A guide to FX payments for merchants

FX (Foreign Exchange) payments are transactions that involve the conversion of one currency into another.

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November 20, 2023
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A guide to FX payments for merchants

According to the old saying, “money makes the world go round”. But to be able to do that, we need to make our money go around the world – and here’s where FX payments come in.

FX payments are vital for merchants looking to send and receive payments internationally. However, the FX payment space can also be a difficult one to understand: with too much uncertainty, too much risk, and not enough information – or transparency – to work with.

That’s why below, we’re walking you through everything you need to know about FX payments: including what they are, how they work, and how much they cost. We’ll also dissect FX payments’ key challenges and benefits, explore the different ways you can make and accept FX payments, and explain how the team here at Checkout.com can help you get started.

What are FX payments?

FX (Foreign Exchange) payments are transactions that involve the conversion of one currency into another. FX payments enable businesses and customers to make and receive payments in different currencies, and so are crucial for conducting international commerce and trade.

FX payments allow you, as a merchant, to pay your overseas-based suppliers in full, without lengthy delays that could lead to strained relationships. FX also enables you to process sales from international customers in your country’s currency, while giving those customers the option to pay both in their own currency – and via their favorite payment method.

How do FX payments work?

Here’s a general overview of how FX payments works, using the example of a merchant selling internationally to a customer based in the UK.

  1. A customer in the UK orders an item from your (US-based) ecommerce store. They’ll expect to see the costs in their local currency – the British pound (GBP) – and also to order and pay in that currency, too. If you don’t have a GBP account, however, your bank will need to exchange those pounds for US dollars, so you can receive the payment in your own currency.
  2. Your payment processor handles your FX payment – be it through wire transfer, credit card, ACH, or more – and converts it at the current exchange rate. (A figure which corresponds to the value of one currency vis a vis another; it’s based on various factors, including geopolitical events, interest rates, economic indicators, and market sentiment.)
  3. Sometimes, your bank or payment processor will utilize an intermediary bank to facilitate the transaction. These ‘middlemen’ banks have relationships between financial institutions in various countries, and are thus able to bridge the gap in transactions involving multiple currencies.
  4. Once the FX payment is complete, you’ll receive the equivalent GBP purchase amount in USD, your home currency – minus a few FX fees, which go to paying your payment processor, as well as the intermediary banks involved in the chain.

How much do FX payments cost?

Typically, FX payments incur a fee of around 1% to 3% of the converted amount.

To continue the example from above, the UK-based customer might spend £190 on a pair of shoes from your US-headquartered ecommerce store. At the current exchange rate, this translates to around US$232.

But on top of this, an FX payment fee of 1.99% + 74 cents also applies. So you, as the merchant could expect to receive around $226.64 – a small cost for expanding the horizons of your business, and dipping your toe into new, exciting international markets.

In the example above, however, it’s the merchant paying the FX payment fees – which isn’t always the case. How FX payments are split can vary based on the ecommerce platform, the payment gateway used, and the merchant’s terms and conditions.

To this end, there are SWIFT (Society for Worldwide Interbank Financial Telecommunication) identification standards that dictate whether FX payment fees are the responsibility of the merchant, the customer, or both:

  • OUR: the customer pays the FX fees; the merchant receives the full amount.
  • BEN: the merchant pays the FX fees; the customer pays only for their purchase.
  • SHA: the customer and merchant split the FX fees.

Types of FX payments

There are different ways of sending money across borders. Below, we explore the varying ways you can send and receive international payments as a merchant.

Wire transfers (bank-to-bank)

Wire transfers are a type of Electronic Funds Transfer (EFT) that enable the domestic and international movement of funds from one bank account to another, without intermediaries.

Secure, reliable, and direct, wire transfers are often used for large cross-border transactions, such as paying overseas suppliers or purchasing property.

One of the most common ways international wire transfers take place is through SWIFT: a global, member-owned messaging network used by over 11,000 financial institutions in more than 200 countries. Banks use the SWIFT network to securely transmit information and instructions through a standardized system of codes.

While bank-to-bank transfers are regulated, reputable, and have a global reach, they can also come with high fees; and wire transfers can take several working days to come through.

Global ACH

ACH (Automated Clearing House) is an electronic payment network that allows businesses and customers in the US to pay for goods and services directly from their bank account.

