A guide to cross-border payments

Cross-border payments are a cornerstone of modern commerce – reaching a total of $50.8bn in 2026. Yet the complexities of sending funds overseas are one of the most challenging aspects of your financial operations. You need to somehow keep track of values moving across entities, noting currency and conversion costs, while meeting compliance requirements of all relevant jurisdictions.

This article will explore some of the main challenges, workarounds, and opportunities for efficiency gains – using local payment methods, domestic acquiring, and payment platforms.

What are cross-border payments?

Cross-border payments are financial transactions where the payer (normally the customer) and the recipient (normally the merchant) are located in different countries. Typically made between individuals, companies, or governments located in different countries, cross-border payments can be for a variety of purposes, such as international trade, remittances, travel expenses, or investment transactions.

For merchants, the process of making cross-border payments can be complex. That’s because it involves multiple parties, including the sender's and recipient’s bank, and possibly one or more intermediary banks.

Cross-border payments can also be subject to various fees, currency conversion rates, and regulatory requirements, such as anti-money laundering laws and economic sanctions (see more about CESOP).

To address this demand, new technologies and payment systems have emerged, including blockchain-based payments (i.e. cryptocurrency) and mobile money transfer services, which aim to make cross-border payments faster, cheaper, and more efficient.

Learn more: What is a money transmitter?

Cross-border payment examples

The most popular examples of cross-border payments include:

• International wire transfers – sending money from one bank account to another bank account in a different country.
• Credit and debit card payments – you can accept payments from customers in different countries using credit and debit cards, which are processed through payment networks such as Visa or Mastercard.
• Online payment platforms – alternatively, you can use online payment platforms, like PayPal and Alipay, to accept payments from customers in other countries.
• Cryptocurrency payments – if your business accepts crypto currency, you can accept payments in currencies like Bitcoin or Ethereum, which can be transferred across borders without the need for a financial intermediary.

As a merchant, you’re most likely to deal with international wire transfers, credit and debit card payments, and online payment platforms, as they’re commonly used for cross-border transactions.

If your business sells products or services globally, you’ll need to be able to accept payments from customers in different countries and currencies, which means you’ll need access to payment processing services that can optimize your global payments performance in each market.

However, as we mentioned, you’ll also need to be aware of the fees and charges associated with cross-border payments and the compliance and regulatory requirements that apply to international transactions.

How do cross-border payments work?

Cross-border payments move money between different countries and currencies through a network of banks or financial institutions. The process typically involves six steps:

1. Initiation: The sender initiates the payment by providing the necessary information, such as the amount, currency, recipient's details, and purpose of the payment. This can be done through a variety of channels, including online banking, mobile apps, or in-person at a local bank branch.
2. Authentication and verification: The sender's bank verifies the sender's identity and ensures there are sufficient funds to cover the payment. The bank may also conduct anti-money laundering checks and verify that the recipient isn’t on any sanctions lists.
3. Routing: The sender's bank routes the payment to the recipient's bank, either directly or through one or more intermediary banks, which can involve multiple steps. This process may take some time to complete, depending on the type of transaction and the banks processing the payment.
4. Conversion: If the payment involves different currencies, the funds are converted into the recipient's currency at the prevailing exchange rate. Then, the sender's bank – or an intermediary bank – may handle the currency conversion.
5. Settlement: Once the currency gets converted, the recipient's bank receives the funds and credits the recipient's account.
6. Fees and charges: Cross-border payments can be subject to various fees and charges, such as transaction fees, currency conversion fees, and various bank fees. It’s important to note that these fees can vary depending on the banks involved, the payment system used, and the amount and currency of the payment.

Why should merchants use cross-border payment methods?

Even though there are some potential challenges to cross-border payments, they can offer many benefits for your business:

Expand customer base and increase competitive edge

By accepting payments from different countries, you can start selling products or services to customers in different markets, increasing your revenue streams. This can also give your business an edge over competitors that only accept payments from customers in their own country.

Meanwhile, cross-border payments enable you to capitalize on the rapidly growing global cross-border B2C ecommerce market, helping you boost sales and conversions.

Convenience and personalized customer experience

Cross-border payment methods offer customers the ability to make payments easily using their preferred payment method and currency, allowing for a more personalized customer experience which can improve your brand image and encourage repeat sales.

Using reputable cross-border payment methods can also help build trust with customers, which is vital for building your brand and boosting your bottom line.

Enhanced efficiency and improved payment processing

Because these payment systems process international money transfers using a single platform, cross-border payments can improve accounts payable efficiency and transparency.

These payments also enable you to connect to multiple acquirers, including local acquirers, resulting in higher bank approval rates, lower interchange costs, and greater risk diversification.

Learn more: Cross-border vs. local acquiring

Easier currency conversion

Most cross-border payment methods offer currency conversion services, which can keep you in the loop when it comes to currency risk, and minimize losses due to exchange rate fluctuations.

Customizable authentication and fraud rules

Cross-border payments increase your ability to customize authentication and fraud rules using configurable workflows and risk management options. This can make it easier to scale your business and accept more payments in different markets.

