As the economy becomes more globalized, our payment systems must keep up with the challenges of cross-border transactions. In 2018, crossborder payments volume went up 11 percent from last year. It doesn’t matter if you are traveling or own an online store, you need to understand cross-border transactions.
Do you know what are cross-border payments? If not, don’t worry about it. We’ve you covered.
We’ll tell you the basics about cross-border transactions and how to set up your own system. Read on to learn more today.
What Are Crossborder Payments?
A cross border transaction is a payment between people or companies located in at least two different countries. If the payment is made in one country but, processed in another country it may be a cross-border payment as well.
This payment structure isn’t as simple as it may sound. It helps many businesses keep up with their international demand. But, it drains their capital with cross-border fees.
These fees relate to the processing of the transaction. Your merchant provider will detail your transaction fees on your statement. Don’t be in shock if your fees fluctuate between transactions.
Your cross-border fees will depend on the currency and nature of the transaction. Keep in mind that your transaction processor doesn’t control the fees. They can’t assume the fees so they pass it along to you.
How to Set Your Own Cross-Border Transaction System?
Deciding on the best cross border payments system will come down to the type of business you are running. Where is your business located? How many sales per month is your business making in that country?
These are some of the questions that can help you decide on what system is best for your business. If you own an online store, E-commerce payment processing such as Paypal or Stripe can help you process international payments. Before choosing one platform over the other, you should take a look at their cross-border transaction fees.
Focus on the most popular countries you service every month. If your business exports products, you may consider setting up an International ACH or Wire Transfer system. Most banks offer Cash Management accounts with different packages according to your monthly transaction volume.
As your business grows, your merchant processor may offer more discounts depending on the number of transactions. Having the best cross border transaction system can help a lot when you are selling your products at trade shows or conventions.
When your business makes most of the sales in another country, it’s time to consider alternate methods to lower your cross-border fees. One of the most popular options is opening an office and registering your business in the other country.
Companies such as Walmart, Sams Club, Aldi, Ikea, among other big-name retailers take advantage of this option. After you register your company, you may apply for a merchant account in that country, therefore, eliminating any cross-border fees.
Understanding and setting up your own crossborder payments system is a must to grow in our globalized economy. It’s important to choose a system that fits your business needs. Remember to focus on the countries you service and the possible transaction fees.
Want to learn how to set up your online store payment system? Check out our post to learn more about starting your Ecommerce store today.