Disclaimer
International payments span methods like wire transfers, digital wallets, and cards, each with different costs and speeds. This guide explores common options, key challenges, and how PayPal World can help simplify international payment processing.
Navigating cross-border transactions can seem daunting, but the opportunities for growth and expansion are significant. Selling internationally can unlock new customer bases and help you reach buyers in markets around the world.
In this article, you will learn more about how to manage the complexities of global expansion and support international sales with PayPal World, a platform designed to help streamline cross-border payments through participating global wallet partners.
International payment processing is the transfer of funds across borders, often between individuals or businesses. This type of payment processing typically requires currency conversion and payment gateways. With international payment processing, companies can accept foreign currencies and engage in cross-border e-commerce.
Additionally, international payments often involve currency exchanges and different regulations based on where users send and receive funds. These payments are common in selling internationally, as online marketplaces now use global payment platforms to streamline trade for small businesses.
Some common international payment methods include wire transfers and international Automated Clearing House (ACH) transfers. With global and online payment solutions, there are multiple ways to participate in borderless commerce.
With international payments, funds are transferred between two or more countries. Domestic payments occur within one country.
There are some key differences to know for global expansion, which can help businesses navigate payment interoperability and other complexities of 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:
International payment processing is an important factor supporting modern cross-border e-commerce trends, and it involves multiple systems working together to move funds from a customer in one country to a business in another.
While the experience can feel instant to the customer, the payment travels through multiple steps behind the scenes to verify the transaction, route it securely, and deliver the funds to the business in the appropriate currency. Here's what a typical flow looks like:
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 more accessible and easier to manage.
Benefits of online payment providers | Challenges of online payment providers |
|---|---|
Global reach | Transaction fees can vary |
User-friendly interfaces | Potential platform dependence |
Fraud protection services | Integration requirements |
Wire transfers involve electronically transferring funds directly from one bank account to another. Due to their security and reliability, businesses often use them for higher-value international transactions. However, they can often be slower and more expensive than other methods.
Benefits of wire transfers | Challenges of wire transfers |
|---|---|
Higher transaction limits | Higher fees |
Secure and traceable | Slower processing times |
Direct bank transfer | 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 an international payment solution itself, it is a network that institutions use to send payments. International wire transfers commonly use SWIFT to facilitate communication between banks around the world.
Benefits of SWIFT payments | Challenges of SWIFT payments |
|---|---|
Global bank network | Can involve multiple banks |
Typically secure messaging system | May incur additional processing fees |
Widely recognized | Can be slower than some alternatives |
International checks are paper checks drawn on a foreign bank. While it may be less common today, many enterprises still use checks for international business payments. However, they can be slow to process and subject to multiple fees and delays.
Benefits of international checks | Challenges of international checks |
|---|---|
Physical payment record | Slow clearing times |
No electronic setup | May have a higher risk of loss or fraud |
Widely recognized | Can be slower than some alternatives |
The Automated Clearing House (ACH) facilitates international payment processing services by allowing 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 the Single Euro Payments Area (SEPA) for European transfers. It's often a lower-cost option for recurring payments or lower-value transactions.
Benefits of international ACH | Challenges of international ACH |
|---|---|
Typically lower fees than a wire transfer | Limited country availability |
May have recurring payment option | Processing times can vary |
Electronic record-keeping | 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 help firms that want to accept international payments by converting funds into the desired currency. They may offer competitive exchange rates and additional services like hedging.
Benefits of Forex brokers | Challenges of Forex brokers |
|---|---|
Competitive rates | Market volatility risk |
Typically has hedging options | Broker selection is key |
Typically currency expertise | Typically, fees and commissions apply |
International money orders are prepaid certificates that payers can send internationally, and the recipient can cash them in their local currency. They provide a secure and traceable way to accept payments globally.
Benefits of international money orders | Challenges of international money orders |
|---|---|
Typically secure and traceable | Often limited availability |
No bank account needed | Typically time-consuming to process |
Prepaid amount | Typically slower than alternatives |
Debit or credit cards are a common way to accept international payments, especially online. They typically offer convenience and purchase protection but may involve foreign transaction fees and currency conversion costs.
Benefits of debit or credit cards | Challenges of debit or credit cards |
|---|---|
Widely accepted | Typically foreign transaction fees |
Convenient | Typically exchange rate costs |
Typically purchase protection | 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:
PayPal World connects PayPal and Venmo with participating global wallet partners, helping businesses reach customers across markets without managing separate wallet integrations. By supporting select global and local payment methods, including digital wallet payments, PayPal World can help streamline cross-border payments and support cross-border conversion.
Key features of PayPal World include:
PayPal World can help address common international payment challenges, such as:
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 cross-border payment strategy. PayPal World helps address these needs by connecting PayPal and Venmo with participating global wallet partners, supporting cross-wallet payments and streamlined management within the PayPal ecosystem.
Explore how PayPal can power your global expansion with international payment acceptance today.