The Ultimate Guide to International Business Payments
Sending funds or receiving funds from one country to another is categorised as International Payments. The reason or purpose of the transfer and the funds used to make the payments specify whether it’s a personal transfer or business transfer.
Suppose you are sending and receiving funds from one country to another country for business purposes and using your business bank account for the same transaction. In that case, such transactions are called International Business Payments.
The involvement of business in sending or receiving international payments have more specific laws and compliance to adhere to.
List of 10 essential things to have as a business for a smooth payment process:
- Business Website
- Business Number other than Mobile Number
- If the retailer/wholesaler/product sourcing agent – has a warehouse or physical business location
- If importing goods, keep shipment landing bills for future references
- File your company taxes on time
- Never do business that is not specified in your SIC code with HMRC
- Have a business bank account
- Never accept or send funds from your business account to someone who is not related to your business
- Always withdraw funds from your business account into your personal account, if you are loaning your friend and relative
- Don’t use your business account for personal expenses, withdraw your salary as a director and use it for personal use
For International business payments, below is the checklist that all the international payments providers look for:
- Business Name
- Business Address
- Business Phone Number
- Business Website and Business Email Address
- Name, Home Address and Date of Birth for all the Directors of the company
- If directors are not based in the UK, Proof of Address and Proof of Identity would be requested.
- Annual Transaction more than GBP 84,000 would need a VAT number if exempted – submit documents by your accountant specifying the reason.
- Countries you are trading in
- Countries your customers are based in
- Currencies Needed
- Reason for Payments
How does the international business payments system work?
1. Purchase a product/service – Buying a product or using a service, get in touch with the provider of your international payment to understand their capabilities of fulfilling the transaction in future.
2. Analyse business payment service provider – Choose a provider on the basis of
- Better FX rate and minimum or no transfer fee
- Ease of booking trade
- Personal Service, dealer or account manager dedicated to your account.
- 24X7 Customer Assistance
- Speed of Payment
- System Accessibility
3. Select the best FX provider – The best provider could be based on your business requirements as every business model is unique and so is the requirement.
You can simply search for the top 10 money transfer companies but those may not be the best for you.
For example, Some companies charge transfer fees but less markup, some charge high markup but no transfer fees, and some charge low but transfer takes time. Some have no human contact and some are all automatic.
So depending on your business needs you should choose one with multiple qualities that can accommodate your needs.
4. Register your business – Visit the company’s website, click on the registration link and fill in your business details and personal details of all the directors and shareholders with more than 25% shares.
5. Get business verification done – 2FA Code, the most business has started a 2-factor authentication code by asking customers to fill in their mobile phone number as it reduces the risk for the international business payment provider to analyse the authenticity of the registration that they have received.
The compliance team processes the application and will ask for further information related to business activity, directors, shareholders, source of funds, business customers, suppliers and many more.
6. Receive an account activation email – Once all looks good by compliance – you would receive an activation email from your international payment provider, requesting you to access the online system and check rates and book deals.
Some international business payments provider allocate a dedicated dealer or account manager for your account, in such scenarios you may receive a call to walk you through the process.
7. Book a trade – You can log in online and place an order for that you need buying currency, buying amount and the system will automatically calculate the selling amount in your local base currency, or if you don’t know the buying amount, you can feed selling amount and buy amount is auto calculated as per FX rate by your international payment provider.
You can also call your dealer and ask him to book the deal for you as per your required currency and the amount.
Once you confirm the trade, you are legally bound by the agreement to settle the contract in the selected time frame
8. Share beneficiary details – You need to have IBAN and Swift Code for any international payment that you are about to place an order for. SWIFT is a globally used mode of payment other than in Europe, from the UK you can send funds in Europe using SEPA.
You need to share Beneficiary details with your dealer via email or you need to add it by yourself but you just can’t give it verbally to your dealer. These are the precarious measures taken to avoid any mismatch and error in beneficiary details.
It’s recommended to send an Invoice to the supplier as that would have all the details like Account Name, Suppliers Address, Bank Name, Bank Address, SWIFT Code and IBAN with the amount, currency and reference number of the invoice.
