Cross-border payments FAQ: Key questions and answers

The main difference between cross-border payments and international money transfers is in their scope and purpose.

Cross-border payments is a broad term, covering business-to-business (B2B) transactions, such as payments to suppliers, international trade,
and payroll, as well as personal (often digital or wire) payments overseas. Cross-border payments can be complex, involve compliance layers, intermediary banks, and multiple fees/exchange rates, and may require foreign exchange (FX) risk management.

International money transfers, on the other hand, often refers to personal remittances (sending money to family or friends), and is a specific type of cross-border payment.

Different providers specialize in different types of cross-border payments. For example, there are specialized services that help consumers make international money transfers, and there are B2B experts like Convera, offering a complete suite of cross-currency products, specialized industry solutions, and deep expertise in managing foreign exchange risk.

Learn more about Convera’s cross-border payment capabilities.

There are five main challenges for cross-border payments.

1. Hidden fees and foreign exchange (FX) markups: FX costs are one of the biggest pain points in international transactions. Traditional institutions often embed large markups in the exchange rate while layering on transaction fees.
2. Choosing the most suitable payment method: There are numerous methods of transferring funds across borders, each with its own unique characteristics, benefits, and drawbacks, such as automated clearing house (ACH), Single Euro Payments Area (SEPA), real-time gross settlement (RTGS), wire transfers, and crypto payments.
3. Lack of transparency: The lack of visibility into payment status and settlement timelines is a major challenge. Funds can go missing for days in the correspondent banking chain, with no way to track their movement in real time.
4. Fraud, regulatory complexity, and compliance risk: Cross-border payments must comply with an intricate web of local and international regulations, while fraud attempts are growing more sophisticated.
5. Slow delivery times: Many international transactions take a few business days to settle, especially when multiple banks and currencies are involved.

Learn more about overcoming these challenges with Convera.

Cross-border payments are financial transactions between a payer and a recipient across borders. They typically involve navigating foreign exchange (FX), currency conversions, different banking systems, regulatory frameworks, and paying fees.

Here’s how cross-border payments work:
– Initiation: A payer sends funds to a recipient in a different country, specifying currency and amount.
– Currency exchange: The payment is converted from the payer’s currency to the recipient’s currency.
– Routing: The funds are routed through banks, payment networks, or local clearing systems.
– Settlement: The recipient receives the funds in their local currency.

Learn more about Convera’s cross-border payment capabilities.

Any business involved in international commerce or trade needs cross-border payment solutions. As do businesses that manage global suppliers and customers, overseas talent, international investments, and global operations or offer cross-border services.

This includes such industries as manufacturing, logistics, financial services, legal, travel, and institutional funds.

Discover how different industry leaders can grow their business with innovative cross-border payment solutions.

Cross-border payments usually take 1 to 5 business days, depending on the destination country, currency corridors, and intermediary banks.

A few additional factors can delay cross-border payments. Payments initiated after a bank’s daily cut-off time, on a weekend, or a holiday can get delayed to the next business day. Extra regulations or additional rules in some countries can slow down the payment process as well.

On the other hand, some payment providers, like Convera, can offer same-day settlement options with no intermediary charges, thanks to its vast payment network.

Contact Convera to get a personalized quote for your business.

Currency exchange drastically impacts international payments. Fluctuations in currency exchange rates can significantly impact the actual value of payments and their costs. Currency volatility driven by economic, geopolitical (and other) factors introduces unpredictability, or FX risk, and influences global trade, international ecommerce, education, and many other industries dependent on cross-border transactions.

Get real-time exchange rates.

Businesses can manage foreign exchange (FX) risk through a combination of financial tools (hedging), operational strategies, and specialized payment solutions to ensure predictable cash flows and growth opportunities.

Hedging tools such as forward contracts, FX options, and FX swaps offer businesses the ability to lock in an exchange rate for a set period to help increase cash flow confidence.

Specialized payment providers, such as Convera, can help choose the best hedging strategy, as well as offer pricing transparency, real-time exchange rates, and multi-currency holding balances.

Learn about FX risk and how to manage it.

Our hedging products are derivative financial instruments which may expose you to risk should the underlying exposure you are hedging cease to exist. They may be suitable if you have a high level of understanding and accept the risks associated with derivative financial instruments that involve foreign exchange and related markets. If you are not confident about your understanding of derivative financial instruments, or foreign exchange and related markets, we strongly suggest you seek independent advice before making the decision to use these instruments.