Cross-Border Payments: Key Terms, Uses, and Challenges

Think about the key initiatives that allow your business to expand internationally: Global trade, e-commerce, payroll, and remittances—these activities are all possible because of cross-border payments. Think of cross-border payments as a car. The purpose, key users, usages, and challenges are the parts. Knowing all the moving parts helps you better understand how the car runs smoothly.

What are cross-border payments?

Cross-border payments are financial transactions between parties in separate countries. Let’s say your company is headquartered in the US and you’re conducting business with a company based in Germany, sending money to their German bank branch is a cross-border payment.

These payments enable businesses and banking institutions to:

• Engage in international trade and globalization
• Save costs
• Mitigate regulatory and cyber risks
• Enhance visibility and transparency
• Ensure compliance

Cross-border payments are transactions between parties in different countries—essentially, moving money across borders. Transaction examples include global trade, remittances, foreign investments, or workforce payments.

Who uses cross-border payments?

Anyone can use cross-border payments, but in the B2B sector, they’re especially for:

Businesses: importing/exporting goods and services and paying suppliers
Financial institutions: lending, borrowing, foreign exchange, and trading
Governments: handling large transactions (e.g., financial markets, imports, and exports)

Common use cases for cross-border payments

While we touched on a few use cases, entities or employees payments can use cross-border payments for any number of reasons. Here’s a list of some popular usages:

• Global trade: Paying or collecting payment for items or services from overseas suppliers or foreign customers.
• Travel: Purchasing services (e.g., hotels, flights, or tours) during international travels.
• Remittances: Sending money to family members abroad.
• Investment: Buying and profiting from stocks, bonds, and real estate in other countries.
• International donations: Donating to charities and nonprofit organizations in other countries.
• Salaries: Paying remote employees from the company’s HQ in one country and sending the payment to a bank in another country.

Steps to sending cross-border payments

Depending on the method and where you’re sending the payment, the steps for sending cross-border payments will look a little different. Here’s a general overview:

1. Pick a payment method

All cross-border payment methods have advantages and disadvantages so choose the one that works for your business. Methods include: wire transfers, credit card transactions, electronic funds transfers, online payment platforms, and cryptocurrencies.

2. Check the exchange rate

Sending cross-border payments usually involves exchange rates. Check the exchange rate to understand what the transfer cost and what the final amount on the other end will be after currency conversion. Exchange rates can vary depending on the day, country, and payment method.

3. Include the recipient’s details

For cross-border payments, you’ll the recipient’s name, address, bank account number, and routing number. You may also need to include information such as the reason for the payment and any relevant reference numbers. For smooth payments, check the requirements of the financial institutions involved with the transfer.

4. Check the payment information

Review that the payment information is accurate before completing the process. This prevents delays or errors that can be hard to remedy or even impossible to fix if sending money orders.

5. Send the payment

After reviewing the payment, you can send it. Payment times will vary depending on the method and countries involved.

6. Track the payment

Track your payment to make sure the recipient gets it. You can track the payment using the tracking number or reference number provided by your payment provider.

“There is a lot of friction with cross border payments. Were trying to balance between efficiency and something which is seamless, but also the safeguarding of funds and compliance and making sure there is no money laundering. So that friction can be very problematic when your managing workforce payments”

Efrat Laor – MD Corporate banking J.P. Morgan

The benefits of cross-border payments

Cross-border payments can create endless opportunities for businesses to expand into new markets and grow their bottom line. Here are the main advantages.

It enables market expansion

Cross-border payments help businesses expand their market reach beyond domestic boundaries. This is especially true in e-commerce, where online transactions are projected to reach $7,938.2 billion by 2031. Cross-border transactions allow businesses selling products or services to break down geographical barriers and expand their market presence (i.e. a Chinese clothing brand can accept payments from American credit cards).
This global business model also means businesses can form partnerships and collaborations with international suppliers, vendors, and service providers, widening their network.

Businesses can deliver personalized customer experiences

Businesses can create customized cross-border payment systems based on the customer’s region and currency while providing multilingual support.

A global online streaming service could offer subscription plans in local currencies, create fee structures with localized payment methods, and establish customer support options in multiple languages for a personalized experience that enhances customer satisfaction, loyalty, and trust.

Let’s use Netflix as an example. The streaming platform operates in many countries, catering content to geographical areas. British account holders may see programs created in the UK and pay for content in pounds.

Accessibility becomes mobile

Many cross-border payment platforms leverage mobile technology, allowing businesses to initiate, track, and manage cross-border payments on the go.
This flexibility aligns with today’s dynamic work preferences, where professionals travel or work remotely. When mobile devices can conduct cross-border transactions, financial processes aren’t confined to one desktop or set physical location.

It works with intelligent scheduling

Entities use intelligent scheduling—leveraging technology to optimize cross-border payment timing—to plan and execute payments during favorable market conditions. Intelligent scheduling can also minimize the impact of exchange rate fluctuations. Modern platforms are increasingly using AI to facilitate cross-border payments, enabling automated currency optimization, predictive analytics for exchange rates, and smart payment routing to reduce costs and processing times.

