What are Cross-Border Payments? Types, Benefits & Tips

Cross-border payments are a key part of how businesses and individuals send money internationally, whether paying overseas suppliers, receiving payments from global customers, or transferring funds to family abroad. While these transactions are common, many people may not fully understand how cross-border payments work or what factors can affect them.

In this guide, we’ll walk through what cross-border payments are, how they work, the available payment methods, risks to consider, and practical steps businesses can take to manage international transactions effectively.

A cross-border payment is a payment made between two countries where funds are transferred across borders in different currencies, jurisdictions, or payment systems.

These transactions allow businesses, financial institutions, and individuals to send or receive money internationally for purposes like trade, investments, or personal remittances.

Benefits of Cross-border Payments

Cross-border payments enable businesses to operate internationally, offering access to global markets, suppliers, and customers. 

Beyond simply sending and receiving funds, they provide several business advantages:

• Manage multiple currencies more efficiently, reducing unnecessary conversion costs.
• Diversify business risks by operating across different markets and jurisdictions.
• Optimise liquidity for global operations and cash flow needs.
• Simplify recurring payments with automation tools offered by many payment providers.
• Improve payment functionality through integration with APIs and payment platforms.

Cross-border payments involve sending money from one country to another. These transactions often require multiple steps to convert currencies, move funds securely, and ensure compliance with regulations in both countries.

Here’s how the process typically works:

Step 1: Payment is initiated

The sender starts the transaction through a bank, digital wallet, or payment service provider. Key details like the recipient’s account, destination country, and currency are provided at this stage.

Step 2: Currency is converted (if needed)

If the sender and recipient use different currencies, the funds are exchanged based on current rates. This can happen through the sending bank, an intermediary, or within the payment platform.

Step 3: Funds move across borders

The payment is routed through international systems like SWIFT, card networks, or partner banks. Intermediaries help bridge gaps where direct relationships between banks don’t exist.

Step 4: Regulatory checks take place

Institutions along the chain verify that the transaction complies with anti-money laundering (AML), sanctions, and reporting rules across jurisdictions.

Step 5: Money is received

After processing, the converted amount is deposited into the recipient’s account. The delivery time can vary depending on the method and countries involved.

To better understand how these steps play out in real life, here are two common examples of cross-border payments in action:

Scenario A: Business Paying an Overseas Supplier

A company in Singapore sends payment to a German supplier using a payment platform. The funds are converted from SGD to EUR, pass through SWIFT, and land in the recipient’s bank account after compliance checks.

Scenario B: A Customer Buying from an Overseas Merchant

A shopper in the US purchases from a UK online store. They check out using a credit card or digital wallet. Currency conversion and backend settlement happen automatically, so the cross-border payment doesn’t disrupt the customer’s purchase flow.

When sending a cross-border payment, businesses typically follow these basic steps:

Step 1: Choose a payment provider

Decide whether to use a bank, fintech platform, or payment service provider (PSP) depending on your transaction size, cost, speed, and destination.

Step 2: Collect recipient information

Prepare complete details including:

• Payee’s full name
• Bank account number
• SWIFT/BIC code (for bank transfers)
• Bank name, address, and relevant payment networks
• Purpose of payment (required in some jurisdictions)

Step 3: Confirm currencies involved

Specify the currency for both sender and recipient to avoid unexpected foreign currency conversion or pricing issues.

Step 4: Review fees and exchange rates

Check transaction fees, currency conversion margins, and any intermediary bank charges before authorising the payment.

Step 5: Submit and track payment

Authorise the payment. Some platforms provide real-time payments or instant payment confirmation, while others may take several business days depending on the payment infrastructure used.

There are several ways businesses handle cross-border transactions depending on transaction size, involved parties, and destination countries.

Broadly, these payments fall into two categories:

• Wholesale cross-border payments: Typically used by financial institutions such as banks, central banks, and fintech providers for large transactions like foreign exchange trading and interbank settlements.
• Retail cross-border payments: Common for businesses, SMEs, freelancers, and individuals, covering supplier payments, customer purchases, e-commerce sales, payroll, remittances, and subscriptions.

For most businesses, retail cross-border payments support day-to-day operations, supplier relationships, and global customer transactions.

Wire transfers move funds electronically between bank accounts across different countries, typically using international payment systems like SWIFT. The sender provides key banking details such as the recipient’s account number, SWIFT code, and any other required information.

Many financial institutions are now adopting the ISO 20022 messaging standard, which helps improve data formats, transparency, and automation in cross-border transactions.
Wire transfers help maintain liquidity for large corporate payments across international suppliers and banks.

Payment service providers (PSPs) like PayPal, Statrys, and Stripe enable businesses to accept and manage cross-border payments through multiple channels, including credit cards, bank transfers, and digital wallets.

These platforms play an increasingly important role in global financial services, offering businesses a wide range of flexible cross-border payment solutions outside traditional banking channels.

Credit and debit cards allow businesses to accept payments from customers worldwide. Card networks handle automatic currency conversion, making transactions simple for customers.

Local payment networks, sometimes called Global ACH, allow businesses to make cross-border payments using domestic clearing systems in different countries, reducing costs and delays.

Digital currencies like Bitcoin or stablecoins enable direct, peer-to-peer cross-border payments without intermediaries. They can offer faster transactions, especially in underbanked regions.

In future, central bank digital currencies (CBDCs) may also play a growing role in international payments.

Cross-border payments open doors to global growth, but businesses face several challenges when sending or receiving funds internationally. Below are key risks to be aware of, along with ways to manage them:

Foreign Exchange Rate Fluctuations

Currency values can change between the time a payment is initiated and when it's settled. This affects the final amount received or paid, especially for large-value international transactions.

Transfer Fees and Hidden Costs

International transactions may involve various fees, including provider charges, correspondent banking fees, and currency conversion margins, which increase overall payment costs.

Processing Delays Across Payment Systems

Settlement delays can occur due to intermediaries, correspondent banking networks, or differences between payment infrastructures in different countries.

Fraud & Security Risks

International transactions are exposed to fraud risks due to multiple intermediaries, payment networks, and jurisdictions involved.

Operational Complexity and Manual Errors

Manual handling of recurring cross-border payments increases administrative work and risk of errors.

Customer Payment Preferences

Payees in different countries often prefer local payment methods and platforms familiar in their market.

Cross-border payments remain essential for businesses expanding internationally. But managing foreign exchange, fees, regulations, and payment methods can feel complex without the right tools.

As global payment systems continue evolving, businesses that stay informed on new providers, technologies, and payment solutions can better streamline their cross-border transactions while reducing costs and risks.