Demystifying Cross-Border Payments
How Remittance Methods and Currency Issues Affect Global B2B Payables
From transaction and conversion fees to reliability, no single payment method works optimally in every situation. Understanding the effect of global payment remittance is critical to creating a payables strategy that:
- Ensures greater delivery success
- Reduces the risk of losing payees
- Scales with global initiatives
Payee Preferences
- PayPal
- Check
- Wire
- ACH
- Prepaid Debit
- eCheck
The map above indicates the top payment methods for each country based on real data from Tipalti. How payees want to be paid depends on the country and transaction amount. Fees and banking infrastructures vary by payment method and that determines how much overhead is associated as well as the deliverability of the remittance. Even within a single country, there’s room for payment diversity.
At Tipalti, we’re constantly analyzing transactions to 190 countries and 3 million payees to understand which methods are the most preferred.
Note: Even though payees may have expressed a preference, that method may not always be the most optimal. Payees don’t always consider the best option, and instead pick the most convenient, so it’s important to educate them what the tradeoffs are.
Global Payment Methods
Here is a quick primer of each payment method. For a more in-depth look at each payment type, be sure to review our comparison of payment methods.
Wire Transfers
Bank-to-bank electronic funds transfer using an agreed upon routing system
Advantages
- Fast
- Reliable
- Widely International
- Virtually No Limit to Amount
Disadvantages
- Variable payment fields
- High transaction fees
- High issue resolution fees
- Requires bank portal/API
- Ill-advised for “under-banked” regions
- Growing fraud risk
U.S. ACH
Bank-to-bank transfer through the NACHA Automated Clearing House (ACH) Network
Advantages
- Inexpensive
- Easy
Disadvantages
- U.S. only
- Requires bank portal/API
- Generally not scalable
Global ACH
Local bank transfers using existing regional networks (a.k.a. eCheck, International ACH, SEPA, EFT, etc.)
Advantages
- Reliable
- Less expensive than wire
- Widely international
Disadvantages
- Variable payment fields
- Not a standard
- Complex routing rules
- Requires bank portal/API
Paper Check
Physical paper bank draft that is primarily mailed to the payee embedded with routing numbers to banks
Advantages
- Widely accepted
- Familiar
Disadvantages
- Expensive to administer
- Slow to send and reconcile
- Lack of traceability
- Subject to postal issues
- Prone to fraud
PayPal
Popular e-wallet solution used in e-commerce, adtech, and marketplaces
Advantages
- Fast
- Simple setup
- Mostly international
Disadvantages
- Requires external onboarding
- Unpredictable fees
- Often more expensive with larger values
- Requires portal/API
- Prone to fraud
- Issues during withdrawal
Pre-Paid Debit / Other E-wallets
Less popular e-wallets / virtual cards that are common in underbanked regions
Advantages
- Fast
- Mostly international
Disadvantages
- Requires external onboarding
- Unpredictable fees and service tiers
- Often more expensive with larger values
- Requires portal/API
- Unpredictable support
The Currency Conversion Conversation
When paying globally, the issue of currency conversions and foreign exchange naturally come up. And depending on the country, there are vastly different reasons where local currency may or may not be favorable.
Based on our remittance data over the last 12 months, when given a choice to automatically have currency converted, here are the countries and the percent of payees that opt for a conversion at the time of payment. The data identifies that payees in some countries have a higher propensity for wanting to be paid in local currency, while others prefer USD.
 | Andorra | 40.0% |
| United Arab Emirates | 27.2% |
| Anguilla | 0.0% |
| Albania | 3.4% |
| Armenia | 0.0% |
| Austria | 84.2% |
| Australia | 82.7% |
| Bosnia and Herzegovina | 2.4% |
| Barbados | 0.0% |
| Bangladesh | 22.5% |
| Belgium | 71.3% |
| Bulgaria | 31.6% |
| Bahrain | 10.5% |
| Bermuda | 100.0% |
| Brunei | 0.0% |
| Bolivia | 66.7% |
| Brazil | 11.1% |
| Bahamas, The | 75.0% |
| Canada | 44.5% |
| Switzerland | 42.4% |
| China | 1.4% |
| Costa Rica | 0.0% |
| Curaçao | 0.0% |
| Cyprus | 25.3% |
| Czech Republic | 44.0% |
| Germany | 84.0% |
| Denmark | 76.4% |
| Dominican Republic | 1.3% |
| Algeria | 0.0% |
| Estonia | 36.9% |
| Egypt | 10.2% |
| Spain | 78.2% |
| Finland | 78.4% |
| Fiji | 100.0% |
| France | 78.4% |
| United Kingdom | 78.6% |
| Guernsey | 0.0% |
| Ghana | 15.4% |
| Gibraltar | 0.0% |
| Greece | 93.6% |
| Guatemala | 41.2% |
| Hong Kong | 7.5% |
| Honduras | 0.0% |
| Croatia | 59.4% |
| Hungary | 65.9% |
| Indonesia | 9.6% |
| Ireland | 64.7% |
| Israel | 16.2% |
| Isle of Man | 28.8% |
| India | 69.3% |
| Iceland | 0.0% |
| Italy | 88.6% |
| Jersey | 27.7% |
| Jamaica | 0.0% |
| Jordan | 61.3% |
| Japan | 73.8% |
| Kenya | 22.8% |
| Cambodia | 0.0% |
