How Global Payment Processing Works

The need for seamless and secure global payment processing has increased, as 47% of small businesses are doing more international business than before the Covid-19 pandemic, according to Mastercard.¹

Businesses of all sizes are expanding their reach across borders to find new customers and suppliers. This requires efficient global payment processing – the system and mechanisms that transfer funds between countries.

This article looks at how the global payment processing industry works. It also explains the factors businesses need to consider when choosing a processor to handle cross-border payments.

How Global Payment Processing Works

Global payment processing of cross-border transactions is a complex system. It involves several players and steps to move money across international borders. This includes payment gateways and financial institutions.

Payment gateways act as intermediaries between merchants, customers, and financial institutions. When a customer initiates a transaction, the merchant’s payment gateway accepts and encrypts the transaction data.

The gateway sends the data to the customer’s financial institution for approval. It then sends the approval or rejection of the payment back to the merchant and customer.

Compliance and Security Measures for Global Payments

The service providers that handle cross-border payments have to follow strict security measures. This includes encryption, tokenization, and multi-factor authentication (MFA) to protect sensitive customer data.

Currency Conversion and Foreign Exchange Considerations

Cross-border transactions need to convert payments in one currency into the recipient's currency. This process involves exchange rate calculations, which can affect the final amount the payee receives.

Businesses need to choose global payment processing companies that offer competitive exchange rates and clear fee structures. In this way, they can avoid currency conversion risks and extra expenses.

Advantages of Global Payment Processing

The ability to handle global payments offers several benefits that are becoming more important in the digital era.

Facilitating International Trade

Businesses can trade with their partners, suppliers, and customers across borders. They can do this without having to deal with complex payment processes.

Expanding Market Reach and Customer Base

Businesses that can access global online payment processing can tap into new markets. Consumers now expect to be able to pay international merchants with ease, making it a competitive advantage.

Enhanced Fraud Protection and Security

Global payment processing solutions put in place security measures to protect against fraud. This reduces the risk of unauthorized transactions and chargebacks. These can affect a company’s merchant account terms and consumer trust.

Mitigating Currency Conversion Risks

Global payment processors often provide competitive exchange rates and low conversion fees. This saves businesses money on international transactions, helping their bottom line.

Challenges and Solutions in Global Payment Processing

Accepting global payments offers advantages. But it can also present challenges – especially for small businesses with limited resources.

Cultural and Language Barriers

Entering international markets can present cultural and language barriers. Businesses can use global payment processors that provide multi-language support and customer assistance. This ensures smooth communication with international customers and partners.

Addressing Payment Disputes and Chargebacks

Disputes and chargebacks can occur because of misunderstandings, fraud, or customer dissatisfaction. Businesses should set clear refund and dispute resolution policies. They should also work with payment processors that offer robust procedures for dealing with them.

Key Factors to Consider When Choosing a Global Payment Processor

When choosing a global payment processor, there are several factors to consider. This will make sure you have access to the right features and lowest fees.

Customer Support and Multi-Language Assistance

It can be a good idea to select a processor that offers 24/7 customer support in multiple languages. This ensures that customers have a positive experience, building loyalty.

Global Coverage and Payment Methods Supported

Make sure that the processor supports the countries where you intend to do business. Check which payment methods it offers, such as credit and debit cards, digital wallets, and local account options.

Transaction Fees and Pricing Structure

Compare the transaction fees and pricing structures that different payment processors offer. Look for competitive currency conversion rates and transparent fees to maximize cost efficiency.

Global Payment Processing FAQs

Are global payment processors suitable for small businesses?

Yes, global payment processors are suitable for businesses of all sizes. Many providers offer solutions tailored to the needs of small and medium-sized businesses.

How long do international transactions take to process?

The processing time for international transactions can vary depending on factors such as the payment method, the countries involved, and the payment processor. Some are complete within minutes, while others can take a few business days.

What are the fees associated with global payment processing?

Fees for global payment credit card processing can include transaction, currency conversion, and cross-border fees. Specific fees depend on the service and the payment processor. It's important to review the fee structure before selecting a provider.

Wise Business: Accept International Payments With Ease

Global payment processing is key to helping businesses thrive in the global economy. It helps them to reach new customers and handle cross-border transactions with ease.

If your business deals with international transactions, then consider opening a Wise Business account to manage your international transactions. Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account makes it easy to receive global payments just as fast as local payments.

Find out more
about Wise Business

Send, hold, and manage business funds in 40+ currencies. You can also get 9 major currency account details for a one-off fee to receive overseas payments like a local.

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1. Borderless payments report 2022 | Mastercard Newsroom