Receiving international payments: A practical guide on how businesses in India can get paid quickly and efficiently

If you are a freelancer, a small business, or a fast-growing global business and have ventured into the world of receiving international payments in India for your services, you know the challenges.

Due to regulations, charges and documentation requirements, international business payments are likely to be more expensive, complex, and slower than domestic transactions. However, businesses (of any size, viz, freelancers, solopreneurs, or SMBs) can seize global opportunities without facing the intricacies of receiving international payments in India.

In this guide, we'll help you navigate the complexities of receiving international payments in India–quickly, effortlessly, and effectively. Let's begin with understanding the key considerations in domestic and international business payments.

The need to move money across borders efficiently is apparent with the rise in global opportunities. According to a PWC report, “India’s cross-border remittances have been growing steadily at a CAGR of 8%, driven by the increase in global mobility of goods and services, international travel and international workforce.” 

International business payments are influenced by factors like:

• Costs: Comprising transaction fees involved in receiving a payment. The fees can include commissions, conversion rates, and more. When dealing with international payments, minimizing costs can significantly improve your profitability. High fees from banks or middlemen can eat into your earnings, especially with forex markups, administrative costs and SWIFT charges. Opting for solutions with transparent pricing and no hidden fees lets you keep more of what you earn.

• Time to collect payments: Processing time helps improve the experience of receiving international payments. The time it takes for a payment to be processed is due to the involvement of multiple entities or banks. With some payment methods, it can take up to 5 days to arrive in your INR bank account.

• Transparency: Transparency in international payments gives you clear visibility into all fees, exchange rates, and processing times. This enables you to predict costs accurately, avoid unexpected deductions, and make better financial decisions. With clear, upfront pricing, you can prevent surprise charges that may reduce the amount you receive, ensuring more predictable cash flow and more accurate budgeting.

• Security: Security is a non-negotiable aspect of international payments. Fraud and scams are prevalent in cross-border payments, and the last thing you want is to lose money or sensitive information. Choosing secure payment providers that offer encryption, multi-factor authentication, and fraud prevention systems ensures that your transactions are protected.

• Hassle-free compliance: Refers to the documentation required to ensure that the transaction is valid and not a fraudulent activity. Managing the complexities of international compliance can be daunting. Simplified documentation processes can save you time and effort.

• Convenience: It is the accessibility to use a payment system or method to collect funds.

The above points also influence domestic payments. However, domestic payments are relatively more straightforward, faster, less expensive, and easier to comply with than international payments. The reason is apparent: domestic payments operate within a single country and currency.

Receiving international business payments comes with a range of costs and complexities. Several factors can influence how businesses receive cross-border payments, from transaction fees to exchange rate fluctuations and processing delays. Businesses must understand these costs and how they impact cash flow and operational efficiency.

The fees involved in international payments can vary significantly depending on the payment provider, the method of transfer, and the countries involved. Banks and payment services often charge a range of fees for their services, which can include intermediary bank fees, wire transfer charges, and currency conversion margins. Additionally, other hidden costs such as account setup fees, operational charges, and compliance-related documentation may make receiving international business payments a costly experience.

In addition to cost, time is another critical factor in cross-border transactions. Time zone differences, public holidays, regulatory checks, and the type of currency involved can all lead to delays in the transfer process.

Furthermore, ensuring that your payment service provider adheres to local and international regulations, such as the Foreign Exchange Management Act (FEMA) in India, and employs stringent security measures is crucial for safeguarding your business.

In the sections below, we’ll dive deep into the key costs and challenges of receiving international payments in India and offer actionable tips to help businesses manage and optimize these processes. Whether you're a freelancer, SMB, or larger enterprise, understanding these factors can help you make informed decisions and improve the efficiency of your international transactions.

Transaction fees and processes can vary widely depending on the financial institution or service provider, the method of transfer, and more. Here are some typical costs to watch out for:

• International payment transfer fees: In international payments, intermediaries transfer funds from one country to another country. Financial payment providers or banks offering businesses a service to receive payments in India perform several steps during this process. For this service, banks and payment providers charge a fee.

• Exchange rate on currencies: International payments are defined by using multiple currencies. One key factor affecting payments is the rate applied for currency exchange. Banks and cross-border or international payments service providers usually add a margin to the exchange rate. This FX or foreign exchange rate margin can change significantly from one provider to another. In most cases, the rate margins are hidden, making it difficult to know whether the deal is good.

