Cross-Border Payments: Moving Money Internationally

International operations mean paying suppliers, employees, and partners in other countries—and receiving payments from international customers. Each cross-border transaction involves currency conversion, banking infrastructure, and potentially significant costs.

The difference between an efficient payment strategy and an ad hoc approach can be tens of thousands of dollars annually for a growing company with modest international activity. Volume increases these savings substantially.

Payment Methods Compared

International Wire Transfers (SWIFT)

Traditional bank wire transfers use the SWIFT network to move money between banks globally. It's reliable and widely accepted but comes with costs.

• Sending fee: $20-$50 per transfer from your bank
• Correspondent bank fees: Intermediary banks may deduct $15-$30
• FX spread: Banks typically markup rates by 0.5-3% from mid-market
• Timing: 1-5 business days depending on currencies and banks
• Tracking: Limited visibility until funds arrive

Fintech Payment Providers

Companies like Wise, OFX, Payoneer, and World First offer alternatives to traditional bank wires, often with better rates and lower fees.

• FX rates: Often 0.3-0.7% from mid-market (vs. 1-3% from banks)
• Fees: Typically $0-$20 per transfer depending on amount and corridor
• Speed: Same-day to 2 days for most major currencies
• Multi-currency accounts: Hold balances in multiple currencies
• Limitations: May have transfer limits, country restrictions, or require additional verification

International ACH/SEPA

Local clearing systems like SEPA (Europe), BACS (UK), and various ACH networks can process cross-border payments within their regions.

• Cost: Very low ($0.50-$5 per transaction)
• Speed: 1-3 business days
• Limitations: Geographic restrictions (SEPA only works within Europe)
• Best for: High-volume, recurring payments within the network

Credit Cards

Corporate credit cards can make international payments convenient but are expensive for larger amounts.

• Convenience: Easy for small purchases, subscriptions, travel
• Cost: 2-3% foreign transaction fee plus unfavorable FX rates
• Limits: Not practical for large B2B payments
• Best for: Small, ad hoc international expenses

Understanding FX Costs

The exchange rate you receive is often where the real cost lies—and it's less visible than explicit fees.

Mid-Market Rate vs. Offered Rate

The mid-market rate (interbank rate) is the midpoint between buy and sell rates in the wholesale currency market. You can find it on Google, XE, or financial terminals. The rate your bank offers will be worse—the difference is their profit.

If the mid-market rate is 1 EUR = 1.10 USD, your bank might offer 1 EUR = 1.12 USD for buying euros (you pay more) or 1 EUR = 1.08 USD for selling euros (you receive less).

Calculating the True Cost

• Look up the mid-market rate at the time of your transaction
• Compare to the rate you actually received
• The difference, expressed as a percentage, is your FX cost
• Add explicit fees to get your total cost

International Banking Strategy

Your approach to international banking depends on the scale and nature of your operations.

Option 1: US Bank with International Capabilities

Large US banks (JPMorgan, Citi, Bank of America) offer international services that can simplify treasury management for companies with multiple foreign entities.

• Pros: Unified treasury view, relationship leverage, multi-currency accounts, integrated cash management
• Cons: Higher costs, FX rates not competitive, may require minimum balances
• Best for: Larger companies ($50M+ revenue) with significant international operations

Option 2: Local Banks in Each Country

Open accounts with local banks in each country of operation for day-to-day transactions.

• Pros: Best for local transactions (payroll, local vendors), local currency efficiency
• Cons: Multiple banking relationships to manage, less visibility, fragmented treasury
• Best for: Companies with significant local operations (employees, local customers/vendors)

Option 3: Fintech Multi-Currency Accounts

Platforms like Wise Business, Mercury, or Airwallex offer multi-currency accounts that can receive and send in many currencies.

• Pros: Lower costs, good FX rates, unified dashboard, easy setup
• Cons: May not qualify as "bank account" for some purposes, FDIC coverage varies
• Best for: Growing companies with moderate international payments

Hybrid Approach

Most companies use a combination:

• Primary US banking relationship for core treasury
• Local bank accounts where you have entities and employees
• Fintech solutions for cross-border payments to optimize costs
• Multi-currency accounts to hold foreign currency when needed

Optimizing Your Payment Process

Batch Payments

Instead of sending individual wires, batch multiple payments together:

• Reduce per-transaction fees
• Negotiate better FX rates on larger amounts
• Simplify reconciliation
• Consider weekly or bi-weekly payment runs for non-urgent payables

Currency Matching

If you receive euros from customers and have euro-denominated expenses, try to match them:

• Pay suppliers in the same currency you receive
• Hold foreign currency balances for upcoming payments
• Avoid converting back and forth unnecessarily

Forward Contracts

For predictable future payments, forward contracts lock in today's exchange rate for a future transaction:

• Eliminates uncertainty about FX costs
• Useful for budgeting and forecasting
• Available from banks and many fintech providers
• Trade-off: you lose potential upside if rates move favorably

Negotiate Terms

• With vendors: Request invoicing in your currency, shifting FX risk to them
• With customers: Offer discounts for payment in your currency if FX costs are significant
• With banks: Negotiate better rates if you have significant volume or a broad relationship

Common Challenges and Solutions

Payment Timing and Float

International payments can take days to settle, creating cash flow uncertainty and potential late payment issues.

• Build 3-5 business days buffer into payment timing
• Use faster payment corridors when available (same-day SEPA, real-time services)
• Track payments through the process using references/tracking numbers
• Communicate proactively with payees about timing

Payment Returns and Rejections

International payments fail more often than domestic ones due to:

• Incorrect IBAN or account numbers
• Missing or incorrect SWIFT/BIC codes
• Beneficiary name mismatches
• Sanctions screening holds
• Intermediary bank routing issues

Prevention: Verify banking details carefully, use payment templates for recurring payments, and maintain accurate vendor master data.

Sanctions and Compliance

International payments are screened for sanctions compliance, which can cause delays or blocks:

• Payments to/from sanctioned countries may be prohibited
• Payments to sanctioned individuals or entities will be blocked
• Additional documentation may be required for certain corridors
• Know your compliance obligations—violations carry severe penalties

Receiving International Payments

The other side of cross-border payments is receiving money from international customers.

Provide Clear Payment Instructions

• Include complete bank details on invoices (account number, routing number, SWIFT code)
• Specify whether the customer should pay in their currency or yours
• Include your bank's address and intermediary bank if applicable
• Provide multiple payment options where practical

Multi-Currency Receiving Accounts

Fintech platforms can provide local receiving details in multiple countries:

• Get a local account number in UK, EU, Australia, etc.
• Customers pay locally (cheaper and faster for them)
• You receive funds and convert on your terms
• Particularly useful for high-volume, small-value transactions