Companies that do business with global partners need a reliable and low-cost way of sending and receiving money abroad. In this guide, we will share the top money transfer options for you to get started. They include widely recognized options like Currencies Direct and Wise.
What are cross-border B2B payments?
Cross border B2B payments occur when one business sends money to another one, and the transfer involves two different countries. In most cases, international B2B transfers involve currency exchange. However, cross-border payments within the EU will usually involve the EUR, so the complications of FX rates are removed.
International B2B payments can be executed by many different methods, and that determines the practicality of the transfer. You have to consider multiple factors with cross-border payments and we will go into them further down the page.
What are the cross-border transaction fees?
International money transfers incur fees in most cases, which adds to the cost of doing business. Banks tend to be the most expensive since they charge around $20 to $50 per wire transfer. Overall, cross-border transactions are more expensive than domestic ones, so factoring in this fee is essential when considering the best way to deal with international business partners.
You can save money on fees by choosing a competitive money transfer company. For instance, options like Wise and TorFX provide free international transfers that businesses can take advantage of.
What are the different ways to make cross-border payments?
We understand that businesses want to have several options available for international money transfers. Therefore, in this section, we provide various methods for sending money abroad.
Credit card payments: one of the most popular and easily accessible methods of sending money is credit cards. That is because every business owner has a credit card, which is accepted on most payment platforms. Also, the processing time is instant in many cases, and robust security measures are used by credit card companies. One downside of credit cards is that the fee can be 1-3% of the transaction amount.
Bank transfers: a commonly used method by companies are bank transfers to complete cross-border payments. Many banks are part of an international network that allows for reliable and safe transactions. The different bank transfer types include SWIFT transfers, wire transfers, and ACH. However, the transfer speed of bank transfers can take a few days up to a week. This can result in cash flow problems for businesses. Therefore, taking advantage of top-tier money transfer companies to reduce the transfer time is a great idea.
eWallet: you can send money using eWallet accounts, which are generally free and instant. However, the most competitive eWallet transaction requires that the recipient also has an account with the same service. Some of the most commonly used eWallets are Cash App, Android Pay, Samsung Pay, Google Wallet, PayPal, and Venmo.
Money transfer companies: to simplify cross-border payments, consider selecting a money transfer company. Business-orientated companies like OFX and Currencies Direct are solid options that you can use to take advantage of forward contracts and spot contracts.
What are the types of cross-border payments?
Cross-border payments can be broken down into several types. Understanding these helps provide a framework for differentiating various types of business payments. The methods, fees, restrictions, and considerations will differ from optimizing them.
B2B: as mentioned previously, B2B payment refers to the transferring of funds from one business to another. This could be when an office pays a cleaning company, or a construction company pays for building materials.
B2C: these transaction types refer to businesses sending money to the consumer. The consumer could be a small business or individual. The reasons for this transfer type include refunds and rebates.
C2C: customer to customer transactions usually involve some kind of system or platform acting as a middle man. For example, goods sold on eBay can be classed as C2C transactions.
C2B: customer to business transactions refer to the purchasing of goods and services by consumers. For example, when you buy food at the supermarket or clothes online.
What are the risks involved in cross-border payments?
Cross-border payments are safe in most cases, but there is always risk associated with the transaction type. Firstly, you need to ensure that a safe and verified platform is used to process the transaction. This ensures that you do not enter details into a scam website. The money transfer services we recommended have all been verified by trusted 3rd party organizations like the Financial Conduct Authority.
You must ensure that the correct recipient details are entered. Otherwise, you may not retrieve the funds if they are sent to the wrong individual. For instance, when sending money through wire transfers, you must enter the correct bank account information.
Best 5 international money transfer providers for cross-border payments
We understand that you might be overwhelmed by the number of money transfer services for cross-border payments. Therefore, we have done the research to narrow down the options to the top 5 companies you can use today.
TorFX offers excellent business functionality like spot contracts and mass payments. This offers businesses the flexibility they need to save money on FX rates and automate the process of sending money to a large number of people. Also, they have a straightforward user interface that is easy to grasp for beginners.
TorFX does not charge a transaction fee, but instead, you will pay a currency exchange markup of 1-3%. The percentage depends on the currency pair and the amount you are sending. Finally, TorFX offers strong customer support, which is excellent for businesses that need help figuring out how to use the platform for setting up cross-border payments.
Wise is a trusted and transparent platform that allows for fast transfers, matches the mid-market rate, and offers free balance transfers. The transparency of Wise will enable you to compare the fees and FX rates before initiating the transaction. This is great for comparing the quality of the deal with other money transfer services.
