Understanding Cross-Border Payments and Methods

What is a Cross Border Payment?

A cross-border payment is defined as an electronic transfer from one country to another. Payments between separate countries are conducted between individual or corporate bank accounts. These payments are foundational in global e-commerce, international supply chains, freelance contracting, and remote payroll systems.

Cross-border payments are quite literally the backbone of the global economy — facilitating the movement of goods, delivery of services, and value exchange across borders. Business operations across the globe would be greatly hindered without these bank account payments.

Unlike domestic payments, cross-border payments include different currencies, regulations, and occasionally, intermediary banks, making cross border payments appealing. Take, for instance, a company in Hong Kong that is paying its supplier in Germany. The company will first need to pay for the required amount in their own currency (Hong Kong Dollars (HKD)), which would then be exchanged into euros (EUR).

The resulting currency exchange incurs both exchange fees and processing fees. Also, due to the involvement of intermediary banks, the payment is likely to be delayed.

Understanding how and why cross-border payments work is vital, especially if you want alternative payment methods to minimise risk and uninterrupted cash flow. Being proactive with your strategy to enhance cross-border payments avoids compliance issues and reduces delays. 

How Do Cross-Border Payments Work?

The journey of a cross-border payment includes multiple steps and payment services. Here's a simplified breakdown of how it typically works:

First, the payment is initiated—usually through a Business Account or digital platform. Then, the payment may be routed through one or more correspondent banks, which act as intermediaries between financial institutions that don’t have direct relationships.

At this point, currency conversion and bank fees often occur. This is where foreign exchange becomes a factor, as the payer's currency is exchanged for the recipient's currency. The final step is settlement, where the receiving institution credits the recipient’s account with the converted amount.

Cross-Border Payment Methods

There are several widely used cross border payment methods and payment providers that send money internationally, each offering different levels of speed, cost, and convenience:

Wire Transfers

Wire transfers are secure and commonly used for larger transactions. Wire transfers rely on international networks like SWIFT but often come with high transaction fees and take several days due to intermediary processing.

Online Payment Platforms

Payment methods like PayPal and Stripe are useful for smaller cross-border payments and offer fast processing. However, the fees can add up quickly, especially when dealing with foreign currency conversions.

Electronic Funds Transfers (EFTs)

EFT cross-border payments move money from one account to another electronically. While efficient for local payments, international EFTs may involve added delays and currency costs.

Digital Wallets

Mobile payment-based platforms such as Alipay and WeChat Pay are widely adopted across Asia for cross-border payments. They’re ideal for peer-to-peer transfers but can have limitations when used for business-to-business international payments.

Credit/Debit Card Payments

Cards are convenient and globally accepted for cross border payments. Still, they tend to incur fees like DCC (dynamic currency conversion) fee and foreign transaction charges, reducing your margins.

Benefits of Cross-Border Payments

Cross-border payment capability is a strategic advantage for modern companies dealing with the international payment process. Here’s how it can benefit your business:

Firstly, it unlocks access to new markets. Accepting global payments from different countries makes it easier to scale. Secondly, you gain flexibility in your supply chain by working with partners across different regions. It also enhances payment flow predictability by letting you settle transactions in the local currency of your partners.

Cross-Border Payment Risks

Despite the advantages, cross-border payments present risks that businesses need to manage proactively.

Currency risk is a key one. Exchange rate fluctuations between the time a transaction is initiated and settled can result in receiving less than expected. Regulatory risk is also relevant, as countries differ in compliance rules, tax treatment, and anti-money laundering protocols.

Security concerns are heightened due to the number of parties involved in cross-border processes. It’s crucial to ensure that your provider uses end-to-end encryption on their bank accounts and secure authentication protocols to reduce the risk of fraud or data breaches.

Lastly, operational risk arises from potential delays due to issues between financial institutions, such as incomplete payment data or intermediary hold-ups.

Cross Border Payment Fees

Understanding the transaction fees involved in cross border payments is essential to control your business costs and to enhance cross border payments for business-to-business international transactions.