Cross-border payments challenges

Despite their increasing importance, the challenges of cross-border payments require careful strategy adjustments. Some of the main concerns of cross-border payments include:

Slower transactions

Cross-border payments can be complex and involve multiple parties, such as banks, intermediaries, and regulatory bodies, making the process more time-consuming and prone to errors than domestic payments. This can result in delays and additional costs for your business.

Higher cost

They can also be expensive, with fees and charges for currency conversion, transaction processing, higher card scheme costs, and intermediary bank fees. These costs can add up – particularly for small and medium-sized businesses – and affect your profit margins.

Currency risk

As you’d expect, cross-border payments involve currency exchange, which can expose businesses to currency risk. Fluctuations in exchange rates can affect the value of payments, resulting in losses or reduced profits.

Compliance requirements

Like all online payments, cross-border payments are subject to various regulations, such as anti-money laundering laws and economic sanctions. To that end, your business must comply with these regulations, which can be time-consuming and potentially costly if you fail to meet the requirements.

Security risks

Cross-border payments involve the transfer of sensitive financial information, which can be vulnerable to cyber-attacks or fraud. That’s why your business must ensure that your payment systems and processes are secure to protect against these risks.

To overcome these challenges, we recommend that your business uses various strategies, such as working with reputable banks and payment providers, using technology-based payment solutions, and implementing robust compliance and security measures.

You should also consider using alternative payment systems, such as mobile money transfer services, like Alipay, which can be faster and easier for your business to accept payments.

How to make cross-border payments work for your business

To stay on top of the latest cross-border payment trends it’s essential to collaborate with an innovative payment service provider.

The ideal payment partner should have an in-depth understanding of the local payment and consumer trends, as well as the constantly changing regulatory framework of your desired markets.

To help you nail your cross-border strategy, we've compiled a list of our best tips:

Offer trustworthy local and global payment methods

In addition to traditional cash and credit or debit card payments, you should offer alternative payment methods such as local digital wallets, mobile payment apps, and neobanks.

“For Delivery Hero to be relevant in every market, we need to offer local payment options, otherwise we’re not convenient for customers,” notes Vera Aichkina, senior manager of payments acceptance in EMEA at Delivery Hero. You can earn customer trust by providing the preferred payment methods of that specific region. We recommend using digital wallet payments like Google Pay or Apple Pay to improve acceptance rates due to their 2FA (two-factor authentication) use.

Examples of popular local and global payment methods include:

• Local card schemes – these operate and are popular within the country in which they're issued, such as Bancontact in Belgium.
• Digital and mobile wallets – you can securely store payment cards and make payments using apps on smart devices. The most popular global options include Google Pay, Amazon Pay, and PayPal, as well as regionally-based versions like Alipay in China.
• Bank transfers – a convenient way to initiate cross-border payments, popular options include EPS in Austria, P24 in Poland or  Multibanco in Portugal
• Prepaid cards – also known as cash-based voucher, prepaid cards enable customers to receive a voucher with a reference number to use in order to complete payment in cash at a bank, ATM, or convenience store.  Popular examples of local payment methods include OXXO and in Mexico or Boleto Bancário in Brazil while global options include Neosurf, available in hundreds of thousands of online and physical stores worldwide.
• Buy now pay later – this method allows your customers to make purchases and pay for them later in installments, such as Klarna or PayPal Pay in 3.

It can take a lot of work to integrate new payment methods one by one, so a quicker solution could be to use

Cut costs of international payments

As the merchant, when you receive funds in a currency that differs from the currency in which the payment was processed, you may be charged foreign exchange (FX) fees. An experienced payment service provider can provide access to competitive and transparent FX rates, helping you save on expenses associated with global payment acceptance.

You can learn more about optimizing costs in our dedicated guide to interchange and scheme fees.

Improve payment acceptance with local acquiring

Local acquiring allows your business to process and route transactions with an acquiring bank in the same country as the issuing bank. These transactions are considered domestic, typically leading to higher acceptance rates compared to cross-border transactions – as well as lower fees.

You can access local acquiring through a payment provider that holds the necessary licenses for the regions you wish to take payments in. To do so, you need a legal entity set up in the same country as that acquirer i.e. if a UK merchant wants to use US acquiring through Checkout.com they will need to have a US entity.

Learn more: Global payment acceptance through domestic banks with Checkout.com

Optimize your cross-border payments with Checkout.com

To grow your business into new markets, you’ll need an experienced payment partner with experience in the relevant regions. Global businesses such as Uber, Netflix, FanDuel and Hello Fresh trust Checkout.com to support their payments operations around the world. Tessa Rötzmeier, Senior Director Product at HelloFresh said: “Partnering with Checkout.com as a trusted global partner means we can continue to expand, innovate, and deliver even greater convenience and reliability in the years ahead, while ensuring every customer has a smooth and reliable payments experience.”

Our flexible payment tool Flow gives you easy access to various local payment methods across various international markets, including digital wallets and global card schemes. With all this at your fingertips, you can more easily expand your customer base and strengthen global revenue streams.