Wise has an easy-to-use platform that provides plenty of useful hints in its user interface. Also, their customer support goes the extra mile to offer help. The company is also regulated by the Financial Conduct Authority for your peace of mind.
OFX is a business-friendly platform that comes with advanced features. For example, you can lock in an FX rate for 24 hours, allowing businesses to manage FX rate costs. Also, recurring transfers and forward contracts are offered to improve further the ease of doing business internationally.
The specialists at OFX provide current market news on FX rates, which helps international businesses to get accurate data. Also, they have a 24/7 customer service department that includes phone and email.
4. Currencies Direct
Currencies Direct is another business-orientated specialist transfer provider that offers strategic advantages. The customized and flexible payment options enable businesses to set up forward contracts and apply for a multi-currency account.
Customers can open up an account with up to 60 currencies, which is perfect for minimizing the cost of cross-border payments. Also, there are no transfer fees for international transfers, which means you will save significant sums of money compared to bank transfers.
Airwallex is an excellent money transfer service for business customers. They offer competitive FX rate mark-up percentages of 0.3-0.6%, which means you will be saving money compared to banks. Also, they utilize local payment technologies to reduce or eliminate cross-border payments.
The company provides accounting software integration and a multi-currency account with 14 currencies. Also, customers can create borderless virtual cards to safely pay for goods worldwide.
Top reasons to make cross-border payments
Cross-border payments are made to pay for goods and services in other countries. For example, a business may need to buy suppliers or services from abroad to run its operations. Construction companies may require more wood or bricks, restaurants may need exotic fish from Japan, or car companies may need to buy specific parts.
When making each of these payments selecting a trusted money transfer company ensures that low fees are achieved. Services like Currencies Direct and TorFX do not charge fees when making cross-border payments, saving you significant sums of money over the long term.
How to make cross-border payments
In this section, we will provide a step-by-step process of how you can send money internationally. This is a general process and may differ based on the specific money transfer company you have chosen.
Visit our Companies page and choose a transfer provider that matches your business needs.
Register with the company and provide verification details.
Begin the transfer process by entering the recipient details and the amount you wish to send.
Review the transaction details and confirm the transaction.
How to receive international payments
The process of receiving international payments depends on the money transfer service you have chosen. Some only permit bank transfers, while others allow for balance transfers. We suggest that you have a look at the available options before registering for an account.
Wise is an example of a money transfer company that provides multiple ways of receiving money. They provide bank details to accept multiple currencies in their banking network. This reduces the transfer time and fees associated with international transfers.
Challenges with cross-border payments
Businesses have to overcome multiple challenges when sending and receiving money internationally. Working through these problems allows businesses to get a better deal with money transfers.
Speed: businesses need good cash flow to ensure that their operations continue to run smoothly. Slow money transfers can result in delays. For instance, when sending suppliers a payment, they may only send the shipment when the funds have arrived. Therefore, companies need to choose a service that offers quick processing speeds. Xe is an example of a company that provides reliably fast transfer speeds.
Cost: Companies must find low-cost money transfer solutions to ensure their profitability is not compromised. Bank transfers are among the most expensive, with up to $20 to $50 per transfer. Instead, choose low-cost companies like TorFX and Currencies Direct. They offer no transfer fees, which is perfect for cross-border business payments.
Limited access: companies may need to do business with countries their bank may have restrictions. This might be an outright restriction dealing with the country or its national currency. Businesses can overcome these restrictions by using money transfer companies like WorldRemit. They offer access to over 130 countries in their global network.
Lack of transparency: some transfer methods lack the transparency businesses need to manage their costs. Hidden costs and uncontrollable FX rates can lead to a loss of money when businesses execute cross-border payments.
Cross-border payments regulation
Businesses need to understand the regulations of the countries where they are sending cross-border payments. This relates to the taxes that must be paid, the paperwork that must be filed, and the organizations that might audit their books.
PSD2 regulations mean that businesses need to provide adequate customer authentication tools to safeguard user accounts. Handing transactions without these security protocols could result in fines.
EU cross-border payment regulations ensure that the cost of sending money abroad must not be lower with a foreign currency than if the national currency was used. This legislation seeks to ensure that the national currency within a country can remain competitive when it comes to cost.
Summary: What are cross-border payments?
To summarize, we learned that there are many things to consider when executing cross-border payments. You need to ensure you get the lowest costs, best FX rates, and fast processing times. Also, there are many services to choose from when sending money internationally. The top ones we recommend include Wise, TorFX, and Currencies Direct. Choosing any one of these will save you money and provide access to better FX rates than what most banks offer.
To continue researching cross-border payments, we recommend you check out the other guides on our website. You can start with Understanding Foreign Exchange Risk and Mass International Payments For Business.