Fees usually fall into three categories: payment provider fees, currency conversion charges, and intermediary bank transfer fees. Providers may charge a fixed fee per transaction or a percentage of the transferred amount. Currency conversion fees are often hidden within the foreign exchange rate margin. Meanwhile, intermediary banks can apply their own charges, especially if the payment requires routing through multiple correspondents.

Using a modern platform that offers transparent pricing and competitive FX rates—such as Aspire—helps you avoid these hidden costs and better predict your margins when it comes to cash flow.

Cross-Border Payment Best Practices

To optimise your cross-border strategy for international trade and global payments, consider adopting these practices:

• Improve cross-border payments by choosing multiple payment methods based on transaction size and frequency to accept payments. For example, regular payments to suppliers’ bank accounts may benefit from recurring EFTs, while large one-time payments might justify the cost of a wire transfer.
• Be proactive with account details. Ensure that all payment data is correct and includes the necessary SWIFT/BIC codes to avoid delays or rejections.
• Monitor your FX exposure closely. If you deal in multiple currencies for international money transfers, consider working with a provider that offers real-time exchange rate management or even a multi-currency account to streamline conversions.
• Most importantly, work with a payment system that understands global finance and central banks. Aspire’s Global Payments solution helps you reduce complexity, save time, and take control of international transfers.

Enjoy Low-Cost Cross Border Payments with Aspire

Aspire was built for businesses like yours, ones that operate across borders, use multiple payment options, manage lean teams, and demand cost-efficient, digital-first financial tools.

With Aspire's Business Account, you can open local accounts in major currencies such as HKD, USD, CNY, GBP, and EUR. This allows you to send and receive payments in these currencies without incurring unnecessary conversion fees. Better yet, Aspire's Business Account comes with no account opening fee, no minimum deposit, and no minimum balance requirements.

Aspire also offers Global Payment Services, enabling you to send money in over 30 currencies to more than 130 countries—at transparent, low fees and market-leading FX rates up to three times lower than those of traditional banks.

To further streamline your cross-border transactions, you can use Aspire’s Corporate Cards, which let you pay directly in USD to avoid conversion costs. You’ll also earn 1% cashback on eligible digital marketing and SaaS spending.

With Aspire’s suite of services, you can save money when sending cross-border payments, monitor foreign exchange rates, and keep expenses under control, all from a single interface.

Instead of juggling multiple platforms and dealing with unpredictable costs when it comes to international trade, you can rely on Aspire to bring clarity, speed, and control to your cross-border transactions.

For smarter ways to handle cross-border payments, get started with Aspire today and simplify how your business moves money globally.

Frequently Asked Questions

What are the most common cross-border payment methods?

Just like domestic payments, the most widely used cross-border payment methods include wire transfers, electronic funds transfers (EFTs), digital wallets, online payment platforms, and credit or debit card payments.

Each method has its own strengths. Wire transfers are typically preferred for high-value global payments due to their security, while digital wallets and platforms like PayPal and Stripe are faster for smaller payments. Your payment method should depend on the transaction amount, speed requirements, destination country, and your business’s need for cost control.

What is a correspondent bank in cross-border payments?

A correspondent bank is an intermediary institution that facilitates payments between two financial institutions that don’t have a direct relationship. It essentially acts as a go-between, helping to transfer funds from the payer's bank to the recipient's bank. These banks are often involved in traditional international payments, particularly in complex or less common currency corridors. While they’re essential in global finance, they can introduce additional transaction fees and slow down processing times.

How can I lower the cost of cross-border payments?

To reduce overall cross border payment services and fees, choose a financial provider that offers transparent foreign exchange rates and minimal hidden fees. Avoid relying on legacy systems that involve multiple intermediaries, which often come with higher costs and slower processing. 

Are cross-border payments safe?

Yes, they are very safe when compared to domestic payments. Cross border payments use trustworthy platforms with strong security protocols and are considered safe to transfer money and take care of Global Payments. Look for providers that offer encryption, secure login features like two-factor authentication (2FA), and robust fraud detection systems. 

How long do international payments take to process?

The timeframe for the international payment process depends on the payment system and the destination of your Global Payments. Traditional wire bank transfers typically take 2 to 5 business days, depending on the number of financial institutions and the correspondent banks involved. In contrast, modern online platforms and digital wallets may complete financial transactions in near real-time or within a few hours.