Cross-border transfers are financial transactions between parties that are located in different countries. They encompass all wholesale and retail payments, as well as remittances, which is a term that refers to money sent back to a home country by migrants. Payments across borders can be created in a variety of forms.The most popular means of exchanging money across borders are bank transfers, credit card payments, and alternate payment methods.
These payments sometimes might be inefficient due to a couple of different reasons. There might be excessive fees, time consuming processes and long delays. This is why you need to choose a reliable platform when you are making cross border transactions. There are very advanced global platforms that help you save time and money. Cross -border transactions are changing globally. There has been a huge increase in the use of digital payment platforms in recent years.
Digital payment platforms are secure and fast compared to traditional banking services. They can operate almost anywhere in the world. Most of the platforms are compatible with any banking infrastructure. What we mean when we say digital payment platforms are more secure. They use every type of security measures from iris scanning to TwoFactor Authentication models. All your data is encrypted and protected. Generally they offer more efficient customer services and their operations are very fast and smooth.
Let’s explain this with a simple example, when you make a purchase online, there is a system that transfers the money from your account to the merchant’s account. This transaction is more complex in cross-border payments. Sometimes there might be a need for a change of currency which can create a difference in exchange rates. Also sometimes there are additional fees to this process. This requires an advanced banking system network both locally and globally.
Every bank or financial institution has a counterpart in another country. So funds will first leave the buyer’s bank and go to that bank’s counterpart in the merchant’s country to prepare for remittance. The merchant’s bank will then receive the remitted funds, and they will be settled into the merchant’s account. These banks often work with others to transfer the money, which often involves more than four banking locations dealing with one another, navigating currencies, different taxes, and transaction fees. Because there are so many entities working on a single purchase, the process can be very slow.
Cross-border transfers are divided into two categories:
Wholesale cross-border payments: They are usually made by financial institutions to fund the operations of their clients or to support the financial institution’s own cross-border activities (such as borrowing and lending, foreign exchange, and the trading of equity and debt, derivatives, commodities and securities).
Multinational non-financial businesses usually make wholesale payments to support:
a) trading or other corporate transactions;
b) financial resources for the firm, such as cash management, which necessitates transferring money through foreign branches to meet the company’s liquidity needs.
Wholesale markets may also be used by governments to conduct major trades with other governments or foreign companies.
Cross-border transfers by individuals and companies are known as retail cross-border payments. Person-to-person, person-to-business, and business-to-business are the three main categories.
For business transactions there are some points to take into consideration to facilitate your cross border payments. First of all, determine the supplier’s preferred payment method. Then identify which currency to send the payment in. You can save time and money by just adjusting these two points. If you are dealing with large volumes of cross border payments you can collaborate with global payables. You can make all your payments from a single centralised account.
It is important to understand the global payment rules. Crossborder transactions have complex regulatory, privacy, and sovereignty requirements. You need to declare certain amounts of payments if not you can face serious fines. It is extremely important to have a compliance department dedicated to this issue. It can save you from a lot of problems. Compliance has many advantages such as elimination of risks related to compliance and costs. Also it enhances customer experience. Before choosing the right platform for your cross border transactions, make sure that your preferred platform is meeting global compliance rules.
How do you send a cross-border payment?
Payments across borders can be made in a variety of forms. The most popular methods of moving funds across boundaries are bank transfers, credit card payments, and Alternative Payment Methods (APMs). The best payment form for your company can be determined by where you are located and where you choose to make payments.
You’ll need the recipient’s International Bank Account Number (IBAN) and (Bank Identifier Code) BIC, as well as their personal information, to make an international bank transfer. B2B and B2C SWIFT transfers are now available to merchants.
Credit cards are a convenient way for shoppers to make international online purchases. They just need to input their card information, but there are always higher transaction and FX fees.
Types of cross-border payments
Credit card payments, prepaid cards, bank transfers and APMs are all types of cross-border payments. Customers like to pay in a way that is convenient for them. On top of this, they like to be offered tailored choices and be assured that their payment data will be securely handled. As a result of this, merchants need to cover all bases and offer multiple ways for their customers to pay across borders.
Credit card payments
Credit cards play a large role in cross-border payments and are a go-to option for many consumers. From the consumer’s perspective, they simply have to enter their card details and wait for the transaction to be verified. Behind the scenes, there is more going on. Cross-border payments require more work from the involved credit card networks and acquiring banks as they need to convert between two different currencies. This additional workload results in increased fees that are passed down the payment chain. You can still talk to your bank and see if there are different options available for your crossborder activities.
