Common Challenges SMB Face When Making Large International Payments
If you have a small or medium-sized business, you’ll probably send and receive international payments regularly — often involving large amounts of money. But making these payments doesn’t need to be a challenge. Below, we’ll examine common issues and explain how you can address them.
Key Takeaways
- International transactions can pose a challenge to your business
- Fees, transaction speeds, and foreign exchange (FX) risk can make large transactions costly and time-consuming
- Regulatory risks and security risks add extra obstacles
- Choosing the right payment service can help address these challenges
Fees
Sometimes, international payments are more expensive than domestic payments. There are several costs that you should consider.
- Transaction fees: You’ll almost always pay transaction fees, but you can find a fee structure that works for you.
- Conversion fees: If you need to send or receive funds in a foreign currency, you’ll probably need to pay a fee for the conversion. Sometimes this fee is explicit. However, some services impose an invisible fee by providing a below-market exchange rate. Either way, you should be aware of how much you’re paying to exchange currencies.
- Intermediary fees: Depending on how you send your funds, intermediaries might take fees as they forward your transaction to the next entity tasked with processing your payment.
There are many ways to save money on fees:
- Percentage-based fees can be proportionate and affordable for small transfers
- Flat fees can be cheaper for large transfers
- Peer-to-peer payments on a shared payment service can avoid the costs of moving money off-platform.
It’s hard to avoid fees entirely, but understanding fees and planning your transactions accordingly can help you reduce costs.
Transaction Speed
Large cross-border payments often take longer than domestic transfers.
Several intermediaries may handle your transaction, and this can extend its time to completion for several reasons.
Consider:
- The number of intermediaries: Each intermediary that spends time processing your transaction will make the entire process take longer.
- Transaction timing: Intermediaries in different countries might not operate on the same schedule due to different operating hours, time zones, and holidays. This factor depends on where your payment is handled.
- Different operations: Intermediaries may use different technology, systems, and procedures, meaning they’ll need to spend more time and effort advancing your payment to the next involved entity.
- Fraud and security checks: Large payments are often subject to extra security checks, which can cause delays.
Choosing the right type of transfer can improve speeds. Wire payments can be a slow option. By contrast, global payment platforms like Payset are often optimized for international transfers and can complete transfers sooner.
Foreign Exchange Risk
When you conduct transactions in a foreign currency, you are exposed to a type of risk called foreign exchange (FX) risk.
This means that money you send or receive can be less valuable at certain times due to fluctuating exchange rates, which will impact your overall finances.
Currency fluctuations may translate into a loss, but you can also benefit from fluctuations by using your money when it’s at its strongest. You can also practice other FX strategies as explained in our foreign exchange risk guide.
Keep in mind that conversion fees are a separate concern. Even if you spend or trade your money at its strongest, you’ll likely need to pay a conversion fee.
Regulations and Compliance
Large international payments need to comply with regulations in every relevant jurisdiction. This often involves complying with:
- Identity checks, such as Know-Your-Customer (KYC), Know-Your-Business (KYB), and Anti-Money Laundering (AML) procedures.
- Foreign tax laws that require part of the amount to be remitted.
- Sanctions and restrictions that can prohibit transactions with businesses, individuals, or entire countries.
- User data protection and privacy laws, such as the EU’s General Data Protection Regulation (GDPR) rules.
- Import and export rules, such as customs duties and tariffs.
Hiring a compliance officer can help you make sure that your company operates in accordance with these and other rules.
However, you may not need to actively concern yourself with all regulatory issues — some are the responsibility of the payment service you use.
Security Challenges
Ensuring that your payments are secure is critical.
Sending large international payments adds some security risks. Information related to your payment might need to move through additional security protocols, and each step adds the risk of a security issue.
Fortunately, many financial services comply with security standards and requirements, meaning that security risks are usually minimal.
In most cases, you can simply follow best practices for security. Be sure to report thefts and fraud to your payment service and to authorities.
If you operate a large enough business, you might choose to hire a Chief Security Officer to improve its all-around security.
Payset’s International Payment Solution
At Payset, we make cross-border payments simple.
With our multicurrency IBAN accounts and built-in currency exchange tool, you can make transactions in many currencies and jurisdictions with ease.
With Payset, you can send and receive funds in over 180 countries and exchange up to 38 currency pairs. Plus, you’ll enjoy competitive fees, free transfers with other Payset users, fast transaction times on multiple global payment networks, and strong account security.
Frequently asked questions
What is a multi-currency account/virtual IBAN?
A Payset multi-currency account allows you to receive money in 34 different currencies and send money in up to 38 currencies, all within the same account.
You can deposit and withdraw funds, convert currencies at competitive exchange rates, and hold your chosen currencies to capitalize on market movements.
A Payset multi-currency account allows startups and business owners to receive payments from clients virtually anywhere in the world and pay suppliers, staff, and contractors quickly and affordably in their chosen currency.
- Funds can be deposited and withdrawn from the account for a small fee.
- Account holders can send and receive money with other Payset users for free.
- Depending on your region, you can use various payment networks from your Payset account, including SWIFT, SEPA, ACH, Fedwire, Faster Payments, BACS, and CHAPS.
- Once you register an account, you will be provided with a Virtual IBAN (International Bank Account Number), which makes all of these transfers easy.
- We provide you with local payments and collections. For example, transactions in USD, EUR, CAD, and GBP are processed through the local payment networks, which is far cheaper and takes minutes as opposed to days
Are there limits on the amount of money I can send and receive?
No, there are no transaction limits on Payset multi-currency accounts.
However, higher-volume transactions may require additional anti-fraud verification. If you plan to make a large transaction, contact us in advance to avoid verification delays.
How is Payset regulated?
Payset is regulated as an authorized Electronic Money Institution by the UK Financial Conduct Authority. Our activities are also regulated by the Payment Services Regulation 2017 and the Electronic Money Regulation 2011 (SI 2011/99).
How do I add money to my account?
How do I send money from my account?
Once you have opened your verified IBAN account and added money to a balance, transferring funds is simple.
Simply log in into your account and add a beneficiary, then simply “make a transfer” in your preferred currency to that beneficiary.
Types of Multi-Currency Accounts
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