9. Receive trade booking email – Once you have confirmed your trade or booked your trade and have added a beneficiary or got a beneficiary added via the dealer, you would get a trade confirmation email with an attachment.
The attachment consists of the following details:
- Conversion reference
- Transaction Date
- Amount Purchased
- Amount Sold
- FX Rate
- Total Amount Due
- Value Date
Please make a payment of XX, XXX GBP by VALUE DATE to the following account details:
- Account details of International Payment suppliers:
- Account Name: Money Transfer Company
- Account Number 00XXX0X0
- Sort Code 0X-0X-XX
10. Compliance Check on Payments (beneficiaries’ details) – Compliance runs due diligence on suppliers, yes you read it right – International Payment Provider runs a check on the supplier to understand if they are in the line of business as they have invoiced and that there are no AML activities.
11. If compliance has queries – They will send you an email asking you for specifics and you need to furnish the related documents, like invoice, email trail between you and the supplier, and website of suppliers.
12. Once the payment is received it is sent to the beneficiary – As soon as you send the funds to the Money Transfer Companies account as mentioned on the trade confirmation received post book the deal, your funds are dispatched post satisfactory results of checks conducted by compliance on the supplier or beneficiary receiving funds.
13. Notifications – Customer and Beneficiary are notified via email about the funds being sent. Once funds are dispatched, customers and beneficiaries are notified via email and they can track the whereabouts of the payments in transit.
14. Time taken in payment sending – time taken to send funds may vary from 10 minutes to days, as it majorly depends on below mentioned 2 factors:
- Send Currency
- Country Sending to
For example, Sending funds from the UK to India in USD is faster as compared to INR.
17. What if the beneficiary claims not to be receiving payment – As most of the payments are made via the SWIFT network, it’s a highly secure and trackable process, MT103 is the message sent from sender banks to receiver banks as the payment instructions and the same can be shared with the customer and beneficiary for ease of tracking payment.
18. After sending MT103 customers still claim not to be receiving funds – in such scenarios banks communicate with each other and if the receiver bank in response accepts the funds received then the beneficiary may be hiding something in the process.
19. If still, beneficiaries claim non-receiving funds – International Payment providers can recall the funds and the time frame depending on the country the funds were sent to and the laws receiving banks abide by as per their central bank governing body.
20. Payment received? – If the customer receives the funds and the beneficiary accepts the delivery of funds, all is good.
What are the ways to send money to payment service providers?
Sending money to Money transfer companies is an easy and simple process, below mentioned are the list of payment modes:
- Bank Transfers
- Debit Cards
- Credit Cards
- SWIFT from across the world
- SEPA from Europe
- Faster Payments from the UK
If you have to choose the fastest and the best way to fund your trade, it depends on the country you are in.
- Sending Funds in the UK is easier and fast via Faster Payments
- Sending Funds in Europe Zone is easier and Fast via SEPA
- Across the World, SWIFT is fast and easy
So choose the best way as per your country.
How much does it cost to make international business payments?
Cost and Fees for making international business payments depend on several factors as mentioned below:
- The volume of Transfer
- Country of beneficiary
As most money transfer companies tend to make money via markup on market price and if the markup amount is less than the cost involved in payment, they may end up charging transfer fees for the same transaction.
For example, you want to send GBP 1000 to USD in China and now that needs SWIFT payment.
So Swift payments roughly charge GBP 5 per transaction, so your international business payment provider needs to charge you a minimum of GBP 10 for this transfer to make a profit.
Hence they will charge you a 1% markup on the market rate which would give them GBP 10 as profit and they will add no transfer fees.
They will charge you flat transfer fees of GBP 10 and gives you the market rate without any mark-up
They will charge you GBP 5 as transfer fees and 0.5% mark-up on the market FX rate and they would make GBP 10 out of the GBP 1000 transfer that you would be making.
What are FX charges on business payments and how to reduce them?
