What are international payments?

International payments, also known as cross-border payments, are financial transactions that facilitate the transfer of funds between parties in different countries. They are primarily used for purchasing goods and services overseas, to capitalize on cost efficiencies and quality benefits.

These payments can take place between individuals, companies, and banking institutions - they are an essential tool for any business that has international customers and global suppliers.

International payments often involve the use of systems like SWIFT, which facilitates various types of cross-border transactions such as money transfers and letters of credit.

They are different to domestic payments where the payer and payee are based in the same country.

Domestic payment systems, focus primarily on real-time settlements for domestic transactions, making them essential for high-value payments within their respective countries.

As businesses expand into new markets, the demand for efficient, secure, and reliable solutions for international payments continues to grow - with the industry expected to reach over $250 trillion by 2027, businesses must prepare to navigate cross-border transactions seamlessly.

What are the different types of international payments?

Sending international payments can take many forms. Let's take a look at some of the most popular methods.

International wire transfers

An international wire transfer is a cross-border electronic transfer of funds. It typically takes place between a domestic and an international bank account and can be arranged online, through banking apps, over the phone, or in person at a bank branch.

These payments are typically used for large transfers, such as property purchases. Some financial companies also offer international wire transfers.

Online payments

Online payment platforms are widely used for eCommerce transactions. They facilitate safe and speedy payments between businesses and foreign customers. These platforms also offer additional features such as currency conversion and fraud protection.

Foreign exchange (FOREX)

FOREX, or foreign exchange, refers to the conversion of one currency into another. FOREX brokers offer online platforms to convert and transfer money internationally. Due to their competitive real-time exchange rates, using FOREX brokers has become an efficient way for businesses and individuals to send money abroad. These platforms are commonly used in stock market trading.

International checks

An international check is a check that is deposited in one country and drawn in another country.

Despite their slower processing time, international checks are a safe method of completing business transactions and can be used for large-sum payments, such as high-value remittances.

International money orders

An international money order is a pre-paid, paper-based financial product that allows individuals to send money abroad. Money orders can be purchased from postal services, retail stores, or financial institutions.

They are typically used for smaller payments where other transfer methods may be too costly, or in countries with limited access to electronic transfer options.

How do I make an international payment?

Cross-border payments involve the transfer of money from one country to another. However, the precise way of making an international payment depends on the method used. Different methods have different processing times, costs and security levels.

• International Wire Transfers: These can be made through a bank or via a wire transfer company. The sender must provide the recipient's details, including their name and account number, the bank's SWIFT/BIC code, and the currency of the transaction. The SWIFT (Society for Worldwide Interbank Financial Telecommunication) network assigns each bank a unique identifier code, which ensures that the funds reach the correct recipient's bank internationally.
• Online Payment Platform: To make an international payment via an online payment platform, the sender must have an account with the platform, which is linked to their bank account, digital wallet, debit or credit card. After logging in, the sender selects the recipient's country and currency, enters the payment details, and confirms the transaction, which is processed almost immediately. Some platforms provide tracking options for easy monitoring of payments.
• FOREX: FOREX brokers use online trading platforms, where individuals and businesses can buy and sell foreign currencies for international payments. Many brokers offer the option to transfer the money directly to a bank account in the currency selected by the sender.
• International Checks: These are issued by the sender at their local bank and mailed to the recipient in another country. The recipient's bank verifies the check and processes it through the international banking system. The banks do not need to be the same, but they both must be part of the international payment network.
• International Money Order: To make a cross-border payment using an international money order, the sender fills out the money order with the recipient’s details and the amount to be sent. After paying the required fee, the sender mails the money order to the recipient, who can cash it at a designated location in their country, such as a convenience store or post office.

What are international payments used for?

There are several use cases where international payments play an important role.

International trade & eCommerce

Cross-border payments are essential for international trade and eCommerce. They allow businesses to expand their market reach to foreign customers and collaborate with suppliers across the globe.

By setting up a checkout page on the business's website, customers can choose their preferred payment option and currency.

Employee salaries & freelancing

Multinational corporations with employees in multiple countries need to process international payments for payroll. Businesses pay salaries in different currencies, ensuring that remote workers and expatriate employees receive their wages on time.

With the rise of remote work and the gig economy, international payments enable freelancers and digital service providers to receive payments from clients worldwide. Platforms facilitate smooth cross-border transactions, allowing businesses to pay independent contractors and digital nomads in different countries.

