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Cross-Border Payments with Local Bank Transfers – 5 Things to Know


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Companies with global operations know all too well the challenges of disbursing payments on an international scale. While several factors make cross-border payments cumbersome, the most significant stumbling block is the lack of a worldwide electronic transfer payment system. However, companies are navigating around those obstacles by processing international payments through local bank transfers. Here are five things you should know about local bank transfers as you expand your business network on a global scale.

1. Each country has its own domestic electronic funds network

Language and customs vary from country to country, and likewise, so do electronic transfer networks. Here’s a snapshot of electronic transfer networks around the world:

  • In the United States, banks utilize the Automated Clearing House (ACH) for transferring funds among accounts located in the United States. Non-profit NACHA administers this network and also advocates for electronic payments standards.
  • The Single Euro Payments Area (SEPA) deals with cross-border euro payments for European Union members and a handful of other European countries. SEPA was established by the European Commission.
  • India has multiple networks for local bank transfers: the National Payments Corporation of India (NPCI), Electronic Clearing Services (ECS), National Automated Clearing House (NACH). Each network handles specific transactions based on factors like the amount, the source of the funds and the transfer destination.

2. Countries leverage domestic bank networks for international payments

International local bank transfers—and similar terms, such as international ACH and global ACH—isn’t referring to a worldwide network for electronically transferring funds country to country. Instead, international local bank transfers leverage existing electronic transfer networks in various countries to electronically move funds from one foreign account to another.

Here’s a further breakdown: a cross-border electronic fund transfer between the payer and the payee goes through a correspondent bank, which is a bank that can provide services on behalf of another bank. An intermediary organization or financial institution facilitates this procedure.

Let’s say a payer sends a payment in US dollars to a payee located in France. Before those funds reach the payee in France, the funds are debited in a corresponding bank that converts the US dollars to the euro on behalf of the payee’s financial institution. Then the corresponding bank credits the funds to the final destination. An intermediary (an organization or a financial institution) is overseeing this process, including the settlement of the funds.

3. Banking identifiers slightly vary among electronic funds networks

Electronic payment processing systems throughout the world all require a bank identifier for the origin and the destination of the funds, but each country has different terminology for this specification. For example, transferring electronic monies domestically through the US-based ACH network requires a bank routing number and bank account number. For electronic transfers in Japan, payers must submit the bank name of the final destination. Electronic transfers in India require an Indian Financial System Code (IFSC), which is a code that identifies the bank branch.

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4. An international local bank transfer is different from an international wire transfer

Another method for sending funds to another country is an international wire transfer, which is sometimes called an international money transfer. Here are a handful of the key differences between a wire transfer and a local bank transfer:

  • A wire transfer is a direct link to the final bank destination in real time; this makes the funds available the same day. Funds sent through local bank transfers get processed in batches, so the money becomes accessible days later.
  • An international wire transfer requires a SWIFT address of the final financial destination. Sometimes called bank identifier code (BIC), a SWIFT is a unique alphanumeric sequence assigned by the Society for Worldwide Interbank Financial Telecommunications.
  • The fee for an international money transfer is expensive, ranging from $10 to $35 a transaction. It’s free or a negligible cost to send money via international local bank transfers.

5. Payment processors make disbursing international payments easier

Companies are navigating the challenges of cross-border payments with the help of automation payment software. Managing the disbursement of global remittances is inherently unwieldy since banking requirements, regulations and more vary from country to country. Financial payment software enables accounts payable to collect and manage payee data at a single point, and the automation takes care of the rest. From validating payee account details to communicating transparency of payment status, financial payment software takes on the heavy lifting of mass global remittance disbursement so companies can put their efforts into other initiatives necessary for expanding the international reach.

Scaling a business requires the ability to be nimble, but ironically, that needed flexibility becomes harder to achieve as operations expand. But with payment processing software like Tipalti, companies can distribute mass payments on a global scale with the power of automation. It helps businesses check off those essential yet time-consuming tasks—like identifying the most cost-effective payment transfer—so that they can focus on strategies that bolster global reach.

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