In an increasingly globalised world economy, businesses that embrace cross-border commerce have unprecedented growth opportunities. In 2022 alone, international payments amounted to nearly US$156 trillion. However, cross-border transactions can be complex to navigate. Businesses must address concerns – such as currency conversions, preferred payment methods, regulatory compliance and fraud prevention – not to mention the operational and strategic considerations required to support all of these efforts.

For many businesses, the work required to accept international payments is worth it. Businesses can not only simplify the process of accepting international payments, but also improve trust and customer satisfaction, while driving long-term success in the global marketplace.

Below, we'll explore the important aspects of international payments, offering insights and practical guidance to help businesses establish a robust and user-friendly system for processing cross-border transactions. Here's what you need to know about how to accept international payments and which factors you need to consider to get started.

What's in this article?

• What is an international payment?
  
• What types of payment methods are used for international payments?
  
• What types of businesses need to accept international payments?
  
• Benefits of accepting international payments
  
• How to start accepting international payments
  
• How are payment gateways involved in international payments?
  

What is an international payment?

International payments, also known as cross-border payments or foreign transactions, refer to the transfer of funds between individuals, businesses or financial institutions located in different countries. These transactions typically involve exchanging one currency for another. They may be subject to various regulations, fees and processing times, depending on the countries involved, the methods used and the financial institutions facilitating the transfer.

What types of payment methods are used for international payments?

As businesses venture into the global market, offering multiple payment options not only improves the customer experience but also increases the likelihood of successful transactions. Businesses must carefully weigh the benefits and drawbacks of each payment method, considering factors such as cost, speed, convenience and security.

Some routine payment methods commonly used for international payments include:

• Bank transfers
  Bank transfers represent a method that is widely used for transferring funds between bank accounts in different countries. Typically, they are secure and reliable, but can be expensive due to the fees charged by both the sending and receiving banks, as well as any intermediary banks involved. Processing times may also vary, taking anywhere from a few hours to several days.

• Credit and debit cards
  International payments can be made using credit or debit cards, either for online purchases or at physical point-of-sale (POS) terminals. While this method can be convenient, it may involve higher fees and less favourable exchange rates than other options, as well as potential foreign transaction fees charged by the card issuer.

• International cheques and bank drafts
  Cheques and bank drafts can be used for international payments, but they are becoming less popular due to slower processing times and higher fees. They also require the recipient to deposit the cheque or draft at a local bank, which may involve additional fees.

• Cryptocurrencies
  Digital currencies are increasingly being used for international payments. Cryptocurrencies can offer faster processing times, lower fees and increased privacy compared to traditional methods. However, their volatile exchange rates and regulatory uncertainty can be a concern for some users.

• Mobile payment apps
  Some mobile payment apps, such as Alipay and WeChat Pay, have expanded their services to support international payments. These apps can offer a convenient and quick way to transfer funds. However, they may have limitations in terms of the countries and currencies supported, and fees may still apply.

What kind of businesses need to accept international payments?

Businesses that operate across borders can tap into diverse markets and reach customers around the world. This approach requires the ability to accept international payments and cater to customers' preferred currencies and payment methods.

Some types of businesses that commonly need to accept international payments include:

• E-commerce businesses
  Online shops that sell products or services to customers worldwide need to accept international payments to facilitate transactions with customers from different countries.

• Travel and hospitality businesses
  Hotels, airlines, travel agencies and tour operators often serve customers from various countries and need to accept payments in multiple currencies.

• International service providers
  Businesses offering services such as consulting, software development or freelance work to clients around the world may need to accept international payments for their services.

• Exporters and importers
  Companies involved in international trade, including manufacturers, wholesalers and distributors, may need to accept cross-border payments for the goods that they sell or buy.

• Educational institutions
  Universities and schools that admit international students may need to accept payments from students or their families from different countries and in different currencies.

• Non-profit organisations
  Charities and non-profit organisations with a global presence or donor base may need to accept international payments for donations and funding.

• Subscription-based businesses
  Companies offering subscription services, such as streaming platforms, software-as-a-service (SaaS) or online publications, may have customers from various countries and therefore need to accept international payments.

This, of course, is not an exhaustive list. Over the past few decades, the proliferation of payments technology and the expansion of digital payment networks have opened up international operations to many more businesses and industries around the world.

Benefits of accepting international payments

Accepting international payments can offer widespread benefits, particularly for businesses that want to expand their reach and operate in global markets. Some of the key advantages include:

• Access to a larger customer base
  By accepting international payments, businesses can open themselves up to customers from different countries, significantly expanding their potential market and increasing sales opportunities.

• Enhanced revenue growth
  Entering new markets and serving a diverse customer base can increase revenue, as businesses can sell their products or services to a broader audience and capitalise on different customer preferences and demands.

• Competitive advantage
  Embracing cross-border commerce and offering multiple payment options can give businesses an edge over competitors that only accept limited payment methods. This can help to attract and retain customers who value an inclusive, accommodating and convenient shopping experience.

• Brand exposure and recognition
  Accepting international payments and serving global customers can help businesses build brand awareness and recognition on a larger scale, potentially leading to further growth opportunities and partnerships.

• Diversification of income streams
  Expanding into different markets allows businesses to diversify their income streams, reducing reliance on a single market and lowering the risks associated with economic fluctuations or localised downturns.