| Saint Kitts and Nevis | 0.0% |
| Korea, South | 72.0% |
| Kuwait | 68.8% |
| Cayman Islands | 0.7% |
| Lebanon | 0.0% |
| Saint Lucia | 0.0% |
| Liechtenstein | 0.6% |
| Sri Lanka | 45.0% |
| Lithuania | 41.9% |
| Luxembourg | 52.3% |
| Latvia | 26.5% |
| Morocco | 79.8% |
| Monaco | 7.7% |
| Montenegro | 78.8% |
| Macau | 20.0% |
| Malta | 53.7% |
| Mauritius | 0.0% |
| Mexico | 75.0% |
| Malaysia | 14.0% |
| New Caledonia | 100.0% |
| Nigeria | 0.9% |
| Netherlands | 72.9% |
| Norway | 82.7% |
| Nepal | 60.6% |
| New Zealand | 73.6% |
| Oman | 100.0% |
| Peru | 8.0% |
| French Polynesia | 100.0% |
| Papua New Guinea | 100.0% |
| Philippines | 72.2% |
| Pakistan | 70.7% |
| Poland | 31.2% |
| Portugal | 74.2% |
| Paraguay | 0.0% |
| Qatar | 33.3% |
| Romania | 42.9% |
| Russia | 23.4% |
| Saudi Arabia | 89.4% |
| Sweden | 67.6% |
| Singapore | 28.7% |
| Slovenia | 52.3% |
| Slovak Republic | 71.6% |
| San Marino | 63.6% |
| Senegal | 100.0% |
| Togo | 0.0% |
| Thailand | 76.3% |
| Turkey | 54.1% |
| Trinidad and Tobago | 0.0% |
| Taiwan | 27.1% |
| Uganda | 25.0% |
| Uruguay | 0.0% |
| Vietnam | 38.5% |
| Kosovo | 87.8% |
| South Africa | 70.7% |
| Zambia | 0.0% |
In building a global payment strategy, finance and treasury teams need to understand the administrative and operations costs of taking on conversion efforts and weigh that against what they think they might save negotiating exchange rates with their bank. The process of establishing and maintaining foreign accounts and maintaining proper governance over them, may not be the best approach. Offloading the effort to an expert may offer the best experience for payer and payee.
Challenges to Multiple Methods and Currencies
Managing multiple payment methods and currencies can be extremely complex, which is why many businesses avoid it. Tipalti handles six different methods and estimates that in those six, there are over 26,000 global remittance rules to contend with. Expecting a team to adhere to those rules manually at scale can be expensive and not a responsible use of operational funds.
The answer to solving this complexity, especially as part of a scalable payables strategy, involves two technologies that streamline the ends of the process:
① Get the right data into the system to make payments
② Simplify payments across multiple methods
① Getting Payment Data Right
Preventing payment issues requires that the correct payee information is collected. While it’s possible to have your finance team communicate individually with each payee to ask how they would like to be paid, this is by far the least efficient and least secure approach.
Instead, put the responsibility on the payee to supply their payment information.
Use a secure portal that asks payees for their payment information, including nuanced elements such as their desired payment method, currency preference, and bank routing codes (e.g. IBAN and SWIFT codes when necessary). Collecting and validating this information up front prevents remittance issues later.
If you decide to build your own portal to accomplish this, note that your developers will need to update the thousands of rules required to collect this information.
② Simplifying the Payment Process
Rather than making your global payments through individual banking portals, run all outbound payments through a single point.
Controlling payments from a single point is much easier and more secure than managing multiple payment branches. While this requires a programmatic interface to connect to the various bank rails, it ultimately reduces the manual effort and payment errors.
Centralizing payments also simplifies reconciliation processes later.
Why Care that Payees Care
74%
Freelancers Willing to Leave Marketplace Due to Payments Issues
Payees want a better payables experience to ensure they’re paid in a reliable way and that it doesn’t cost them a premium to do so.
In multi-sided or marketplace business models (such as in digital media, adtech, or the gig economy), partners are critical to delivering the content, goods, and services that drive revenue. When unhappy payees leave, that depletes your supply chain, hinders growth, and damages your reputation. In those situations, getting payables right is crucial to a sustainable business.
69%
Publishers Willing to Leave Network Due to Payments Issues
Tipalti’s global mass payment capability enables you to pay thousands of suppliers in a matter of clicks:
- Schedule Thousands of Payments
- Pay to 190 Countries in 120 Currencies
- Supports Multiple Payment Methods
- Built-In OFAC and Other Sanctions Screening
- Enterprise-Grade Financial Controls
Request a Payment Mix Analysis
Want to understand how the payment method mix you’re offering may impact you? Contact one of our payment experts today to learn more. We can take your real-life data and help you optimize how you pay for a better payee and payer experience.
Note that the analysis will require your payment data and a thorough understanding of your use case.
