as they begin to expand and accept foreign currencies.
EU merchants, for example, take guidance from the Payment Services Directive 2 (PSD2)3, while retailers in China are beholden to the Payment and Settlement Systems Act.
Businesses can incur costs for processing global payments, especially if customers pay with credit or debit cards. For example, banks may charge international transaction fees, and merchants may also have to pay cross-border fees when they convert currencies from international shoppers.
Businesses looking to expand globally may not have access to the local payment methods shoppers use to make quick and convenient transactions in their home country.
For example, customers in other parts of the world may rely on specific localized payment methods to make instant payments from mobile devices. If growing businesses can’t offer these local payment methods, they may risk frustrating customers at checkout and losing revenue.
Expanding globally opens the door to a much larger customer base, but it also means navigating the complexities of international payments. Here are some key steps to consider when setting up businesses to receive payments from customers worldwide:
Choose a payment gateway that supports multiple currencies: For a simplified process, select an international payment system or gateway that allows multi-currency payments and offers currency conversion services.
Understand international regulations and compliance: Get familiar with the regulations and compliance requirements in the countries where the business will operate. This may include tax laws, AML regulations, and data privacy laws.
Set up multi-currency pricing: Offering products or services in multiple currencies may provide a positive experience for international customers. Businesses should clearly display prices in the customer's local currency, and international pricing should account for exchange rate fluctuations.
Offer various payment methods: To increase conversion rates, businesses may want to provide various payment options that are popular in different regions. This could include credit cards, debit cards, digital wallets, and local payment methods.
Factor in transaction fees and exchange rates: Be aware of the fees associated with international transactions, such as currency conversion fees and cross-border fees. To avoid surprises, businesses may want to factor this into their pricing strategies.
Provide clear communication and customer support: Businesses may want to offer customer support in multiple languages and time zones. It’s important to communicate payment policies, shipping information, and return policies to international customers.
Consider using invoicing for international transactions: Invoicing can be a professional and organized way to request and track international payments. It should include all necessary details, such as the payment amount, currency, due date, and payment instructions.
PayPal supports a global network of 400+ million users across over 200 markets. Through PayPal’s scalable platform, large enterprises can easily accept and make payments, streamline solutions, and accelerate international growth.
PayPal offers a range of global and local payment methods, including card payments, Venmo, digital wallets, bank transfers, and buy now, pay later offers. That means businesses can reach shoppers across the globe with their preferred payment options, and it may help to increase checkout conversions and improve customer experiences.
Expanding into international markets can help businesses increase sales and fuel exponential growth. However, businesses often face obstacles like complex regulations, transaction fees, and varying user experiences.
To navigate these challenges, merchants need the right global payment solution. PayPal Open offers a key advantage — For enterprises based in the U.S., card processing authorization rates for cross-border transactions through PayPal Checkout are up to 7% higher than the market average.4
Explore how PayPal can power your global expansion with international payment acceptance today.