International travel & tourism

International payments allow individuals to pay for accommodation, flights, and other expenses when traveling abroad. Whether for leisure, business, or education, tourists and travelers rely on payment systems such as credit cards, wire transfers, and mobile banking to manage their expenses in foreign currencies.

Investment activities

Investment activities supported by international payments include foreign direct investments, cross-border mergers and acquisitions, and portfolio diversification. For example, foreign investors and expatriates often use cross-border payments to buy property in other countries.

These activities not only support business expansion into new markets but also support managing financial risk and optimizing capital flow on a global scale.

Education & tuition fees

Students studying at foreign universities often need to make international payments for tuition fees, accommodation, and living expenses.

Parents and guardians transfer money from their home countries to support their children studying abroad, ensuring they have access to funds for their education and daily needs.

Opportunities in processing international payments

Accepting and processing international payments presents many opportunities for businesses looking to expand their global reach and generate higher revenue streams.

Business expansion

International payments allow businesses to expand beyond their domestic markets and tap into diverse talent pools. International payments facilitate the timely remuneration of remote employees and support collaborations with global partners.

Revenue growth

International payments open new revenue streams as they enable businesses to reach foreign customers and tap into emerging markets. International payments allow customers to pay in their preferred currency and payment method.

Global supply chain

Using international payment options, businesses can expand their supplier base. Companies can source goods and services from international suppliers at competitive rates and schedule invoice payments on their online banking platform. This connectivity streamlines the payment process and enhances supply chain efficiency.

Payment optimization

Integrated payment systems simplify cross-border transactions and reduce administrative overhead. These systems process international money transfers effectively and enhance security for businesses and their customers. Timely international transactions also help businesses manage cash flow more efficiently.

Challenges in processing international payments

Like all payment opportunities, conducting payments overseas can come with its downfalls.

Cost structure

International payments involve a series of costs associated with the processing of transactions and currency exchange.

• Transaction Fees are charged by the bank or the payment service provider for facilitating the transfer of funds. They vary depending on the provider and the payment method used.
• Currency Conversion Fees are charged when converting one currency into another. They depend on the exchange rate and can differ from one bank or financial institution to another. As exchange rates tend to fluctuate rapidly, businesses can use different tools and strategies to manage foreign currency risk, such as hedging.
• Platform Fees are charged by online payment platforms and FOREX brokers for using their services.

International regulations

International payments require compliance with two sets of rules and regulations: those governing the originating country (where the money is sent from) and those of the recipient country (where the money is sent to).

Countries have laid down specific data privacy, Know Your Customer (KYC) and Anti-Money Laundering (AML) laws that businesses must comply with. Some countries also impose restrictions on the amount of money that can be transferred abroad and payments to certain countries. Failure to comply with these regulations can result in the cancellation of payments or even severe penalties such as fines.

Businesses must maintain accurate records of all international payment transactions to comply with their reporting obligations.

Security & compliance

Security and compliance are vital components of international payments. Businesses must implement robust security measures to safeguard against fraud, cybercrime, and unauthorized access.

One way to achieve this is by working with a reliable payment service provider that ensures PCI compliance. These security standards are designed to protect cardholder data and payment information through measures such as data encryption, firewalls, and fraud management tools.

Infrastructure and processing times

Businesses need to ensure they have the necessary infrastructure to receive international payments. This includes a bank account that can receive foreign currency, an account with the relevant online payment or FOREX platform and the internal systems to process electronic payments. For international checks, the recipient must ensure that their bank accepts foreign checks.

Payment processing times may also vary depending on the financial institutions and the countries involved. Some transactions can even take several days to process. Using the same bank can be an effective way to reduce processing times for cross-border transactions.

Nuvei's global payment solutions

By offering tailored, multi-currency processing and real-time exchange rate optimization, Nuvei enables seamless international transactions and helps companies expand into new markets.

Nuvei supports international wire solutions and payment systems that allow users to send fast and trackable USD or foreign currency transactions across more than 195 countries and 45 currencies while ensuring speed, security, and transparency.

Conclusion

International payments enable businesses, individuals, and institutions to engage in cross-border transactions with ease. From trade and eCommerce to payroll, investment, and travel, the ability to send and receive international payments facilitates economic growth and global connectivity.

Partnering with a trusted payment service provider like Nuvei helps businesses ensure seamless transactions and navigate these challenges with efficiency and transparency. Elevate your international payments today.