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Challenges of cross border payments

Business without borders

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Although there is a tempting range of advantages to accepting cross-border transactions, there are some challenges to be aware of and prepare for ahead of time.

Taxes and fees

Different countries will have different fees on imported goods, levels of customs taxes and VAT or equivalent. It is crucial to be aware of these fees and how they could affect your customer and your business before you make your products available internationally. Many of these fees are also subject to change depending on political and economic climates, making it important to keep up to date to avoid any surprise expenses. Regardless of country-specific fees, all cross-border payments will be subject to some form of bank or credit card processing fee. International payments often require currency exchange and payments may be processed through multiple intermediary banks, both of which take time and can contribute to higher payment processing fees.

Regulations

Accepting cross-border transactions also makes your business subject to comply with international regulations. Each country will have its own regulations for imports, exports, use of personal data and international payments. It is important to research the regulations of any country that you accept cross-border payments from to ensure that your business and products are compliant. For example, EU distance selling regulations and GDPR can affect cross-border payments. Failure to comply with international regulations could result in expensive penalties. 

Time

Cross-border payments can take approximately 5 working days to process and can have longer settlement times, meaning it can take longer for you to get your money in your account, of course this can depend on the payment method used by the customer. While this issue will not affect consumers often, it could cause cash flow issues for your business. Be sure to account for this processing window when conducting any financial planning to avoid cash flow issues.

Exchange rates

In many instances, cross-border payments are also cross-currency payments and are therefore affected by exchange rates. This can make it challenging to create cash flow forecasts for your business as exchange rates can change daily. Additionally, many banks or credit card issuers may charge a fee for exchanging currencies for cross-border transactions. Staying on top of exchange rate fluctuations can be time-consuming but potentially crucial for your business.

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Read Next Chapter: Making and accepting cross-border payments

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Read Next Chapter: Making and accepting cross-border payments

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The Ultimate Guide to Cross-Border Trade

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