Guide to international business payments: the most common payment methods

The ability to send and receive international business payments is the lifeblood of global commerce. It’s the stitching that holds the fabric of cross-border trade together; the common language allowing economies around the world to communicate and collaborate.

Foreign exchange – with over $6 trillion traded every day – is the biggest financial market in the world. So more and more businesses – realizing the opportunities international customers present for growing their brand, their customer base, and their revenue – are turning their attention trends in global commerce.

Are you? If not, this guide will show you why your business absolutely should be – and how it can.

Below, we’re unpacking what international business payments are, as well as the litany of different ways you can make and receive them – from wire transfers and ACH payments to international money orders and credit cards. Then, we’ll outline our best practices for optimizing your global business payments strategy – and how Checkout.com can assist.

Understanding international business payments

International business payments are financial transactions that take place between businesses in different countries. 

This could be for several reasons: purchasing goods and services, paying an international invoice, making card payouts, as well as a range of other cross-border economic activities.

Because international business payments typically involve more than one currency, they’re slightly more complicated than domestic business payments, and transactions tend to involve more parties. For example, a business in Germany paying a US-based supplier will pay in their local currency – euros – while the supplier will need to receive the payment in US dollars.

For this reason, international business payments qualify as foreign exchange (FX) payments, because one currency is transmuted into another during the transaction. Here, intermediary banks are often employed to act as ‘middlemen’: bridging the international gap between the two financial institutions involved, and translating the different languages of the transaction into a common dialect that both sides can understand.

Learn more: Multi-currency payments: benefits and use cases

How do international business payments work?

When different currencies are involved – not to mention banking systems, regulations, and time zones from multiple countries – global payment processing can get complicated.

Perhaps even more confusing is that there are so many different payment methods for making an international business payment. So below, we’ve summarized the array of different ways you can send and receive money to and from other businesses.

International payment gateway

Imagine you run an online store in New York, selling products to customers from around the world. To be able to accept international payments, you’d integrate an international payment gateway into your website.

Then, when a customer from, say, Sydney makes a purchase, your payment gateway will securely authenticate, verify, and process the transaction: handling a range of alternative payment methods, converting the currencies involved, and ensuring the funds reach your account without drama or delay.

Checkout.com acts as a payment gateway, as well as a payment processor and acquirer (which, in payment lingo, is a company that accepts payments on a merchant’s behalf). Our end-to-end solution means we can help you accept international business payments through a secure online payment gateway – handling all the hassle and heavy lifting of the transaction for you.

Credit card

Credit cards remain one of the most popular ways to pay in the US, and they’re an important way of making and accepting cross-border transactions.

To accept credit cards from international businesses, you’ll need to join forces with a reputable payment service provider – like Checkout.com – to enable this infrastructure. Once you’re set up, you’ll be able to accept payments from international credit cards online, over the phone, or from the countertop of your brick-and-mortar store. You could even use convenient payment links to facilitate easy transactions.

Credit cards have the major benefit of being ubiquitous, as well as universally accepted and understood. Some drawbacks, however, are the interchange fees you’ll pay to accept credit cards, and the stringent data handling processes imposed by the Payment Card Industry (PCI).

To learn more about both credit card processing and your PCI compliance obligations as a card-accepting merchant, our guides will provide an excellent starting point.

International wire transfer

Also known as a remittance transfer, international wire transfers are a form of EFT (Electronic Funds Transfer) payment that allows your business to send money directly from your bank to that of a business in another country.

You simply have to let your bank know how much you want to send, who you’re sending it to, and the SWIFT (Society for Worldwide Interbank Financial Telecommunication) or BIC (Bank Identifier Code) number of the recipient’s bank.

International wire transfers can often be settled on the same day you send them; and can even be immediate. However, wire transfers tend to be more expensive than some other forms of international business payment (such as ACH).

Compared to ACH payments, wire transfers are typically used more for larger, one-time transactions, rather than regular, continual payments (such as wages). 

ACH (Automated Clearing House)

ACH payments are a way of making and receiving cross-border payments to and from other businesses.

Unlike wire transfers – which are initiated by the sender of the international business payment – ACH transactions can be initiated by both parties, either as:

• A ‘push’ payment, where the sender initiates the funds by ‘pushing’ the money into the recipient’s account.
• A ‘pull’ payment, where the recipient, with prior authorization, ‘pulls’ the funds they’re owed from the payer’s account.

Check out our in-depth article on push payments vs pull payments to learn more.