Processing around 24 billion transactions a year in the US, ACH payments can be both merchant- and customer-initiated. That means they allow you, as a merchant, to debit an amount from your customers’ bank account – making them ideal if you’re a subscription-based business that relies on accepting recurring payments.

Global ACH extends the ACH network’s functionality out to an international level: allowing you to ‘pull’ funds from your customers’ accounts in different currencies, from bank accounts based in a range of countries around the world.

ACH is one of the most cost-effective ways of sending an FX payment – particularly larger ones. However, as ACH payments are processed in batches, settlement times can vary; and can take several business days to land in the recipient’s account. What’s more, global ACH payments can require more stringent setup and compliance requirements than some of the other FX payment types we’ve listed here.

For more information about the differences between ACH and wire transfers, our guide offers an in-depth take.


A household name throughout the world, PayPal is a recognized and trusted way of making and receiving cross-border payments.

The sender (who must have a PayPal account) simply has to select a funding source for the FX payment – this can be through a credit card, a linked bank account, or their PayPal balance – and to choose a recipient (who must also have a PayPal account).

PayPal’s advantages are that it’s convenient, widely accepted, and (relatively) fast, and that it provides protection for the buyer and seller. However, its fees – and exchange rates – aren’t the most competitive on the market.

Prepaid debit or credit cards

Prepaid credit or debit cards can be loaded with a specific currency in one country, then used in other countries (and, of course, other currencies) where that card scheme (such as Visa, Mastercard, Discover, and American Express) is accepted.

This FX payment method is widely accepted, secure, and extremely convenient – especially when it comes to budgeting and keeping a handle on expenses. However, the obvious limitation is that the card is limited to whatever the customer has added to it; and that currency conversion fees do, of course, still apply.


They feel a little less modern than some of the other FX payment methods on this list, but checks are still valid – and widely accepted – by banks around the world.

Checks are a paper-based payment method where a customer can draw a check in one bank, and use it to withdraw money in another – even if that bank is in another country.

Checks are slow to process and come with high fees – not to mention the risk of losing or damaging the check in transit. However, checks do have some advantages. As a concept, they’re widely understood (particularly in certain regions of the world), and allow for a physical record of the transaction, too.

Why are FX payments important?

FX payments allow businesses to buy and sell goods or services across international borders, which means they’re crucial if you have contractors, employees, customers, suppliers, or partners based in a different country to the one you operate in.

Without the ability to receive FX payments, you’d be missing out on custom from 194 of the 195 countries in the world. And, without the ability to make FX payments, you’d be unable to source goods from overseas, pay important consultants or employees who live there, or benefit from more competitive labor markets abroad.

But even if you don’t do any kind of business with countries in different parts of the world, the ability to send FX payments is a vital part of the social fabric. FX payments:

  • Enable you to expand and diversify your investment portfolio – and spread the risk – by investing overseas; and potentially profit from exchange rate fluctuations, too.
  • Facilitate cross-border trade, fostering the global trade relationships and financial security so crucial to the world’s economies.
  • Empower people, such as migrant workers, to send money back to their families at home in another country. In doing this, as well as enabling access to financial services for businesses and individuals – even in regions lacking adequate banking infrastructure – FX payments also play a role in financial inclusion.

You can read more about the benefits of FX payments below. But first? Its challenges.

What are the challenges of FX payments?

FX payments are an integral part of how we move money throughout the world. Like all good things, though, FX payments also come with challenges – we’ve listed the main ones below.

Exchange rate fluctuations

International exchange rates can be highly volatile, which makes it difficult to predict exactly how much a payment will be worth in the recipient’s currency at the time of the transaction. 

Particularly in long-term international contracts, adverse exchange rate movements may lead to unpredictable costs, which can impact your profit margins and bottom line.

Sometimes, for instance, an exchange rate can shift unfavorably in the period between when your contract starts, and when the payment is due to take place.

Let’s say, for example, that you’re a shoe factory based in Spain. You sign a deal with Sneaky Sneakers to produce US$100,000 worth of shoes – around 95,000 in Euros. You budget your costs against this expected income, and forecast for the costs of labor and materials around it.

You deliver the footwear, but Sneaky Sneakers has insisted on net payment terms of 90 days, giving them three months from after you provide the shoes to pay up.

In those three months, however, the value of the Euro takes a serious hit vis a vis the US dollar. And, because the currency conversion was only locked in at the time of payment (rather than service delivery), by the time you get paid you only end up receiving $88,000 – a disparity that adversely impacts the margins you were expecting.