Transactions are more transparent and efficient

Most cross-border payment systems can streamline transactions through automation that reduces manual workload, minimizes errors, and accelerates transaction processing.

Cross-border payment systems also give finance managers a better view of the entire payment lifecycle. Teams can track transaction statuses in real-time and receive immediate updates on payment progress, alerting managers of where things stand.

Higher bank acceptance rates and lower interchange costs

For merchants, one of the biggest benefits of cross-border payments is access to a network of acquiring banks. Accessing an acquirer network increases merchants’ acceptance rates and provides a plan B if one acquirer has technical issues, downtime, or restrictions around processing certain transactions.

Using multiple payment processors also helps businesses save money on fees. The merchant’s bank pays interchange fees to the customer’s bank every time the customer purchases with a card. Working with different processors allows businesses to find better rates and lower these costs.

Businesses focus on their fraud management

Businesses can improve security and comply with local regulations by customizing how they verify customer identities (i.e. using fingerprints, one-time passwords, or multi-step verification). Strong fraud protection creates safer cross-border payments, as smart systems can learn from data and adjust to new fraud risks. This is especially important as online scams and hacking methods continuously change.

Financial messaging gets standardized

ISO 20022 – an international standard for messaging and data exchange between financial institutions – promotes interoperability, reduces errors, enhances transparency, and creates more informed decision-making in cross-border transactions.

Unlike previous standards, ISO 20022 supports extensive, structured data in financial messages, such as detailed information about transactions, parties involved, and payment purposes. Several global financial market infrastructures (FMIs) rely on ISO 20022, which will become the sole globally recognized standard in November 2025.

Cross-border salaries are more secure

For ongoing, large-sum payments, traditional banking methods can rack up fees and add unnecessary expenses to your budget. But beyond that, they’re often slow and inflexible, which means employees may not get paid on time or if there’s a payment issue, resolution can take a while. Cross-border payments are faster and more secure thanks to:

• Same-day payment times
• Automation that reduces fraud risk
• Compliance with the latest global standards to protect employees and employers from labor law and payment

Cross-border deals in multiple currency transfers

Cross-border payments were built to support multiple currencies and facilitate transactions between different nations. If your business has offices in five countries, cross-border payments are how they’ll get paid. To facilitate payments though, you’ll need a tech solution that can handle different currencies and provide a fair exchange rate. Using a payment solution ensures that whether employees live in Canada and receive Canadian Dollars or India and are paid in Rupees, they’re paid in the right amount.

Additional cross-border payment benefits for corporations

• Automated payment scheduling saves teams time
• Collaboration with contractors and contingent workers across the globe
• Accessing a convenient self-service payment portal

Cross-border transactions increase productivity, speed, and ease, but they also have various risks and challenges.

Cross border payment methods

There’s no shortage of ways to move money internationally. But not every method is built for every use case. Here’s where the common options work—and where they don’t.

SWIFT wire transfers

The old-school standard for sending money between banks.

• Strengths: Global reach, particularly for high-value payments.
• Weaknesses: Long delivery times (often several business days), high fees, low transparency on where the payment sits along the chain.

Best suited for: Large vendor payments where timing isn’t critical—but often overkill (and overpriced) for payroll or contractor payouts.

Automated Clearing House (ACH)

Electronic fund transfers through local clearing systems.

• Strengths: Cost-effective for recurring payments like payroll; fewer intermediaries than SWIFT.
• Weaknesses: Not available everywhere; slower than real-time payments; often requires local bank accounts.

Best suited for: Payroll in regions where local ACH systems exist and are reliable.

Payment Service Providers (PSPs)

Platforms like PayPal, Wise, or Revolut, are payment service providers.

• Strengths: Easy to set up; good for small transfers; faster than SWIFT for certain corridors.
• Weaknesses: Limited scale for enterprise payments; varying compliance coverage; not always appropriate for salary disbursements.

Best suited for: Small vendors or freelancers—less ideal for employee payments or regulatory-heavy markets. For businesses working with international contractors, understanding the nuances of managing global freelancer payments is essential to ensure compliance, timely disbursements, and proper tax handling.

E-Wallets and digital wallet solutions

Payment into digital accounts, which recipients can withdraw or use directly.

• Strengths: Fast access to funds; useful in regions with underbanked populations.
• Weaknesses: Withdrawal fees and delays; often fails to meet formal payroll compliance standards.

Best suited for: Gig economy workers, specific markets where traditional banking isn’t prevalent.

Prepaid debit cards

Loadable payment cards issued to recipients.

• Strengths: Direct access for the recipient; no need for a bank account.
• Weaknesses: Usage limits; may not satisfy tax reporting or employment classification requirements.

Best suited for: Contractors in select regions, not suitable for formal employment scenarios.

