Introduction

As more shoppers become international digital buyers, cross-border eCommerce presents an increasing number of opportunities for business growth. There’s no doubt that selling overseas in key markets and building a loyal customer base can unlock the potential of maximising sales revenue. As globalization among businesses increases, the need to make banking and fintech globally competitive becomes of foremost importance. Let's find out how digital solutions pave the way for the growth of businesses globally.

In this article, we unpack all you need to know about cross-border payments and how to accept them efficiently for enhanced payment acceptance rates and increased profitability!

What are cross-border transactions?

Cross-border payments, also known as international payments, are defined as transactions where the payer (customer) and the recipient of the transaction (merchant) are not based in the same country. Such payments can be performed among individuals and companies to name a few who are looking to transfer funds across a country's border.

If your eCommerce brand operates away from your home country, it becomes vital that you accept payments across all the markets you’re after. Transfi offers cross border payment solutions to combat the challenges associated with globalization of businesses and makes the entire payment pipeline extremely accessible. More about that further in the article, let’s first find out more about cross border payments for e-commerce merchants. 

How Do Cross-Border Payments Work?

The general concept behind cross-border payments is fairly simple: You set up a website with a checkout page and, on that checkout page, offer various payment options to customers. A customer making a purchase can select their preferred payment method and finish the transaction, often after completing some sort of identity authentication.

On the back end, the situation is far more complex: 

1. Currency changes

International payment processing typically involves a change in currency, which means merchants have to navigate exchange rates, taxes, foreign transaction fees and bank accounts in each currency. If the consumer makes a payment using a credit or debit card, there are also interchange fees to contend with.

2. Payment methods

Merchants must also be pragmatic about which cross-border payment methods they configure and make available to customers. Naturally, they’ll want to select payment methods that appeal to their target market — for example, credit and debit cards for customers based in North America and Latin America, digital wallets for those in the Europe and Asia-Pacific regions and so on. Regardless which payment method(s) a merchant chooses to configure, they must be visible in the technical connection in the payments processing gateway.

3. Fraud protection

From there, merchants must decide whether to implement localized or global fraud prevention and authentication strategies and whether to create a single or multi-acquirer setup. Additionally, if a merchant wanted to use a local acquirer in a shopper’s country of origin, they would need to register as a local entity in that country. 

In order to achieve all of this, merchants require a cross-border payments platform capable of recognizing the consumer’s origin source, applying the appropriate configuration to payment connectors, utilizing the appropriate authentication method and generating business analytics for payments optimization. This last item is especially important, as performance metrics are essential to merchants adapting their cross-border payments strategy for the future. Transfi provides these features all in one platform making it a great choice for e-commerce merchants to adopt it as their primary payment system for cross border payments.

What are the challenges associated with cross border payments? 

Despite the benefits they offer, cross-border payments do come with a few drawbacks:

1. Cost complexity

Some merchants find cross-border payments intimidating due to their perceived complexity and the fact that costs associated with them — foreign transaction fees, interchange fees, taxes and so on — can be high.
It can also be difficult to predict settlement times on cross-border payments and challenging to reconcile multiple currencies for revenue accounting. End consumers may find exchange rates confusing, which can deter them from completing a purchase, and merchants must ensure that they select the right payment methods for each market.

2. Regulatory requirements

There are a wide variety of laws and regulations pertaining to the transfer of financial data, including:

• Regional regulations
• National regulations
• Transaction-specific regulations

Depending on which cross-border payment options they offer, and which markets they operate in, merchants need to be cognizant of various regulations in order to ensure that their international payment processing systems are compliant. Fortunately, these compliance concerns — as well as concerns related to cost and complexity — can be resolved by choosing the right cross-border payments platform.

3. Lack of transparency

A common complaint with cross-border payments is a lack of transparency — that once a payment is initiated, those sending and receiving funds have no way to track it in real time. This visibility issue not only pertains to the status of payments in transit, but also to the foreign exchange fees tied to said payments, which — depending on the type of transaction — could come out of consumers’ pockets. There are a few ways merchants can increase transparency around cross-border payments, including;

• Partnering with a financial institution or payments service provider that has a strong reputation for delivering transparent, efficient cross-border payment services
• Investing in a payments platform that supports real-time payments tracking
• Leveraging blockchain technology, which creates a tamper-proof ledger of cross-border transactions and reduces the cost of these transactions by avoiding traditional payment rails (which are often more expensive)

Transfi provides transparent and secure transactions by leveraging the blockchain technology and recording every transaction real time with giving users the advantage of tracking their transactions as and when they get processed. 

