What is the cross border payments?

Cross border payments

Here we will explain everything you need to know about cross border payments in banking: how cross border payments work, what they are, what types exist, how long they take and what fees they have.

Which are the cross border payment challenges?

Before mentioning the most significant challenges of cross border payments, we need to address some fundamental questions about cross border payments in order to understand what we are talking about.

What are cross border payments?

E-commerce is currently a worldwide trend, as more and more businesses are deciding to sell their products on the Internet with the possibility of expanding their business beyond the limits of their physical establishments.

The customers of companies that have digital sales are not only regional but even international customers; who can also make their purchases at any time and, of course, from anywhere in the world.

Therefore, since there are international sales and purchases, there are also those kinds of payments which, in essence, are money transactions made for the purchase and sale of a product and which transcend the borders of the country or region in which the parties involved are located. Generally, these are interbank transactions (with banks as intermediaries) between companies and/or individuals.

As you may have noticed, the term cross border refers to those banking operations that cross borders between regions or countries, starting in one region and ending in another. If you’re wondering how cross border payments work, we’ll explain it next.

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Steps for do the cross border money transfer

Through a series of steps, we will guide you through the experience of making a cross border payment, so pay close attention.


  • Purchase: as a customer, you will go to the store of the company of your choice, fill the shopping cart with the goods you wish to purchase and choose a payment method.
  • Routing and processing: in this step, there is an exchange of information between banks, yours as a customer and the seller’s bank. The seller’s bank requests approval for the purchase from your bank.
  • Approval: this is the response from your bank, either denying the payment request or approving it as such.
  • Release of funds and payment: your bank releases the purchase amount, and the seller receives their money through their bank.

Having said that, let’s learn about the main challenges that arise in this type of payment.

  • Banks consider cross border payments riskier, so they charge higher fees than domestic payments.
  • Due to the high fees, buyers tend to refuse to complete this type of transaction more often.
  • By their very nature, these types of payments are complex, as the more regions you operate in, the more banks you will have to work with.
  • Usually, an intermediary is needed to complete the transactions, as not all banks have relationships with each other.
  • There is often a discrepancy in the currency used between the consumer and the seller; therefore, many transactions are denied.
  • There is a higher number of returns and refunds among cross border buyers.
  • Not all regional regulations are always complied with.

Regarding this last point, we are sure you will be interested to learn more about: What is cross border payment regulation?

Before we answer this question, we need to ask another: what are cross border payments and plus reporting? These are the specifications based on the ISO 20022 global standard for such payments.

ISO 20022 regulates cross border payments by standardizing the exchange of digital information between banks through the use of a common language or single messaging model for the world’s existing payment systems.

Types of cross border payments

  • B2B: refers to business to business transactions, for example, to purchase supplies.
  • B2C: these are business to customer transactions; for example, in the case of payroll or interest payments, in the case of banks.
  • C2B: these are customer to business transactions, as in the case of online sales.
  • C2C: these are customer to customer transactions; an example would be individuals selling products or services on Craigslist, Etsy or eBay.

Each of these payment types can be made using these two globally accepted payment methods:

  • Bank transfers: these are made by means of traditional credit or debit cards such as the ones you normally use.
  • Electronic wallet: facilitates transfers by supporting multiple currencies and interacting with multiple banks.

Wholesale cross border payments

This occurs when governments and large companies import or export goods and services, and when banks participate in the financial market (trading stocks, collecting debts, foreign exchange, etc.). That is, B2B payments.


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How long do cross border payments take?

They take an average of 3 to 5 days to be reflected in the bank accounts of those who act as recipients. But there are also more efficient payments; we will briefly tell you: what are fast cross border payments? These are executed in a maximum period of 24 to 72 hours.

Cross Border Payment Fees

Usually, payment fees or commissions differ depending on the economic region in which they take place, the exchange rate at the time of payment, the payment method used, the payment providers and the banks in charge (issuer and receiver). It is estimated to be approximately 3%.

Now that you know how cross border payments work, we invite you to let PayRetailers advise you; we will help you boost your business throughout Latin America, reaching your customers through the most known and trusted payment methods. Don’t wait any longer!


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