Given ACH’s ability to enable both customer-initiated and merchant-initiated transactions (MITs), it’s ideal if your business model relies on you providing an ongoing subscription service (such as SaaS, or Software-as-a-Service) to your international customers, and need to be able to process regular recurring payments.

The ACH network processes transactions in batches, which makes them highly cost-effective. It also means ACH payments are better for processing smaller, recurring international business payments – rather than larger, one-off amounts, which are better suited to wire transfers.

For a full breakdown of the ACH vs wire transfer debate, our guide provides the big picture.

International money orders

International money orders are available from financial institutions – including post offices and banks – and can be used to pay businesses in countries around the world.

To pay a business in Mumbai, for instance, you could head to your local post office in Toronto and purchase a money order for a specific amount.

You’ll need to provide the cashier with the name and address of the recipient, as well as information about the destination country and currency. The money order is then sent through to the recipient in India, who simply cashes it at their local post office for the full amount (payable in their local currency).

International money orders are a reliable – if not a particularly scalable – way of paying a business overseas. They’re secure, and offer a paper trail; however, fees are generally involved, and international money orders tend to take longer to process than digital methods.

Letters of credit

A letter of credit is a financial document – issued by a bank on behalf of the buyer – that promises to pay you, as the seller, a specified amount of money. 

Essentially, a letter of credit acts as a guarantee of payment: providing security to both the buyer and seller in an international transaction.

Let’s say, for instance, that you’re a wholesaler in Chicago, importing goods from a manufacturer in Shanghai. To ensure the transaction proceeds smoothly, you request a letter of credit from your bank. The bank then issues the document to assure the manufacturer you’re working with that, once they fulfill the pre-agreed conditions – which, in this example, is delivering the goods – you’ll make the payment.

Letters of credit are particularly useful as a safety net for larger transactions. However, they also involved detailed paperwork. And, due to the bank fees involved and the need for both parties to comply with international regulations, can be both costly and time-consuming.

Cryptocurrency payments

Based on blockchain technology and secured with cryptography, cryptocurrency payments are faster than traditional international business payment methods.

Unlike traditional, government-issued currencies (such as the US dollar or British pound), cryptocurrencies are decentralized. The idea is that no central bank from one nation would control or regulate the currency. That makes them globally traded currencies, thereby eliminating cross-border exchange fees.

That said, cryptocurrency payments are not suitable for every business, and they're even banned in several countries. You should carefully check the local regulations of the country you are planning to make international payments to or from, to see whether or not cryptocurrency payments are permitted.

Best practices for global business payments

International business payments have big benefits – whichever side of them you’re on.

However, managing your global business payments involves careful planning, attention to detail, and a range of other best practices to ensure the security, efficiency, and compliance of your cross-border payouts.

We’ve listed a handful of these best practices for international business payments below:

• Understand and stay abreast of local and international regulations, tax laws, and compliance requirements in your home country – and in all those you do business in.
• Consider the stability of foreign currencies before deciding on a payment method. This will help you mitigate the impact of exchange rate shifts on your business’s bottom line.
• Provide a wide range of international business payment methods (scroll up for a reminder!) to accommodate various customer preferences and reduce risk.
• Work with a reliable, reputable payment service provider to help you accept international payments, and develop a comprehensive global payments strategy.
• Invest in robust cybersecurity measures to secure sensitive payment data from threats and breaches; or ensure your payment service provider has fraud detection in place.
• Maintain open lines of communication with your international customers and suppliers: clearly outlining payment terms, delivery schedules, and penalties for non-compliance.
• Regularly review – and refine – your international business payment processes; responding to client feedback, changing regulations, and evolving market conditions.

Not sure how to choose the right company to process your international business payments? Our guide to selecting the right payment service provider for global expansion will help.

Explore international business payments with Checkout.com

We understand how daunting it is to learn how to accept international business payments. Payments experts at Checkout.com will demystify the process for you, ensuring you spend as little time as possible worrying about foreign exchange fees and regional regulations.

When you partner with Checkout.com, you’ll also gain access to local experts in performance, tech, industry, local markets, and payment regulations: helping you navigate the picturesque (but perilous) international waters of global transactions with confidence.

We process international business payments in over 150 currencies. And we’ll give you access to all the business payment methods your customers want to pay with most.

Our international coverage solution will help boost your acceptance rates. Limit the foreign transaction costs your customers will pay. And, by processing locally, allow you to leave those frustratingly high bank surcharges and international fees behind.