There are mainly 2 FX charges:
- Transfer Fees
- Mark-up or Margin over and above live FX rate
You should choose a company that charges no transfer fees as that reduces a component of the cost of the transfer.
Mark-up or Margin over and above the live FX rate is something that you need to negotiate and can be customised or personalised as per your business transition volume.
For example –
ABC LTD does 1 Million worth of USD in FX transactions annually
And XYZ LYD makes 100,000 worth of USD in FX transactions annually
As they both trade in USD but their volume is different hence their Mark-up or margin will be different.
Every business wants to make a profit, you being a customer of FX services or FX service providers.
There is something that you can surely get by negotiating, a fixed markup or margin for all your transactions.
For example, if You have an annual FX turnover of 1 million USD, you can ask your FX provider to give you a fixed markup irrespective of volume per transaction as that may vary from time to time.
Your International Business Payment Provider will send you a write-up guarantee of the markup/margin fixed by you both.
Mark-up/Margin can be in percentages.
9 Verification checklist before selecting an international business payment provider
Choosing an international business payments provider is a crucial decision for businesses that need to send or receive funds across borders. Here are some key factors to consider when making your selection:
1. Fees and exchange rates: Compare fees for different payment methods and be aware of any hidden charges such as markups on exchange rates.
2. Speed and reliability: Consider how quickly the provider can transfer funds and how reliable their service is in terms of delivery time and accuracy.
3. Payment options: Consider the variety of payment methods offered, including wire transfers, ACH transfers, and credit card payments.
4. Security: Ensure that the provider has robust security measures in place to protect your sensitive financial information and prevent fraud.
5. Customer support: Look for a provider with responsive and knowledgeable customer support that is available to help you with any issues that may arise.
6. Compliance: Ensure that the provider complies with local regulations and laws, especially if you will be making payments to countries with specific financial regulations.
7. Integration: Check whether the provider offers APIs or other integrations that can help streamline your payment process and automate repetitive tasks.
8. User-friendliness: Consider the user interface of the provider’s platform and whether it is easy to navigate and use.
9. Reputation: Read customer reviews and research the provider’s reputation in the market to ensure they have a track record of delivering high-quality services.
Ultimately, choosing the right international business payments provider will depend on your specific business needs and preferences. Consider your priorities and do your research to find the provider that best fits your requirements.
List of 16 most frequently used terms in International Payments
International payments can involve a range of financial terms that may be unfamiliar to those new to the field. Here are some of the most commonly used terms in the international payments world:
1. Exchange rate: The rate at which one currency is converted into another currency.
2. FCA-authorised: FCA is responsible for ensuring that firms operating in the financial sector follow fair, transparent, and honest business practices and that consumers are protected from financial harm.
3. Wire transfer: A method of transferring funds electronically from one bank to another, often used for international payments.
4. SWIFT code: An international standard for identifying banks, used to facilitate international wire transfers.
5. Beneficiary: The recipient of a payment, who will receive the funds being transferred.
6. Remitter: The person or entity sending the payment.
7. Correspondent bank: An intermediary bank that facilitates international wire transfers, by exchanging messages and funds between the remitter’s and beneficiary’s banks.
8. Cross-border payment: A payment made between two countries, involving the transfer of funds across international borders.
9. Foreign exchange (Forex): The buying and selling of currencies on the international market, used to facilitate international payments.
910. FX rate: Another term for the exchange rate.
11. ACH transfer: An electronic payment method that transfers funds from one bank account to another, commonly used for domestic payments but also available for some international payments.
12. Transfer fee: A fee charged by a bank or payment provider to process an international payment.
13. Currency conversion: The process of converting one currency into another currency, typically for the purpose of international payments.
14. Remittance: A payment made to a foreign recipient, often for personal or family purposes, rather than for business purposes.
15. Payment gateway: A software platform that facilitates the processing of electronic payments, connecting the merchant’s website to the payment provider.
16. Compliance: The process of ensuring that a payment service provider complies with relevant financial regulations and laws.
By understanding these commonly used terms in the international payments world, you can better navigate the complex landscape of international payments and make informed decisions about your payments strategy.
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