4. Security threats

Cross-border payments have become a popular target for fraud, as poor visibility into the status of funds in transit, decentralized payment networks and a lack of a centralized regulatory body to govern cross-border transactions all present vulnerabilities for fraudsters to exploit. And fraud isn’t the only type of threat that cross-border transactions face — they’ve also become a common vehicle for money laundering.

Although it will take international action to counter more widespread threats of fraud and money laundering activity in cross-border payments as a whole, businesses can take measures to secure their own transactions and those of their customers, including implementing strong fraud protection systems and complying with anti-money laundering (AML) and Know Your Customer (KYC) requirements.

Benefits of cross-border payments 

Expanding into international markets through cross-border payments offers merchants a range of advantages, facilitating growth, increasing revenue streams and enhancing competitiveness. Here are some key benefits:

1. More flexibility for customers

By offering your customers their preferred payment method you can give them more flexibility to pay how they choose. Whether your customers are based in Europe, Africa, North or South America, or the Asia Pacific, with cross-border payments they can pay how, when and where they want.

2. Merchants can extend their reach

Cross-border payments enable merchants to reach customers beyond their domestic borders, tapping into new markets and unlocking a larger customer base. This expansion increases merchants’ market opportunities and their revenue potential.

3. Increased sales potential

Access to a global customer base means merchants can capitalise on demand in different regions. Offering products or services to international customers expands a merchant’s sales potential, leading to increased revenue and business growth.

4. Brand exposure and recognition

Operating in multiple countries enhances brand exposure and recognition on a global scale. This increased visibility can lead to greater brand awareness, attracting new customers and reinforcing trust among existing ones.

How Does Transfi Support Cross-Border Payments?

Transfi offers global connectivity via a single API to payments orchestration based on customer journeys; this enables us to automatically convert transactions so that they align with local payment options, customs, acquirers, fraud strategy and authentication. We’re constantly adapting to changes in the market and supporting emerging payment types, such as BNPL and digital currencies, to help merchants take advantage of new technology, close payment gaps and seize new revenue growth opportunities. All of our solutions are tightly integrated, which means Transfi customers are able to easily switch on new solutions as needed, enabling them to break into new global markets at speed.

Streamline your system with global payment and finance compatibility by providing fast, cost effective and secure transfers on your online service platforms with the help of Transfi and ensure the upward growth of your platform. 

Conclusion

Transfi is the ultimate payment gateway for freelancers, ecommerce platforms, businesses and developers wanting to tap into cross border payments and approaching expansion globally. You can use Transfi to get paid from anywhere in the world and securely send money everywhere. Online platforms can use it to receive payment securely without any hassle. Compared to other international payment methods, Transfi only takes a few minutes to process your money in the most secure form. It provides multiple payment methods to the customers giving them the independence of choosing their preference. 

Frequently asked questions (FAQs)

1. What are cross-border transactions?

Cross-border payments, also known as international payments, are defined as transactions where the payer (customer) and the recipient of the transaction (merchant) are not based in the same country. Such payments can be performed among individuals and companies to name a few who are looking to transfer funds across a country's border.

2. What are the benefits of cross border payments?

• More flexibility for customers
• Merchants can extend their reach
• Increased sales potential
• Brand exposure and recognition

3. What is the best payment system for cross border payments?

The best payment system for your online business will depend on your unique needs. We encourage you to do your research to find the system that fits your goals and requirements. Our platform, Transfi, offers businesses the most comprehensive, end-to-end financial operations system with global reach. We offer multi-currency accounts that make it quicker and more cost-efficient to help you accept, hold, and make payments internationally.

4. What are the challenges associated with cross border payments? 

• Cost complexity
• Regulatory requirements
• Lack of transparency
• Security threats 

5. What is the best way to accept payments for online platforms across borders?

Offering flexibility is key. Most customers expect to pay using cards, bank transfers, or digital wallets. Transfi makes this simple with hosted checkouts, payment links, and plugins. You can accept local and international payments without needing multiple systems or complicated setups.