Bank transfers
International bank transfers are another long-standing way of placing a cross-border payment. Most larger banks will have a limited range of currencies stocked, but it is not possible to accommodate more than a handful at any given time. Therefore, when a customer in the UK is looking to transfer money to a country that they don’t have the currency in stock for, they will have to rely on their foreign banking partners to engineer the transaction. Smaller banks often do not hold any foreign currencies, so look to large banks to host cross-border payments on their behalf.
This is just a snapshot of cross-border payment processing and there can be many more parties involved that cause delays to the transaction. SWIFT gpi, which we will discuss further below, is an attempt to speed up the processes behind cross-border payments.
eWallets
An eWallet, also known as a digital wallet, is a software-based electronic APM that allows customers to pay for online or in-store transactions. Commonly available through apps for smart devices, eWallets allow users to safely store their payment cards of choice so they can pay for goods and services. A popular payment method that offers all similar services with fast and secure cross-border transactions is Jeton. E-Wallets are very similar to your traditional bank accounts, they offer beyond all the services offered by physical banks.
E-wallets enable traceability thus you can track the status of your transaction. Also you can get very detailed notifications about your transactions or even your spending habits.
You can use your e-wallet account as a financial investment tool. You can easily buy and sell assets such as cryptocurrencies or bonds from another country.
With an e-wallet account you also get high quality customer support which is available 7/24. It doesn’t matter if you are in your home town or any other country. You can reach out to customer services any time without paying extra phone bills for waiting long hours on the phone just like you do when you use traditional banking.
There are very innovative and cost efficient trends in cross border payment promising a bright future. These trends enhance the user experience. E-wallets minimise fraud and security risk. Also they are cost effective as we know currency exchange rates can fluctuate rapidly, introducing volatility and uncertainty into transactions. You can avoid loss up to 50% by just switching to e-wallets or any other digital payment method.
Digital currencies
Digital currencies are one of the most preferred methods to make crossborder transactions. They are very low cost and offer a wide range of options according to the needs of everybody. Cryptocurrencies have started with Bitcoin, Litecoin, Ethereum. As of March 2024, there are 13,217 cryptocurrencies in existence. You can choose the best option according to your personal preference or business needs.
Globally 75% of retailers plan to embrace cryptocurrency as a crossborder payment method.
This information is very promising and exciting. However, we recommend you to do some good research about cryptocurrency payments. The value of digital currencies are volatile and unpredictable. Rates change constantly and there is a bigger risk of fraudulent activities. Also most of them are non-traceable and irreversible. Also there are security risks.
While trying to save money from expenses you can lose all your money if you don’t have enough knowledge. You can work with professionals to make your crossborder transactions more efficient.
Prepaid Cards
Prepaid cards also known as cash cards, these debit cards facilitate international payments.
The fund is deducted from your account and transferred to the recipient’s debit card account.
Transactions are real-time and instant which has a big advantage if you want to make an international payment. You need to consider that these types of transactions generally have fees for both parties. There might be ATM commissions and these transactions are not covered by the federal consumer protection laws. However if you are sending money to a country with limited bank infrastructure then definitely you can benefit from using prepaid cards.
Unlike traditional banking services that often require extensive paperwork and credit checks, prepaid cards are relatively easy to obtain. Prepaid cards can be bought from financial institutions or simply you can buy them online. In other words with prepaid cards you can benefit from all services offered by regular debit cards without hustle and bustle.
Prepaid cards are very secure to use as they have limits and they are generally equipped with PINs and EMV chips. Additionally they offer 7/24 customer support and fraud protection services. So you can use prepaid cards easily in your cross border transactions. Prepaid cards are flexible and convenient and they are cost effective solutions. You can use prepaid cards while you are travelling in order to save a serious amount of time and money. You can easily connect your prepaid cards to your mobile applications.
Cross-border payments have become very popular, opening gates to faster transactions, expanded markets, and improved efficiency. The benefits are endless, yet so are the challenges from navigating complexity to handling costs and possible security threats.
We should ask this question to ourselves: Is it really possible to experience the perfect flow of international transactions?
With Jeton, the answer is a hundred percent yes. Jeton allows customers to operate in multiple currencies and to place orders across borders. Although wallet to wallet transactions do not technically count as cross-border payments, they do help facilitate the transaction. It is not until the funds are withdrawn from the eWallet and transferred to the merchant’s bank account, that the process can be classified as a cross-border payment. Jeton account has all the features that you need for cross border transactions.
Jeton is compatible with all types of banking infrastructure in more than 100 countries. We are ready to enhance your growth in global markets. Whether you have a small business or you are operating on a global scale, Jeton offers the most personalised services according to your needs. Join Jeton today and take a step forward for your future.
