Best Way to Pay Overseas Suppliers: A Complete Guide for US Businesses

In today’s global economy, overseas suppliers present a great opportunity to scale your business and lower your costs. But, one of the key barriers to profiting from this relationship is making timely and convenient payments.

This article looks at how to pay overseas suppliers, including different factors to consider when making international payments and popular methods and platforms for paying overseas suppliers. Finally, you'll learn about how Wise Business helps many companies pay their overseas suppliers efficiently and securely.

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Factors to Consider When Paying Overseas Suppliers

Several key factors should be considered when paying overseas suppliers, as they can impact the security, cost, and efficiency of the transactions your business undertakes. Some factors to consider when paying overseas suppliers include:

1. Exchange Rates

Securing the best exchange rate is a powerful tool for businesses when sending payments to overseas suppliers. By finding and locking in lower exchange rates, businesses can take control of their costs, especially when dealing with substantial sums.

Even a slight difference in exchange rates can lead to significant cost savings or financial losses when making international payments. This underscores the importance of actively seeking the best exchange rates available when considering how to pay overseas suppliers as it can impact overall cash flow and finances for your business.

Fluctuations in exchange rates happen for a variety of reasons, including political instability, economic announcements, or changes in monetary policy, among others. These fluctuations can impact the actual amount you end up paying to an overseas supplier. For example, if the currency you’re sending in weakens against the suppliers’ currency between the time the invoice was issued and payment was made, your cost will increase. That’s why it’s so important to keep vigilant of exchange rates and try to find the best exchange rate when possible.

2. Fees

There are different kinds of fees associated with international transactions, which increase the cost of the payment to an overseas supplier. Types of expenses associated with a global payment could include:

Transaction Fees: Banks or payment service providers may charge a transaction fee for processing international transactions. The fee may vary depending on the amount being sent and the banks or providers involved.

Currency Conversion Fees: Banks or payment service providers may charge another type of fee if currency conversion is involved. A small percentage of the exchange amount is charged when transactions involve currency conversion.

Intermediary Fees: If an international transfer involves the use of correspondent banks, the chain of banks handling and transferring the funds may charge intermediary fees depending on the amount and their policies.

There are a few ways for US businesses to pay overseas suppliers without incurring large fees. You may need to shop around for the best rates and look at the different fee structures offered to find the best option. You can also pay in local currency to supplies where possible to reduce currency conversion fees.

3. Speed

Another factor to consider when paying overseas suppliers is the time it takes for the transaction. Businesses need to send payments in a timely fashion to maintain trust with suppliers and avoid any late fees, but it’s often a challenge with international transactions. Prompt payments are vital for several reasons.

Payment providers and banks may have different timelines for processing and receiving payments, which could affect the transfer timing and when your supplier receives the payments.

When paying overseas suppliers, consider how long each method takes before making a final decision. For example, electronic wire transfers are generally faster and are completed within 1 to 2 business days, depending on the countries involved and when the transfer is initiated. On the other hand, international money orders are generally slower as they rely on the postal service. Other methods, such as checks, may not clear quickly.

4. Security

Security is an incredibly important consideration when processing sensitive information, such as banking details. It’s crucial to use trusted and secure payment methods, such as wire transfers through reputable banks or recognized online payment platforms that comply with international security standards like PCI DSS, ISO 27001, or SWIFT. These standards ensure that the platform has robust security measures in place to protect your transactions.

Fraud is a risk, and businesses must stay vigilant.

When paying overseas suppliers, it is key to do due diligence on different financial providers. This process of investigation and vetting should be a standard practice before providing sensitive information. It's a crucial step in ensuring the security and reliability of your international transactions.

Keep teams educated on the latest frauds and scams and stress the importance of following security protocols. This comprehensive approach will help businesses feel secure and confident in their payment methods.

Popular Methods to Pay Overseas Suppliers

Wise Business

Wise Business is a money service provider (MSP). Known for its simplicity and low fees, Wise is an excellent choice for international businesses who want an international account with clear and transparent exchange rates and global money transfer services.

Features

Feature/Fee	Wise Business
Trustpilot Rating	+230,000 reviews - Excellent 4.3 out of 5 stars
Hold Currencies	40+
Send Money	from 0.33%
Receive Money	Free after one-time fee in GBP, USD, EUR, CAD, AUD, JPY, and more (non-wire), Wire payments: Flat fee of 6.11 USD
Expense Management	Free
Bill Pay Feature	Free
Accounting Integrations	Free
Interest Feature	Yes

The Cost of Sending to Your Overseas Suppliers

International Wire Transfers

International wire transfers are one of the most widely used methods for sending money globally. They are reliable and can be used to send large sums to overseas suppliers securely. Wire transfers involve moving money electronically between banks or transfer services across an international network such as SWIFT.

