A Beginner’s Guide to Effective International Payments

The ability to effectively manage international payments enables businesses to expand beyond their domestic markets. Likewise, it helps them secure global supply chains and explore diverse talent pools. 

However, sending and receiving international payments can be complex. Fluctuating exchange rates, geopolitical regulations, and financial risks can pose significant challenges. Hence, mastering the nuances of international payments is essential for any business that aspires to operate beyond its domestic borders. 

This post serves as a beginner’s guide to effective international payments, covering all the key aspects of cross-border payments. Without delay, let’s get into it. 

What are International Payments?

International payments, also known as cross-border payments, are transactions in which the payer and the recipient are based in different countries. Usually, these payments are crucial for businesses that have international suppliers, contractors, employees, customers, or partners.

International payments usually involve the transfer of money from one currency to another. Hence, they’re important to global commerce by facilitating trade between countries and fostering economic cooperation. 

What are International Payments Used For?

International payments are required for various transactions including but not limited to:

Foreign Investments 

Individuals or businesses can transfer funds abroad to purchase foreign assets, stocks, or bonds. In the same manner, they can receive returns on investments made abroad through international payments.

Trade Transactions

Many businesses utilize international payments to pay for imported goods and services or receive payment for exports. 

Remittances

Migrants use international payments to send money back home to family members or loved ones. Usually, remittances provide financial support for family and friends or cover living expenses.

Business Operations

Multinational businesses often require international payments for their operational needs. These needs may include paying suppliers and employees as well as other expenses in different countries. 

Travel Expenses

This covers the cost of flight tickets and other expenses when employees travel abroad for business reasons. International payments are usually used to settle these expenses. 

Types of International Payments 

There are many ways to perform international transactions depending on factors such as cost, transaction speed, transaction time, and so on. The following are the most common types of international transfer:

Wire Transfers

A wire transfer is a form of electronic payment that sends money directly from one bank account to another via a secure network. In theory, it can refer to both domestic and international transfers, but wire transfers are realistically used for transfers abroad.

Typically, you’ll need to supply the following information when making an international transfer:

• Name and address of recipient’s bank
• Recipient’s IBAN (International Bank Account Number)
• BIC/SWIFT code of the recipient’s bank
• Reason for the transfer
• Transfer amount and currency
• Who will pay the associated fees: You, the recipient, or a split between you and the recipient?

International Checks

These are less common due to their slower processing time. International checks are another option for cross-border payments. They are physical checks drawn on a bank in one country that can be cashed in another country. They are utilized for a variety of purposes, such as paying suppliers or sending money to individuals.

Domiciliary Accounts

A domiciliary account is an account that allows the operator to hold money in currencies other than their country’s currency. Usually, individuals use it for the transfer of funds directly to foreign receiving accounts for either business or personal transaction purposes. Sending money between countries using a domiciliary account will involve presenting some important bank details. These details include account name, account number, bank name and branch, Swift Code, routing number, and amount of money you want to send. Keep in mind that the sum of money to be transferred will first be converted to the destination currency using current foreign exchange rates. 

Online Payment Platforms

Sometimes, people use online payment platforms like Changera for international payments, particularly for e-commerce transactions. These platforms are commonly used for smaller transactions due to their ease of use and speed, but can also handle larger transactions.

Best Practices for Effective International Payments

International payments can be complex and involve cumbersome processes. Hence, businesses must uphold the best practices to ensure efficient, compliant, and secure transactions. Here are some of the best practices:

Understand the Cost

One important thing you should always do before choosing a method for international payments is understand the associated costs. This cost includes transaction fees, currency conversion fees, and other potential bank fees. 

Keep in Touch with Current Exchange Rates

Currency exchange rates are constantly fluctuating. Consequently, this can significantly affect the cost of international payments. You should regularly monitor and stay on top of foreign exchange trends relating to how they affect your transactions. This will help you create hedging strategies to help manage or mitigate potential exchange rate risks.

Maintain Accurate Records

Maintaining accurate and reliable records is important for audit purposes and effective financial management. You should keep detailed records of all your international payments including the date, amount, total fees, and the details of the recipient. 

Be Aware of Potential Fraud

Due to the complex processes involved in sending money abroad, international payments can be targets for fraudulent activities. You should be aware of common scams like phishing attempts or fake invoices. Ensure that you always verify any changes to payment details. Also, make sure that you use only secure payment methods and platforms like Changera for your cross-border payments. 

Use Secure and Reliable Payment Platforms 

To avoid common challenges that people face with international transactions, use only secure and reliable payment systems. You should consider the reputation and reliability of the service provider, their security measures, and customer care support in case anything goes wrong. 

Takeaway

Effectively navigating international payments opens the door for business expansion and growth. Hence, businesses aspiring to enter international markets need to have a good grasp of international payment systems. Businesses should give top priority to transparency and security by using only trustworthy service providers. 

Also, by adhering to the best practices listed above, one can significantly enhance the reliability and success of cross-border payments. 

Do you want to take your business global with a reliable payment platform? Look no further than Changera. With Changera, you can send and receive money in multiple currencies and convert it to your local bank account from the comfort of your home. 

Learn more by downloading the Changera mobile app from the Google Play Store or the App Store today.