The ultimate guide on cross-border payments

As more shoppers become international digital buyers, cross-border eCommerce presents an increasing number of opportunities for business growth. As Statista reports, the value of these transactions amounted to US$190 trillion as of 2023 and is projected to hit US$290 trillion by 2030. There’s no doubt that selling overseas in key markets and building a loyal customer base can unlock the potential of maximised sales revenue.

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 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. We’ve created an explainer video with insights about cross-border payments, so you can delve deeper into the global payments ecosystem.

How do cross-border payments work?

Unlike domestic transactions, which involve a direct transfer from the buyer to the seller within the same country, cross-border payments are more complex due to currency conversion. Fluctuating exchange rates further add to this complexity.

Cross-border transactions also incur cross-border transaction fees due to intermediary banks and differing banking systems. Typically, the payer's bank initiates the transfer to a counterpart bank in the seller's country, often partnering with other banks for this purpose. If the seller's account is not with the counterpart bank, further transfers are necessary before the funds reach the seller's account.

With multiple banks involved, navigating currency exchanges, fees and tax regulations can slow down cross-border payments considerably compared to domestic transactions.

Examples of cross-border payments

Choosing the right payment method for a transaction depends on factors like the transfer amount, transaction speed, currencies involved and associated fees. To make informed decisions, businesses should assess available cross-border payment methods and select the most appropriate one for their requirements. Here are a few different types of cross-border payments:

Local card schemes

Many consumers opt for debit or credit cards for online transactions due to their familiarity with the process. This typically involves entering card details and waiting for the transaction to be approved by all respective payment parties. For higher conversion and payment acceptance rates in cross-border transactions, consider offering domestic card schemes. Examples include Bancontact in Belgium, Elo in Brazil and RuPay in India, which can help enhance your global business presence.

Bank transfers

Initiating cross-border payments through bank transfers is both easy and convenient. This allows customers to make payments securely and directly via their banking environment.

Offering trending bank transfer options for your target market is crucial for building trust and encouraging repeat business. Examples for Europe include EPS in Austria, P24 in Poland, Multibanco in Portugal and MyBank in Italy. In Latin America (LATAM), popular options include Pix in Brazil and PSE in Colombia.

Digital and mobile wallets (eWallets)

eWallets allow users to securely store their preferred payment cards and pay for their items using their smart device (e.g. smartphone, tablet or watch). While eWallets such as Google Pay™ and PayPal are widely used on a global scale, there are also regionally based versions of digital wallets. For example, WeChat Pay is a leading payment platform in China, with 1.06 trillion people projected to be using it in the country in 2024.

Buy Now Pay Later

As the name indicates, Buy Now Pay Later (BNPL) enables buyers to purchase goods and services by paying for them later rather than upfront. An example of a BNPL service is PayPal Pay Later – an interest-free payment solution that allows customers to repay their digital purchases in instalments. This payment method is available for customers in the UK, France, Germany, Italy, Spain, Australia and the US, with the number of instalments varying based on the country.

Cash-based vouchers and prepaid cards

With cash-based vouchers, customers typically receive a scannable voucher with a transaction reference number that they can bring to a bank, ATM or convenience store to complete the payment in cash. Popular voucher-based payments in LATAM include Mexico’s OXXO, Brazil's Boleto Bancário and Chile’s Servipag.

Prepaid cards are a type of transaction, which allows customers to top up a card with funds and use it to pay for goods and services. Neosurf is an example of a prepaid voucher that is available in hundreds of thousands of online and physical stores worldwide.

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:

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.

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.

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.

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 to make international payments work for your business

As explored in emerchantpay’s latest report, Global Payments Outlook 2024, there are numerous advantages to be reaped by merchants from cross-border payments. However, when implementing such a strategy, there are few key things for businesses to consider to maximise international transactions. Below we share some of our top tips for nailing your cross-border strategy.

Tailor your payment methods to your customers

As discussed previously, cross-border payment methods allow businesses to expand into new markets by allowing customers to pay using their preferred local payment method. To maximise your payments in any given region, it’s paramount to ensure you provide a good mix of local and global payment methods to cater to varying payment preferences and optimise your conversions.

Partner with a trusted payment service provider

If you’re a digital merchant who wants to give your overseas customers a level of trust and ease in doing business with you, partnering with an experienced payment service provider is a must. This is because the right payment partner will have an extensive grasp of local consumer and payment trends while staying up to speed with the ever-evolving regulatory environment of your target regions. The right payment service provider may also be able to help you access competitive and transparent FX rates, thereby cutting down on expenses associated with global payment acceptance.

How to offer seamless cross-border transactions with emerchantpay

Understanding how cross-border transactions work, including any infrastructure developments and current regulations attached to them, is integral to successfully expanding your global footprint. However, international payments can be complicated when a business manages them by itself, so it’s worth getting a reliable and dedicated payment partner on board to ensure you're keeping your acceptance rates high and your overheads low.

emerchantpay is a payment service provider and global acquirer with over 20 years of experience in online payment processing. We’ll help you optimise your cross-border payments with:

• Our powerful global payment gateway, which supports 25+ settlement currencies and 150+ processing currencies
• A comprehensive suite of local and global payment options to help you expand into new markets like SEPA Direct Debit and Google Pay™
• Value-added services like strategic data-driven advisory and robust fraud prevention tools