Wire transfers are one of the fastest ways to send money. Transactions are usually completed within 1-2 business days, but depending on the bank, they may take more time. Before paying overseas suppliers via wire transfers, it’s best to confirm how long it will take to ensure payments arrive on time.

However, wire transfers generally come with higher fees compared to other payment methods. This is because wire transfers involve multiple banks and security measures, and there may be fees associated with intermediary banks used during the transfer process.

Global ACH (Automated Clearing House)

Global ACH transfers are an alternative to traditional wire transfers for payments to overseas suppliers. Global ACH is an efficient way to transfer money with reduced costs, so it’s a good option for regular or recurring payments to suppliers.

Automated Clearing House (ACH) transfers are electronic payments made through the ACH network, which coordinates these payments among financial institutions. These transactions are directly debited from checking or savings accounts and credited to the recipient’s bank account.

ACH transfers are processed in batches. The transactions are accumulated over a set period and processed together, which helps reduce costs. ACH transfers take between 1-2 business days, depending on the financial institutions involved for both the recipient and the sender. The fees are lower due to batch processing and are generally either a small flat rate or a small percentage of the transaction amount.ⁱ

PayPal Business

PayPal Business is a payment provider platform designed for businesses making international payments. It is generally easy to use and accepted in a large number of countries, making it an easy option.

PayPal Business allows companies to send payments to overseas suppliers directly through its platform, which has an extensive network and currency conversion capabilities. Businesses will need to have a dedicated PayPal Business account, which involves providing company information and linking a bank account or credit card. Payments can be sent using the recipient’s email address but must be associated with a PayPal account.

PayPal business payments are usually processed and instantly available in the recipient’s account once sent. PayPal Business charges a small percentage of the transaction amount as part of its fee, plus a fixed fee if currency conversion is involved.

Credit Cards and Virtual Cards

Credit cards are a common method for businesses and individuals to make international payments. While they have their advantages, such as convenience, speed, and the potential for rewards, they also come with specific costs.

Credit cards and virtual cards can be used to pay directly for services or goods internationally by entering card details on a supplier’s chosen payment platform. The credit card can automatically convert payments into the recipient’s currency if needed, as credit card networks have their own exchange rates.

Credit card transactions are processed almost instantly, which means payments are completed and cleared within seconds. Depending on the recipient's bank's processing times, the funds may take a few days to settle and reflect in their account.

However, paying with credit cards and virtual cards does come with its own fees. Most credit card companies charge a currency conversion fee, which can range from 1% to 3% of the transaction amount. This fee is in addition to the exchange rate provided by the credit card network, which may already include a markup. Some credit cards may also have additional foreign transaction fees for purchases made overseas, which can be another 1% to 3%.

Prepaid Debit Cards

Prepaid debit cards offer businesses a convenient way to handle international payments. They can be preloaded with funds and used similarly to traditional debit cards without being directly linked to a bank account.

Prepaid debit cards allow a specific amount of money to be loaded onto the card. The card can then be used for payments until the funds are finished. Money can be loaded onto the card online or at retail and used for transactions like a debit card would. Debit cards are usually through major card networks like Visa or MasterCard and can also be used for international payments.

Once funds are loaded on the card, they are immediately available for use, making them a fast option for making payments. Similar to regular debit and credit cards, transactions are processed instantly.

Prepaid debit cards may have fees associated with them, including loading fees each time funds are added to the card. There may also be transaction fees, particularly for international payments where currency conversion is involved.

Peer-to-Peer (P2P) Payment Platforms

Peer-to-peer (P2P) payment platforms are another way overseas suppliers can be paid. These platforms involve transferring money directly between parties without the need for traditional banking infrastructure.

P2P payments can be made through mobile devices or computers with an account on the platform linked to a bank account via apps such as PayPal, Venmo, Zelle, and Zelle.

Most P2P platforms offer instant or near-instant transfers between users. However, overseas suppliers must have an account on the same platform in order to receive the payment.

P2P platforms may charge a fee for each transaction, especially when using a credit card or converting currencies. For example, while sending money domestically via bank transfer may be free on many platforms, international transfers or credit card usage often incurs a fee. For international transactions, P2P platforms may charge a currency conversion fee, which is usually a percentage of the transaction amount.

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Sources:

1. What is Global ACH?
2. USD Sending Limits