Cross-border payment options compared for small exporters
Cross-border payment options fall into three groups for a small exporter: a bank wire, a card payment and an online transfer service. Each one costs a different amount, moves at a different speed and carries a different risk. The best choice depends on the size of the sale and how well you know the buyer.
Why moving money abroad costs more than you expect
A payment that crosses a border often passes through more than one bank. Each bank may add a fee, and each one can add delay. Small payments feel this most, because a flat fee is a bigger share of a small amount.
The Financial Stability Board, the group that coordinates financial rules for the G20, put it plainly in October 2020. It named four problems with cross-border payments: high costs, low speed, limited access and too little transparency. It said individuals and small companies face particular difficulty with retail cross-border payments. It also noted that low-value payments can carry high fees as a share of the amount sent.
Sources: Financial Stability Board, Enhancing Cross-border Payments: Stage 3 roadmap, 13 October 2020, fsb.org/2020/10/enhancing-cross-border-payments-stage-3-roadmap/
Bank wire: the familiar route
A bank wire sends money from your buyer's bank account to yours. Most banks offer it, and most buyers know how it works. It suits larger orders, first-time deals with a new importer, and any sale where the buyer wants a bank record.
The trade-offs are cost and clarity. The sender's bank may charge a fee. An intermediary bank may take a cut on the way. Your own bank may charge to receive the money. The amount that lands can be lower than the invoice. Speed varies by route and by how many banks are in the chain, so a wire can arrive in a day or take several.
To protect yourself, ask your bank three things before you quote a price. What do you charge to receive an international wire? Which currencies can the account hold? Can you tell me where a payment is if it goes missing?
Card payments: easy for the buyer, slower for you
A card payment through a payment page lets a buyer pay in minutes with a tool they already use. That helps with small, repeat orders and with buyers who do not want to set up a wire.
The cost is a percentage fee, often with a currency conversion charge on top. There is also a risk that the buyer disputes the charge later, and the money can be pulled back. Cards work best when you can show clear proof that the goods were shipped and received. Funds may also be held for a period before they reach your bank account, so check the payout schedule.
Online transfer services: a middle path
Online transfer companies let a buyer pay from a bank account or card, and you collect the funds in your own currency. Many publish their fees and exchange rates up front. That makes it easier to see what you will receive before the buyer pays.
Look at the exchange rate, not only the headline fee. A low fee can hide a weaker rate, and the rate is part of the real cost. Also check the sending limit. Some services cap the size of a single payment, which can rule them out for a large container order. Make sure the provider is licensed in the country where you operate, and read how it handles a payment that fails.
How to pick: a short checklist
Use the same test for every option. Work out the full cost, not one fee. Add the sender fee, the receiving fee, the exchange rate gap and any card charge. Then compare what lands in your account to what you invoiced.
- Small order, new buyer: a card or online transfer limits your risk of chasing payment.
- Large order, trusted buyer: a bank wire is usually the cleaner record.
- Regular small orders: an online transfer service often keeps costs steady.
- Any size: send a small test payment first and see what arrives and when.
Whatever you choose, state it on the invoice. Say who pays the bank fees, which currency applies and when payment is due. A clear invoice prevents most short-payment arguments.
What to watch in the coming months
Cross-border payments are getting attention from regulators. In 2020 the G20 made better cross-border payments a priority, and the Financial Stability Board published a roadmap for faster, cheaper, more transparent and more inclusive payments. The roadmap sets out practical steps and timeframes, including better data standards and clearer rules. These steps will take years. For now, the choice is yours to make with the tools on offer, so compare them each time instead of defaulting to one.
Sources: Financial Stability Board, Stage 3 roadmap, 13 October 2020; Committee on Payments and Market Infrastructures, Enhancing cross-border payments: building blocks of a global roadmap (Stage 2), 13 July 2020, bis.org/cpmi/publ/d193.htm
Sources
- fsb.org/2020/10/enhancing-cross-border-payments-stage-3-roadmap/
- bis.org/cpmi/publ/d193.htm