INTERNATIONAL BUSINESS PAYMENTS
<br> This complete guide to international payments goes beyond the basics of international money transfers and cross border payments, supporting your understanding of the most efficient and cost-effective ways for your business to transfer money internationally. <br>
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Powered by real-time data analysis from our insights team, your account manager provides unparalleled insights, helping you make informed decisions and optimise your international transactions. Say goodbye to costly surprises and hello to strategic currency risk management that empowers you to confidently navigate global markets with your own tailored approach. Best of all knowing your account manager is there watching rates for you and your business circumstances, you can get back to doing what you do best - running your business.
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Simply put, international payments, also known as cross-border payments, is sending or receiving payments from one country to another. This could be to pay a supplier or a bank, and normally involves two different currencies being exchanged - a foreign exchange, or FX. Because the value of currencies fluctuate, there is a risk that the value of the international payment you are making or receiving will change. The main goal of making successful international payments for business is to limit your exchange rate risk and keep fees to a minimum.
We've already used a few acronyms in this international payments guide, so let’s quickly cover off the definitions of the key international payments terms. Understanding the language will be essential to gaining a fuller understanding of international payments and how they impact your business. The basics are below, or consult the complete financial markets and FX glossary.
International payment transactions can range from the small and mundane, to market-moving cross-border merger and acquisitions, and everything in between. International payments take place 24/5.5, from Monday morning in New Zealand, to Friday night in New York. The market tends to be cyclical in nature with trading volumes rising as the economy grows and contracting as economic activity declines.
To help you manage your international payments better, let's look at the journey your money will take. Every international payment in a business starts with somebody purchasing goods or services overseas.
You have agreed to pay for a product or service in an international currency, requiring an international payment. Lets say you are in the UK, using £GBP and your product is in Germany costing €275,000.
You then choose your bank or an alternative FX provider. No matter which you choose for international payments, you must already have or open an account with them, requiring the usual identity checks.
To send an international payment, you need to get the details of where the supplier would like the international payment to end up. This will include an IBAN for cross-border payment within the SWIFT network.
You next instruct the FX provider or bank, how much you want to pay (€275,000 in this example) and where the money should go to in the international payments system.
Your international payment provider will do an FX calculation from euros to GBP based on the exchange rate they are offering when you instruct. Check if they add a margin (anything from 0.1% to a hefty 4%) and an international payment fee.
Once you have instructed the international payment provider how much to pay and who to pay, they will make the transaction on your behalf and you will need to settle the outstanding funds including margin and fee, normally within 2 days of the instruction.
Once your international payment is in the system, the institution who sent it may use an intermediary or 'gateway' institution – this institution will settle all the payments on 'the back end' including administration of post trade settlement, and records of ownership.
The beneficiary bank will receive the international payment from the intermediary bank and credit the supplier’s bank account with the correct funds in Euros. There's still one more step to pay for your product.
Depending on the payment method, normally SEPA in this case as it’s going to Europe, the monies should be settled (received) in your suppliers account the next working day - you have paid for your product.
When dealing with the purchase and sale of goods in foreign currency, the type of international payment transaction is also sometimes know as deliverable FX, this is compared to speculative FX which guesses where the value of currency will go. You can read all about the basics of FX in our article, What is FX?
Businesses which import and export products and supplies, are at risk of currency fluctuations which can affect business profitability. Businesses who deal in large or frequent international payments should consider the benefits of hedging their FX exposure. Hedging will [help insure your business] (/business/news/what-is-hedging)against the impact of a negative event on your bottom line.
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When sending or receiving cross-border payments, you need to find the right provider for you. Payments must be simple, fast, cost-effective, and above all - secure. Traditionally, businesses make and receive international payments from their banks. But this can sometimes take longer, leaving you more open to changing exchange rate. You are also unlikely to have the personal service of an international payment expert. There are, however, a number of alternatives such as FX brokers and online specialists which can be cheaper than traditional banks.
As with any financial services company, do your research and use your best judgment. Even if you think your bank is the best, they can be a little more expensive. It’s worth considering an FX provider, but look out to see if they meet some of these criteria.
As someone who manages international payments, we know what’s important to you: simplicity, security, service, and keeping costs down. Let us help you to manage all of your local and global payments, in one platform, to keep track of international payments and keep costs down.
You can reach payees in over 195 countries and territories. Choose from 28 different currencies and exchange over 750 currency pairs. Enjoy excellent, real-time rates in multiple currencies when you send, receive, and exchange money.
Your dedicated business account manager will help you to safely negotiate the currency markets, to maximise value and minimise risk. Plus, our platform interface interacts with your accountancy package via API, to let you quickly reconcile and manage bulk transactions.
Minimise the risk of foreign exchange market volatility, with a risk management strategy. Use our platform-only service for confident currency management or for more complex currency management, tap into our Account Managed service.
Expand your global reach with a Caxton multi-currency holding account and say goodbye to long wait times and poor communication from traditional payment providers. Manage multiple currencies seamlessly, and make international payments with ease.
Accounts payable and receivable. Domestic or international. Pay suppliers from around the world, in an instant – with our secure, reliable payments system, enabling your business to simply ‘Plug and Pay’.
Explore our managing risk case studies to learn how our team of experts can help helps to minimise the risk of foreign exchange market volatility, with a tailored risk management strategy. Read about more case studies.