Virtual IBANs /Digital Wallets

Centralized management of global payments through local account numbers in each country, without needing separate banking relationships.

• Strengths: Support local currency payments with full compliance alignment; simplifies disbursement operations; enables tracking and reconciliation.
• Weaknesses: Require a partner with the infrastructure to support Virtual IBAN issuance and compliance.

Best suited for: Companies managing payroll, contractor payments, or authority disbursements across multiple countries—especially where scale, visibility, and compliance are priorities.

Cross-border payment processing challenges

Cross-border payment processing can pose various complications from financial and regulatory to technological, and operational. The main challenges of cross-border payment include:

Strict data privacy regulations

Cross-border payments mean navigating diverse data protection frameworks and laws across different countries, like The General Data Protection Regulation (GDPR), which imposes stringent requirements for processing and transferring personal data in the EU.
Ensuring the legality and security of data transfers under various data protection laws is a difficult task. International workforce payments must comply with specific regulations such as the EU-US employee data Privacy Shield framework to prevent data breaches, unauthorized access, hacking, or other cyber threats.

Fraud prevention is harder

Cross-border transactions are more susceptible to fraud; they involve multiple jurisdictions, currencies, and financial institutions, all of which open the door for fraudsters to exploit vulnerabilities in the payment process.
Know Your Customer (KYC) processes are also challenging across borders. Countries have specific regulations for identity verification, meaning it’s more complicated to standardize KYC processes. Anti-Money Laundering (AML) program regulations also differ across jurisdictions, requiring due diligence on customers and transactions.

Businesses must deal with multiple intermediary banks

Involving multiple intermediary banks can limit visibility and clarity in the payment journey and complicate record reconciliation, trust, and cross-border payment efficiency.
For customers, dealing with multiple intermediary banks and financial institutions could mean putting in more work to understand when funds will be debited from their accounts or when beneficiaries will receive payments. Confusion over payment path payments can lead to misunderstandings and disputes.

Transaction costs are high

Cross-border transactions can incur high fees that lower the overall value of the transaction for payers and recipients. Let’s start with currency conversion fees; financial institutions charge a fee for converting currencies and rates can include a markup. Adding up these fees can result in high transaction costs.
Additionally, every intermediary bank involved can charge a fee for its role in the process.

Regulatory requirements vary greatly

Each country follows specific financial transaction regulations and compliance requires understanding global legislation, collaboration with regulatory bodies, and ongoing efforts. Full compliance could mean following a country’s capital controls that manage money flow across borders and slow down transactions.

Foreign exchange regulations, including restrictions on currency conversion and fluctuating exchange rates, also impact the cost and speed of cross-border payments.

Taxes aren’t the same across nations

Many countries impose tax withholding on cross-border payments, such as dividends, interest, or royalties. Depending on the nation, businesses may need to withhold a different percentage of the payment and remit it to the tax authorities of the payment’s country of origin. Here’s an example of tax discrepancies across different nations:

• Employer taxes in Argentina are 26.91% – 29.91% +100 Argentinian Pesos
• In Indonesia, employer taxes are 10.24% – 11.74%

Employers with workers in either country would need to abide by that country’s tax requirements.
Misunderstanding of tax laws across multiple jurisdictions increases the potential for double taxation.
Companies also need to account for bilateral tax treaties that can impact the tax rates and the ability to claim credits for taxes paid in one jurisdiction against taxes owed in another.

Time zone differences can create delays or confusion

Making global payroll payments involves navigating different time zones. If a business headquartered in New York wants to pay its employees in New Delhi, it may need to wait for New Delhi business hours – 10.5 hours ahead of New York – to initiate the payment.

Payment tracking presents another challenge. Companies need to track payments across multiple time zones, making it hard to know when a payment was initiated, processed, and received. Then finance teams have trouble reconciling payments and correctly paying receipts.

Technology falls on a wide spectrum

The banking infrastructure varies across countries—some countries have sophisticated and modern banking infrastructure, while others use slower legacy systems. Integrating and harmonizing transactions across diverse systems may take more time and manpower.

Language barriers delay payment processing

Cross-border payments require exchanging contracts, tax forms, payment instructions, and other documents. If these documents are in a language the payer or payee can’t, it can cause delays or errors in payment processing.
This can be particularly challenging when dealing with local tax authorities or regulatory bodies that require specific documentation in a particular language.

Cross-border payments with Papaya

Papaya simplifies global payments across 160+ countries and 130+ currencies. Automate, track, and optimize payments with real-time visibility on a single platform. Access competitive FX rates, intelligent routing, float optimization, and a three-hour processing time.

Fulfill cross-border payments with ease using the only unified payroll and payments platform.

Papaya Global’s payment services are offered through Azimo, Papaya’s licensed payments arm. Azimo is a payment services provider regulated in five Tier-1 jurisdictions. These licenses allow Papaya, together with its partners, to provide workforce payments worldwide. For further information on Azimo’s licences worldwide, check our licensing page.