How Do Cross-Border Payments Work?

What Are Cross-Border Payments and How Do They Work?

With the development of the internet and the rise of e-commerce, significant changes have occurred in payment methods. One of the fastest-growing payment types in recent years is “Cross-Border Payments.” So, what do cross-border payments mean? Cross-border payments refer to transactions in which the payer and the recipient are located in different countries. These transactions involve individuals, businesses, or financial institutions transferring money across borders. For globally operating individuals or organizations, receiving payments from all the countries they operate in—without issues—is crucial. If you want to grow your business and make better use of the global trade ecosystem through cross-border payments, choosing the right partner is key. Read on for the details.

What Is an International Payment Gateway?

When selling products internationally, it’s best to work with a Payment Service Provider (PSP) that offers an international payment gateway. A payment gateway acts as a bridge between users in the payment ecosystem, allowing for secure transfers between the customer, seller, and acquiring bank. PSPs also verify payments and encrypt sensitive financial data shared between parties. The payment gateway you integrate should support multiple currencies to help you reach new markets. Using local payment methods and currencies for card transactions can significantly improve your acceptance rates. This is because consumers prefer seeing the final charge in their own currency when shopping online. To meet this expectation, you could open multiple bank accounts in different countries, though this can be costly. Instead, you can partner with an experienced PSP that specializes in cross-border transactions. Here are a few ways to improve the customer experience in international trade and apply a successful global strategy: • **Offer Popular Local Payment Options** Research which payment methods are most commonly used in your target regions. While credit and debit cards are common in some countries, others may favor alternative payment methods, such as digital wallets. Ignoring local preferences may lead to lost customers. • **Work with a Local Partner** Collaborating with local partners helps you understand regional culture, consumer behavior, logistics, infrastructure, and regulations more effectively. • **Embrace the Local Language** Offering multilingual customer support increases loyalty. Customers appreciate being addressed in their own language, which makes them feel valued. Targeting globally spoken languages can further expand your customer base.

What Are the Common Cross-Border Payment Methods?

Credit card payments, bank transfers, and alternative payment methods are among the most widely used cross-border payment options today. Shoppers expect customized payment experiences and want assurance that their data is handled securely. Offering diverse and secure payment options can attract more customers. For example, under the European Union’s PSD2 (Payment Services Directive), you can offer safer and more competitive payment services to your customers.

How to Make a Cross-Border Payment?

To make an international bank transfer, you need certain information about the recipient, such as their name, International Bank Account Number (IBAN), and Bank Identifier Code (BIC). For online shoppers purchasing from foreign e-commerce sites, the process is mostly handled by the merchant and their PSP—requiring minimal effort from the consumer. Cross-border payment mechanisms can be complex. Lidio, with over 90 different payment solutions and secure card storage capabilities, simplifies global commerce for businesses. If you're ready to overcome the challenges of international trade, now is the time to partner with Lidio. Once you experience the freedom of seamless payments, you'll understand the value of Lidio’s quality firsthand.