In today’s world, it is not uncommon for businesses to operate internationally; a lot of merchants engage in cross-border transactions, regardless of the nature of business being B2B or B2C. Naturally, there is a requirement for an efficient international payment solution that businesses can rely on.
What does it mean?
International payment is a financial transaction between two countries with different currencies. This type of payment can be made via online banking as well as in-branch. Unlike domestic transfers, international transactions involve more steps and precautions and can take relatively longer to process. Here is what every business, especially those who have recently introduced international payment to their clients or have a supplier in another country, should know about making and accepting overseas transactions.
What do you need to know?
When making a bank transfer of any kind, you are asked by your bank to provide the bank account details of the recipient. Normally, this means their name and IBAN. However, when making an international payment, you would be required to provide a code. This depends on the countries as well as the currencies. Let us take a look at what these codes are.
SWIFT stands for Society for Worldwide Interbank Financial Telecommunication. It is the largest international payment network. A SWIFT code, also known as Bank Identifier Code (BIC), is a set of characters (letters and numbers) that serve as an identity for banks worldwide. It is a unique code that includes the bank code, country code, location, and often, the branch code of the receiving bank.
Next comes SEPA, BSB, ABA, CNAPS, etc. These codes, unlike SWIFT, are more precise. Whereas SWIFT is for international payments, these codes are region specific i.e. national.
What are the costs?
There are costs involved in making overseas payments. Depending on your bank, you may be charged a certain processing fee for each transaction that you make. These charges are usually fixed rates. As far as the amount charged, that depends on the bank that you are using to make transactions. It is better to do thorough research on the banks with international payment services and compare the charges to find which one is the most affordable. The cost of a single overseas payment may not be much but if you are a business that frequently makes these transactions, they can add up to be expensive.
There is also a margin for the foreign exchange rate to consider when making international payments.
Having an efficient system in place that allows you to make and accept international payments is essential since most companies, nowadays, ship their products/services overseas to increase their customer base.