How to Make Cross-Border Payments

 

What Are Cross-Border Payments?

Cross-border payments are defined as payments sent from one country to another. There are a few different ways to make a cross-border payment. You can use a wire transfer, an international money order, or a bank draft. However, the most common way to send money cross-border is through an electronic transfer.
 

An electronic transfer is a payment sent electronically rather than by check or cash. The funds are transferred from one bank account to another bank account. This is the quickest and most convenient way to make international payments.

 

How Do Cross-Border Payments Work?

Most cross-border payments today rely on correspondent banking relationships to carry out international money transfers.
 

This means that to make a cross-border payment, the transfer has to go through a correspondent bank where the recipient is located. That is; the sending bank will transfer funds to the correspondent bank, which will forward the money to the recipient's bank. To accomplish this, the payment process is done in three stages. And here's how it works  

 

Three Processes of Cross-border Payments

 

• Pre-funding
• Clearing
• Settlement

 

In the pre-funding stage, the sender (an individual or a company) creates or funds a local bank account. 

 

The clearing phase involves routing the funds through a clearing bank (correspondent bank) in the recipient's country. 
 

Lastly, the settlement stage involves the crediting of the recipient's bank account by the  receiving bank.

 

 

Furthermore, a cross-border payment may involve one or more intermediaries/ banks for each stage of this process. This also depends on the amount of money being sent, the location of the recipient and the banks involved. 
 

Four Major Components of a Cross-Border Payment

Whether you're sending or receiving a cross-border payment, there are four essential components you should pay keen attention to. They include:

 

 

• Currency: The currency a buyer wants to use to pay for a product or service e.g US dollars, Naira, Euro, etc.
   
• Exchange rate: The amount charged by a bank for converting one currency into another during a foreign exchange transaction.
   
• Payment type: The most common payment types are wire transfer and credit card, but when it comes to international payments, other options such as Automated Clearing House (ACH) and direct debit play an important role too.
   
• Payee details: The person, company, or institution you're sending the money to.

 

Also Read: All You Need To Know About Money Remittance 

 

How to Make Instant Cross-Border Payments

Making an instant cross-border payment is quite simple and straightforward. Here's how it works:
 

1. Select the currency you want to pay in

2. Enter the recipient's email address or phone number

3. Enter the amount you want to send

4. Review the details of your payment

5. Click Send Payment

 

For Africans who need to move money across Africa with swift and reliable transactions, Transfy offers a better way to move money across Africa without hassles. 
 

Transfy is a Pan-African money remittance platform that offers  individuals and businesses in Africa a seamless and cost-effective means to send money across Africa.