The world is quickly becoming more connected in myriad ways. Of course, this applies to the world of business. More and more businesses of all stripes are hiring more remote work, and some of that remote work is found internationally. This trend is no longer unique to enterprise companies. Small businesses can now easily find employees across the world for both part-time contract work and full-time positions.
The trend also applies to the consumer side. Many shoppers are now purchasing items from foreign countries online and having them shipped to their homes. So retailers, too, need to be prepared to accept payments across borders.
Still, the transition has not come without its headaches. And these are mainly found in the process of making cross-border payments. Both businesses and employees have run into problems when trying to complete a cross-border payment. And with over $150 trillion sent internationally in 2022 alone, this is a problem that desperately needs solving.
Read on the learn more about cross-border payments and how small businesses can make this process simple, reliable, and efficient.
What Are Cross-Border Payments?
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A cross-border payment is rather self-explanatory. It’s simply a financial transaction between international borders. Such a payment could be sent between traditional banks, online banks, other financial institutions, businesses, or individuals.
As mentioned in the introduction, cross-border payments exceeded $150 trillion in 2022. That number is expected to significantly rise in years to come.
Who Can Use Cross-Border Payments?
Cross-border payments can be used by just about anybody. When done right, they’re fast, secure, and remarkably convenient. Still, there are some best practices that businesses must follow. More on that later.
Cross-border payments can take make forms, including the following:
- International wire transfers
- Bank transfers
- Credit card payments
- Debit card payments
- Prepaid debit
- ACH payments
- Digital currency exchanges
- Mobile and digital wallets
- Blockchain payments
What Are the Benefits of Cross-Border Payments?
Globalization has created a growing demand for more goods and services from all over the world. Business, in particular, has never been so global. In fact, the majority of businesses now hire international employees in at least some capacity. And many more sell to international customers.
Among other things, cross-border payments help small businesses both directly and indirectly:
- Significant operational savings
- Improved ROI
- Reduced need for physical office space
- Better payment security
- A larger talent pool
- Broader audience
- Improved profits
What Are the Steps Needed for Making a Cross-Border Payment?
As promised, here are the various steps a small business must take to ensure that they are sending international payments correctly:
Get the Right Platform for Your Employees
Different countries have different regulations and different platforms for sending and accepting payments. China, for instance, mainly uses WeChat and AliPay, two platforms mostly unheard of in the United States.
Find out what the most common platforms are for the area in which you’re hiring, and make sure you offer those as options.
Navigate the Currency Issue
Make sure that any payment you send can be accepted or easily transferred to the local currency. You don’t want your employees to have a major hassle each time they’re paid.
Familiarize Yourself with SWIFT and CHIPS
These are nearly universal international regulations for sending and receiving cross-border payments. They roughly achieve the same thing.
SWIFT codes are created and maintained by the Society for Worldwide Interbank Financial Telecommunication, or SWIFT. These identify the country and bank of the person receiving payment and help ensure that the money is received promptly and securely.
CHIPS, on the other hand, does the same thing for the sender of the money.
Reduce Your Fees
Payment fees are a major pain. Even small fees add up quickly and dig into your ROI. Traditional banks created payment fees because they used to hold a monopoly on the payment market.
With the rise of more digital payments, digital currencies, and other forms of secure instant payment, non-traditional financial institutions have emerged in droves. Many of these institutions offer far more favorable payment fees for a small business account.
Stay Compliant
Ensuring full compliance is even more important when sending international payments. You need to make sure you’re following the laws of both your own country and the country to which you’re sending the payment.
And many countries are taking more and more steps to protect workers and consumers. Europe’s GDPR is the most prominent example and a good indicator of where many countries are likely to gravitate.
Make sure you find a payment platform that maintains full compliance in the country to which you’re sending the money.
What Are the Steps for Accepting a Cross-Border Payment?
Retailers who sell to an international audience also need to make sure they’re well-suited for accepting cross-border payments. Below are some important things to keep in mind:
Optimize Your eCommerce Page
No one likes a tedious checkout process. Make sure your eCommerce store has a smooth checkout page that is seamless for all currencies in the countries you sell to.
Track Routing and Processing
Make that your store is set up to receive all payments made from any country in which you do business.
Stay Compliant Here, Too
Compliance is also important when it comes to payments, whether you’re on the sending or receiving end. Follow all laws in your own country and, again, all laws in each country to which you sell.
Settle and Track
Ensure the prompt delivery of all payments by settling and tracking. Treat cross-border payments the same as any other type of payment to ensure that you can receive the revenue of each of your sales.
It Starts With the Right POS System
To ensure that you can accept all cross-border payments, you’ll need to work with the right retail POS and credit card processing. KORONA POS integrates with all major credit card processors. This allows our users to always find the best solution for their business, no matter where they’re selling.
