Due to the internet, we now are capable of transacting with millions of people nearly anywhere they are in the world. If you are making a cross-border payment, it means that you are sending money from one country to another, and there are several payment methods to choose from. But, as with all money matters, you must pick the right payment provider.
When making an international payment, we must be aware that each country has its own rules when it comes to such financial transactions. Yet, note that these payment methods rules are set in place to facilitate smoother and secure transferring of funds. There is no country that wants to hinder incoming money, yet there are reasons why the various governments are concerned. People can be sending money for drug transactions and other illegal operations. That makes it difficult for senders to easily remit their funds through financial institutions. However, there are ways to send remittance without having to pass through the strict banking system.
How a credit card transaction works
For you to better understand cross-border payments, here is a simple example of a transaction that happens because of e-commerce. A woman who lives in the UK buys a dress from an online store that is based in the US. When she checks out the item, she might be asked to choose among the payment options, such as an online payment system or via credit card. If she decides to pay using her credit card. After filling out the necessary information, she will have to ‘submit’ it via clicking a button to start the credit card payment processing. The information that she furnished will make her UK credit card correspond with the online store’s bank in the US.
About the cash flow
When you make a cross-border payment, there is the ‘cash flow.’ This is a system that sends and receives the funds, like in the example, from the buyer’s credit card company to the dress seller’s account. As the cash flows through this system, a number of things happen. If we go back to the example, the Euro of the buyer has to be exchanged into US dollars to be deposited into the seller’s account. For the transaction itself, the bank will have a fee for sending the money, and the amount of Euro will also have to be subjected to the financial institutions’ currency exchange rate for it to become US dollars.
Choosing the remittance option
When one chooses the payment options from online sellers, it is good to know that there are online payment systems that are available. At times, it is to the sellers’ advantage to use such payment systems as credit card transactions may take a few days before the amount paid is reflected in their account. If you are a buyer, the online payment options will be limited to what the seller provides.