• Better understanding of customer preferences
  Serving an international customer base can provide valuable insights into different customer preferences, behaviours and trends. This knowledge can help businesses tailor their products and marketing strategies, leading to improved customer satisfaction and loyalty.

• Greater innovation and adaptability
  Expanding into global markets and accepting international payments can encourage businesses to innovate and adapt, as they must navigate new challenges and opportunities. This can lead to the development of new products or services and the optimisation of internal processes.

How to start accepting international payments

As businesses expand their reach to serve an increasingly global customer base, it's important to develop an efficient internal operations process for accepting international payments and work towards creating a positive customer experience.

Businesses must consider factors such as currency conversions, popular payment methods in target markets, regulatory compliance, tax obligations and fraud prevention. Here are the key steps that businesses can take to establish a robust, user-friendly system for processing cross-border transactions:

1. Research your target markets

Your approach to international payments might vary considerably depending on where you're trying to do business. You should start by researching the specific needs and preferences of your target audience in different countries. This includes identifying popular payment methods and currency preferences, as well as any unique regulations or requirements that apply to the countries you plan to serve.

2. Choose a payment gateway or processor

Select a payment gateway or processor that supports multiple currencies and payment methods that are popular in your target markets. For example, Stripe offers international payment processing services, including support for more than 135 currencies. Compare the fees, exchange rates and features offered by different providers to find the best fit for your business.

3. Set up a multicurrency account

If you work with a payments provider, such as Stripe, that comprehensively supports an optimised, dynamic approach to international payments, this additional step won't be needed. Otherwise, you'll need to open a multicurrency account or use a third-party service that can help you manage multiple currencies, minimise conversion fees and simplify the process of accepting payments from customers in different countries.

4. Display prices in local currencies

If your e-commerce site is meant to serve audiences in multiple countries, make sure that you build out the web experience to display product and service prices in your customers' local currencies. This will help them understand the cost without having to convert it themselves. You can display prices using currency-conversion tools or plugins that are available for most e-commerce platforms.

5. Be aware of taxes and regulations

Companies that do business internationally must understand and adhere to the local tax and regulatory requirements, including sales taxes, VAT and any import or export regulations, everywhere they operate. Ensure that your business complies with these requirements to avoid legal or financial issues.

6. Implement fraud prevention measures

Cross-border transactions can be more susceptible to fraud, so it's important to employ robust security measures to protect both your business and your customers.

7. Optimise the customer experience

Currency conversion is just one aspect of meeting the needs of customer segments that are internationally diverse. Think carefully about the customer journeys that you're building. What are the differences between your various customer segments? What does it look like to build an experience that's intuitive and accommodating for each of them? Start by making your website and checkout process user-friendly and ensure that it is available in multiple languages, if necessary. Providing clear, concise information about delivery, returns and customer support can build trust with international customers.

8. Monitor performance and make adjustments

Review your international payment setup, analyse customer feedback and keep an eye on industry trends on a regular basis. Be prepared to make adjustments as needed to improve the customer experience, remain compliant with regulations and optimise the costs associated with accepting international payments.

How are payment gateways involved in international payments?

Payment gateways play an important role in facilitating international payments for businesses that operate across borders or serve customers from different countries. They act as intermediaries between businesses, customers and financial institutions, securely processing and authorising transactions in real time.

Here's an overview of how payment gateways are involved in international payments:

• Multicurrency support
  Payment gateways that support multiple currencies enable businesses to accept payments in various currencies from customers around the world. They handle the currency-conversion process, often providing competitive exchange rates and ensuring that the funds are deposited into the business's account in their preferred currency.

• Diverse payment methods
  International payment gateways support a wide range of payment methods, including credit and debit cards, digital wallets and bank transfers, which are preferred by customers in different countries. By offering popular local payment options, businesses can refine the customer experience and increase the likelihood of successful transactions.

• Fraud prevention and security
  Payment gateways employ advanced security measures, such as encryption, tokenisation and secure customer authentication, to protect sensitive data during transactions. They also offer fraud prevention tools, such as address verification services (AVS) and card verification value (CVV) checks, to minimise the risk of fraudulent transactions in cross-border payments.

• Compliance with regulations
  Payment gateways ensure compliance with international payment regulations, such as the Payment Card Industry Data Security Standard (PCI DSS) and local regulations in the countries that businesses operate in. This helps businesses to comply with the complex regulatory landscape and maintain customer trust.

• Seamless integration
  Payment gateways can be easily integrated with e-commerce platforms and websites, providing an intuitive and user-friendly checkout experience for customers. Most gateways offer APIs, plugins or other tools that facilitate integration with popular e-commerce platforms.

• Access to advanced reporting and analytics
  Many payment gateways provide businesses with comprehensive reporting and analytics tools, enabling them to monitor and analyse international transactions, track sales performance and gain insights into customer behaviour across different markets.

With payment gateways, businesses can streamline the process of accepting international payments, ensuring secure and efficient transactions while catering to the diverse needs and preferences of customers worldwide. This can provide businesses with a range of benefits, including increased revenue, expanded market reach and enhanced competitiveness, while enabling businesses to position themselves for long-term growth and success in the global marketplace.