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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

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

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 Andorra 40.0%
United Arab Emirates United Arab Emirates 27.2%
Anguilla Anguilla 0.0%
Albania Albania 3.4%
Armenia Armenia 0.0%
Austria Austria 84.2%
Australia Australia 82.7%
Bosnia and Herzegovina Bosnia and Herzegovina 2.4%
Barbados Barbados 0.0%
Bangladesh Bangladesh 22.5%
Belgium Belgium 71.3%
Bulgaria Bulgaria 31.6%
Bahrain Bahrain 10.5%
Bermuda Bermuda 100.0%
Brunei Brunei 0.0%
Bolivia Bolivia 66.7%
Brazil Brazil 11.1%
Bahamas, The Bahamas, The 75.0%
Canada Canada 44.5%
Switzerland Switzerland 42.4%
China China 1.4%
Costa Rica Costa Rica 0.0%
Curaçao Curaçao 0.0%
Cyprus Cyprus 25.3%
Czech Republic Czech Republic 44.0%
Germany Germany 84.0%
Denmark Denmark 76.4%
Dominican Republic Dominican Republic 1.3%
Algeria Algeria 0.0%
Estonia Estonia 36.9%
Egypt Egypt 10.2%
Spain Spain 78.2%
Finland Finland 78.4%
Fiji Fiji 100.0%
France France 78.4%
United Kingdom United Kingdom 78.6%
Guernsey Guernsey 0.0%
Ghana Ghana 15.4%
Gibraltar Gibraltar 0.0%
Greece Greece 93.6%
Guatemala Guatemala 41.2%
Hong Kong Hong Kong 7.5%
Honduras Honduras 0.0%
Croatia Croatia 59.4%
Hungary Hungary 65.9%
Indonesia Indonesia 9.6%
Ireland Ireland 64.7%
Israel Israel 16.2%
Isle of Man Isle of Man 28.8%
India India 69.3%
Iceland Iceland 0.0%
Italy Italy 88.6%
Jersey Jersey 27.7%
Jamaica Jamaica 0.0%
Jordan Jordan 61.3%
Japan Japan 73.8%
Kenya Kenya 22.8%
Cambodia Cambodia 0.0%
Saint Kitts and Nevis Saint Kitts and Nevis 0.0%
Korea, South Korea, South 72.0%
Kuwait Kuwait 68.8%
Cayman Islands Cayman Islands 0.7%
Lebanon Lebanon 0.0%
Saint Lucia Saint Lucia 0.0%
Liechtenstein Liechtenstein 0.6%
Sri Lanka Sri Lanka 45.0%
Lithuania Lithuania 41.9%
Luxembourg Luxembourg 52.3%
Latvia Latvia 26.5%
Morocco Morocco 79.8%
Monaco Monaco 7.7%
Montenegro Montenegro 78.8%
Macau Macau 20.0%
Malta Malta 53.7%
Mauritius Mauritius 0.0%
Mexico Mexico 75.0%
Malaysia Malaysia 14.0%
New Caledonia New Caledonia 100.0%
Nigeria Nigeria 0.9%
Netherlands Netherlands 72.9%
Norway Norway 82.7%
Nepal Nepal 60.6%
New Zealand New Zealand 73.6%
Oman Oman 100.0%
Peru Peru 8.0%
French Polynesia French Polynesia 100.0%
Papua New Guinea Papua New Guinea 100.0%
Philippines Philippines 72.2%
Pakistan Pakistan 70.7%
Poland Poland 31.2%
Portugal Portugal 74.2%
Paraguay Paraguay 0.0%
Qatar Qatar 33.3%
Romania Romania 42.9%
Russia Russia 23.4%
Saudi Arabia Saudi Arabia 89.4%
Sweden Sweden 67.6%
Singapore Singapore 28.7%
Slovenia Slovenia 52.3%
Slovak Republic Slovak Republic 71.6%
San Marino San Marino 63.6%
Senegal Senegal 100.0%
Togo Togo 0.0%
Thailand Thailand 76.3%
Turkey Turkey 54.1%
Trinidad and Tobago Trinidad and Tobago 0.0%
Taiwan Taiwan 27.1%
Uganda Uganda 25.0%
Uruguay Uruguay 0.0%
Vietnam Vietnam 38.5%
Kosovo Kosovo 87.8%
South Africa South Africa 70.7%
Zambia 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

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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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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.