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Understanding Cross-Border Payments: What You Need to Know

16 October 2023
Grof Writer
6 Minutes Read
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It is a beneficial ally for businesses and individuals who wish to enjoy business transactions across borders. You need to work with cross-border payments to reap the benefits for your business. Whether a small business wants to expand its global reach or initiate a business globally, cross-border payments play an essential role in building a strong business around the world when conducting international business. 


In today's advanced world, where business transactions and personal connections span countries, cross-border payments have become essential to our lives. Yet many small businesses are still unaware of cross-border payments. It is necessary to know its significance, what cross-border payments are, and how they work. 

What Are Cross-Border Payments? 

Cross-border or international payments are a financial transaction between the sender and receiver in two countries. The payment thus crosses a border during the transaction process, and that is why called cross-border payment. 


In e-commerce, when a customer purchases from a different country from a business based in another country. B2B cross-border payments happen between companies based in other countries. Therefore, it also has some fees that you should know before. It includes different components, including the sender's bank fees, correspondent bank fees, recipient's bank fees, foreign exchange markup, and any intermediary fees.

Also, note that some banks may charge hidden fees, so know the total fees and then decide. To optimise cross-border payments, consider these tips: 


Compare Services: Different banks and payment providers present varying exchange rates and fees. Take your time and complete an analysis and comparison between services before choosing. 

Timing: Exchange rates can fluctuate with time, so keep an eye on the rates and choose a favourable time to transfer your money. 

Alternative Providers: Some companies offer competitive rates and faster transfer times than traditional banks. You can choose them if you want a quick transfer. 

Transparency: Transparency is a must in any transaction. Ensure you understand the entire cost breakdown before initiating the payment. 

Why Use It for International Transfers? 

The beginning of international payments has been long-standing in the financial world, facilitating business and marketing, and sending & receiving money via international business contracts has been common ever since. Today's growing global marketing can be attributed to the growing volume of global digital payments. 


Therefore, if you want to start a business in Singapore, you should consider applying for a multi-currency bank account to facilitate faster and lower-cost international transfers. In this way, you are not bound by serving only local clients or businesses. We have covered this bit in our previous blog where we compare bank charges of notable banks in Singapore, do check it out! 

→ Sign up for a free business account today! 

How Does It Work? 

Imagine you're shopping online and paying for something. When you hit that "buy" button, a special system takes money from your bank and gives it to the store. 


Now, picture this: you're buying from a store in another country. Things get a bit tricky with cross-border payments. There's stuff like changing money from your currency to theirs, extra fees for foreign transactions, and the value of money changing all the time. 


However, there's a clever system that oversees the movement of funds through these channels. Cross-border payments involve a collaboration between banks and various domestic entities. In this scenario, a "correspondent bank," which is the fund requester, communicates with a "respondent bank," representing the entity making the transaction. 


In every known city of the world, banks have partners. They work together to move your money from your bank to the recipient's bank. Then, the receiver's bank adds the money to their account. These banks team up to send and get money across countries. 


As a result, the procedure can take time and effort because many entities work on a single purchase. This may also cost some hidden charges, so it is necessary first to research different services and then make decisions. 

Key Challenges Of Cross-Border Payments 

Cross-border payments mean money transactions between people or businesses in different countries. It may sound simple, but some tricky challenges come with these types of payments. 


One big challenge is speed. Sending money across borders can sometimes take a while. It's different from sending a text message that arrives instantly. There are various banks, currencies, and even different rules in each country that can slow things down. So, if you're waiting for money from another country, it might test your patience. 


One more option regarding global transactions is their cost. Sometimes, sending money internationally can cost more than paying within the same country. There might be fees at every step of the process – from your bank, the recipient's bank, and even mediator banks that help the payment go through. These fees can add up, and it's not fun to lose money on fees when you're just trying to send some to your family or do business. 


Exchange rates also play a role. When dealing with other currencies, the value of money can alter. So, if you're sending money in one currency, but the recipient gets it in another, the amount they receive might differ due to these exchange rate fluctuations. This can make it hard to predict how much money will end up in the recipient's pocket. 


Security is another concern. With money zipping across borders, there's a chance that it could get into the wrong hands of that someone could try to steal sensitive information during the process. Fortunately, Singapore's banks and solution providers have stringent measures in place, making it difficult for scammers to carry out their illicit activities. 


In a nutshell, the key challenges for border payments are speed, cost, exchange rates, security, regulations, and making the whole process as convenient as possible for everyone involved. It's like trying to untangle a knot, but with some effort and innovation, things are slowly getting better! 

Fees Associated with Cross-Border Transactions 

You can't run away from the fees associated with global transactions. International payments take time and fees, as the banks need to compensate, as they help you transfer your money globally. Institutions like banks tend to set a premium rate mainly hidden on foreign exchange transactions and add additional costs that may be difficult to understand or spot. 

However, the complete cost of cross-border payments is divided into bank fees, intermediary fees, compliance fees, operational costs and FX rate margins


Hence, we're here to save you from unexpected and high fees. Our mission is to help your business expand globally. Discover more at here and let us clear the path for your business growth. 

In Conclusion 

In this full technological world where people are advanced with these technologies. This is where cross-border payments come in to make your business grow more in different countries and promise a seamless and efficient method for all your international transactions. 


It is a secure, transparent, and efficient approach, and it has the potential to streamline global transactions, empower individuals by providing them control over their finances, and cut down on the complexities associated with traditional global payments. As the world shrinks and business becomes increasingly global, innovations like this pave the way for a more connected and prosperous future. 


Connect with us and give a high reach to your business globally without worrying about your business finances because we are here to make your way hassle-free! Sign up for free today! 

Your Ultimate Singapore Incorporation Checklist
Explore crucial dos and don'ts, along with essential tips for a successful company registration when establishing your foothold in Singapore!
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Explore crucial dos and don'ts, along with essential tips for a successful company registration when establishing your foothold in Singapore!
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