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Demystifying Cross-Border Payments 1

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:

  1. Ensures greater delivery success
  2. Reduces the risk of losing payees
  3. Scales with global initiatives

Payee Preferences

Preferred Payment Methods
  •  PayPal
  •  Check
  •  Wire
  •  ACH
  •  Prepaid Debit
  •  eCheck
Click Below to Filter on Transaction Size

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 196 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

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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 Andorra40.0%
United Arab Emirates United Arab Emirates27.2%
Anguilla Anguilla0.0%
Albania Albania3.4%
Armenia Armenia0.0%
Austria Austria84.2%
Australia Australia82.7%
Bosnia and Herzegovina Bosnia and Herzegovina2.4%
Barbados Barbados0.0%
Bangladesh Bangladesh22.5%
Belgium Belgium71.3%
Bulgaria Bulgaria31.6%
Bahrain Bahrain10.5%
Bermuda Bermuda100.0%
Brunei Brunei0.0%
Bolivia Bolivia66.7%
Brazil Brazil11.1%
Bahamas, The Bahamas, The75.0%
Canada Canada44.5%
Switzerland Switzerland42.4%
China China1.4%
Costa Rica Costa Rica0.0%
Curaçao Curaçao0.0%
Cyprus Cyprus25.3%
Czech Republic Czech Republic44.0%
Germany Germany84.0%
Denmark Denmark76.4%
Dominican Republic Dominican Republic1.3%
Algeria Algeria0.0%
Estonia Estonia36.9%
Egypt Egypt10.2%
Spain Spain78.2%
Finland Finland78.4%
Fiji Fiji100.0%
France France78.4%
United Kingdom United Kingdom78.6%
Guernsey Guernsey0.0%
Ghana Ghana15.4%
Gibraltar Gibraltar0.0%
Greece Greece93.6%
Guatemala Guatemala41.2%
Hong Kong Hong Kong7.5%
Honduras Honduras0.0%
Croatia Croatia59.4%
Hungary Hungary65.9%
Indonesia Indonesia9.6%
Ireland Ireland64.7%
Israel Israel16.2%
Isle of Man Isle of Man28.8%
India India69.3%
Iceland Iceland0.0%
Italy Italy88.6%
Jersey Jersey27.7%
Jamaica Jamaica0.0%
Jordan Jordan61.3%
Japan Japan73.8%
Kenya Kenya22.8%
Cambodia Cambodia0.0%
Saint Kitts and Nevis Saint Kitts and Nevis0.0%
Korea, South Korea, South72.0%
Kuwait Kuwait68.8%
Cayman Islands Cayman Islands0.7%
Lebanon Lebanon0.0%
Saint Lucia Saint Lucia0.0%
Liechtenstein Liechtenstein0.6%
Sri Lanka Sri Lanka45.0%
Lithuania Lithuania41.9%
Luxembourg Luxembourg52.3%
Latvia Latvia26.5%
Morocco Morocco79.8%
Monaco Monaco7.7%
Montenegro Montenegro78.8%
Macau Macau20.0%
Malta Malta53.7%
Mauritius Mauritius0.0%
Mexico Mexico75.0%
Malaysia Malaysia14.0%
New Caledonia New Caledonia100.0%
Nigeria Nigeria0.9%
Netherlands Netherlands72.9%
Norway Norway82.7%
Nepal Nepal60.6%
New Zealand New Zealand73.6%
Oman Oman100.0%
Peru Peru8.0%
French Polynesia French Polynesia100.0%
Papua New Guinea Papua New Guinea100.0%
Philippines Philippines72.2%
Pakistan Pakistan70.7%
Poland Poland31.2%
Portugal Portugal74.2%
Paraguay Paraguay0.0%
Qatar Qatar33.3%
Romania Romania42.9%
Russia Russia23.4%
Saudi Arabia Saudi Arabia89.4%
Sweden Sweden67.6%
Singapore Singapore28.7%
Slovenia Slovenia52.3%
Slovak Republic Slovak Republic71.6%
San Marino San Marino63.6%
Senegal Senegal100.0%
Togo Togo0.0%
Thailand Thailand76.3%
Turkey Turkey54.1%
Trinidad and Tobago Trinidad and Tobago0.0%
Taiwan Taiwan27.1%
Uganda Uganda25.0%
Uruguay Uruguay0.0%
Vietnam Vietnam38.5%
Kosovo Kosovo87.8%
South Africa South Africa70.7%
Zambia Zambia0.0%

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.

Demystifying Cross-Border Payments 3

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

Demystifying Cross-Border Payments 4

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.

Demystifying Cross-Border Payments 5

Why Care that Payees Care

74%

Freelancers Willing to Leave Marketplace Due to Payments Issues

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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

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Demystifying Cross-Border Payments 6
WATCH THE VIDEO

Tipalti’s global mass payment capability enables you to pay thousands of suppliers in a matter of clicks:

  • Schedule Thousands of Payments
  • Pay to 196 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.

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