Cross-border fees and a lack of transparency

Cross-border transactions don’t come cheap – and banks and financial institutions charge more for international payments than domestic ones.

These fees (which are levied on top of the other interchange and per-transaction fees you’ll pay to accept credit and debit card payments) can impact the amount you receive when you make a sale. What’s more, some fees – those imposed by intermediary banks, for instance – often won’t be transparent: leaving you unaware as to what you’re paying, and to whom.

Risk management

FX payments involve a healthy amount of risks – all of which need to be managed.

Take the exchange rate fluctuation, for instance. It’s a risk which, because international markets and economies are so volatile, is hard to predict; but one that’s also possible to manage.

To do this, businesses engage in ‘hedging’. It’s a strategy of using financial instruments or contracts to offset potential losses that future exchange rate movements could cause. However, this is a resource-intensive process that requires a certain level of expertise and experience – so it isn’t feasible for all businesses.

Some of the other FX payment risks you’ll need to manage as a merchant include:

  • Operational delays in FX payments due to differences in banking hours, time zones, or country-specific public holidays.
  • Regulatory complexities, which can arise from differing international approaches to regulatory standards and FX payment compliance.
  • Fraud and security threats, such as phishing, hacking, and identity theft: all of which can lead to financial losses and data breaches.

Cross-border payouts

Cross-border payouts involve transferring funds internationally – either to pay contractors located overseas, or accept funds from international customers.

Cross-border payouts can be made directly to the recipient’s bank account or credit card. The only thing is, cross-border payouts can be tricky – particularly when you take into account considerations like:

  • Knowing how much these cross-currency card payouts cost to process, and what you’re paying in markup fees to the FX payment processor
  • Ensuring you’re paying (or being paid) within a reasonable timeframe

This is why it’s so important to choose the right company to process your foreign exchange payments; something which we can help you with below.

What are the benefits of FX payments?

Buying and selling across borders and throughout a wealth of different regions and countries throughout the world has a huge range of benefits for merchants. FX payments can:

  • Expand your customer base into new countries across the globe; tapping into international markets to build your brand and boost your sales opportunities. By accepting foreign currencies, you’ll also diversify your customer base: helping you reduce your business’s reliance on the economic conditions of a lone country or region.
  • Give you a competitive advantage over businesses that don’t accept FX payments.
  • Protect you from adverse fluctuations in exchange rates to ensure a more predictable cash flow, and help you plan your business’s financial future with confidence.
  • Facilitate, through simpler, more streamlined international payments, better relationships with your overseas-based suppliers (and, potentially, more favorable terms with those suppliers).
  • Handle the legal and regulatory nuances of cross-border transactions, allowing you to remain compliant with international financial standards: such as Know Your Customer (KYC) and anti-money laundering (AML) requirements.
  • Engender trust, loyalty, and good will with your customer base by enabling them to pay in the way they’re most comfortable with (and without them having to worry about the ups and downs of exchange rates). Simple, seamless, and familiar payment experiences equal happier customers – and happier customers always come back for more!

Explore FX payments with Checkout.com

At Checkout.com, we’re always listening to our merchants: talking to you to understand what you need, where your biggest frustrations lie, and how we can solve them.

We know, for example, that you want to be able to provide your customers with the ability to pay in different currencies, and make it as easy as possible for them to do so. We know you need transparency around how much your goods and services cost in different currencies, and to know exactly how much accepting cross-currency payments is going to set you back.

That’s why our FX payments solution makes all of these issues a thing of the past.

Our FX rate updates every 10 minutes, meaning you get the latest, most accurate exchange rate possible. Better still, we lock your rate in as soon as you capture the payment – so there’s no surprises when the money actually lands in your bank account.

On top of all this, we allow you to accept payments in over 150 currencies, and via a range of alternative payment methods most popular in the regions you sell in. Whether that’s Alipay, Asia’s leading digital wallet, or WeChat Pay – China’s alternative to Apple Pay – you can accept FX payments via the methods your customers actually want to pay with. Boosting customer perceptions of your brand, while boosting your business’s bottom line, too.

Want to know more? To start making and receiving FX payments with ease, convenience, and a refreshing dose of transparency?

Get in touch with our team of experts today for a no-obligation chat.

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November 20, 2023 17:20
November 20, 2023 17:20