• Intermediary bank fees: If your international payments pass through intermediary banks before reaching your account, each can charge a processing fee to initiate the transfer, typically deducted from the transferred amount. The intermediary banks act as agents. Just like any agent, the bank charges fees for their services. The transaction fees depend on multiple factors, such as transfer processing, payment method, and the cost of routing the funds from one entity to another. To add to the complexity, intermediary bank fees aren't always transparent or accessible.

• Wire or receiving fees: Your bank may charge you a fee for receiving an international money transfer. The fees for receiving payments in India can vary based on the bank and the transfer method. Even the country involved and invoice amount influence the wire fees. However, you will save money if your client bears these charges. Alternatively, if your service providers enable you to offer your customers local payment methods, you may save on costs, too. Local payment methods such as ACH in the US are practically free for your customers. These local payment methods work like NEFT in domestic transactions and are easy to use, quick, and affordable. There's a bonus too. Your clients might prefer these payment methods over traditional wire transfers, which will help you boost engagement.

• Processing fees: When you receive international payments in India, your bank or transfer service may charge processing or operational fees. These fees are often recorded as additional fees and are charged above FX fees–leaving you to play a guessing game. But you have a choice. Players like Xflow offer transparent pricing and don’t charge any additional fees. The upfront transparency helps you understand the amount you are likely to receive.

• Account opening and documentation fees: To be able to initiate an international payment invoice, businesses need to sign up for the service. This signing up could involve setting up an account or onboarding with the financial institution. The process of sign-up or onboarding can come at a cost. However, some financial services providers offer account opening and access to documents like e-FIRA for every withdrawal for free. That's right—a chance for you to save money.

Pro tip: If you want to save costs on receiving international payments, compare FX rates or look for competitive FX rates linked to inter-bank and mid-market rates. In addition, opt to receive payments via local payment methods, which offer a significantly lower rate than international wires and can be practically free for your customers.

After costs, time plays a crucial role in international payments. Receiving international payments can often be a slow process. Here's why:

• Time differences: While you understand the time zone difference, business hours between two countries can cause significant delays, especially between countries with longer time gaps. For instance, if your customer is on Pacific time, then as a business operating in India hours, your fund transfer will be initiated after a gap of 12 hours. The Indian Standard Time (IST) is 12 hours and 30 minutes ahead of Pacific Standard Time (PST).

• Public holidays: Besides time zone differences, public holidays in the sending or receiving country can further delay processing times.

• Complex processes: The international banking network requires each intermediary bank to process the payment, verify details, and comply with regulatory requirements—for instance, banks often screen transfers for fraud, economic sanctions, money laundering, political exposure etc. Further, background checks to verify identities, payment destinations, and purposes can also cause delays in processing.

• Type of currencies involved: If the wire transfer needs to be converted into a different currency than the one being sent, this can cause delays in processing. Unfortunately, you can do little to expedite this unless your bank allows you to send the transfer in the recipient's local currency. Alternatively, you can use a service like Xflow, which handles currency conversion seamlessly.

Pro tip: The good news is that you can cut back time on receiving payments by asking for local payment methods from your payment provider. Offering payment options like Fedwire in the US, SEPA Instant in Europe, and FPS in the UK, fund transfers can be initiated within a few hours.

International payments are often marred by a need for more transparency and security risks. However, as a freelancer, SMB, or solopreneur, you can protect yourself from these challenges. When choosing your payment service provider to initiate international or cross-border business payments, check for the following:

• Documentation: When a freelancer or SMB receives payment, especially from international clients, follow local regulations like the Foreign Exchange Management Act (FEMA) if the payment is cross-border. Key steps include, reporting foreign currency inflows. FIRA (Foreign Inward Remittance Advice) or eFIRA serve as proof of foreign currency receipts, helping businesses comply with FEMA regulations, track transactions, and maintain proper records for tax and audits. With eFIRA, accessing and managing these records is faster, safer, and more efficient.

• Security standards: A few security checks could include certifications like SOC (Service Organization Control) and ISO (International Organization for Standardization) 27001. SOC and ISO guarantee security, processing integrity, confidentiality, and privacy controls. Payment service providers must assess these rigorous compliance and security checks to earn their SOC and ISO certifications.

• Anti-Money Laundering (AML) compliance: AML helps protect your business from identity threats and suspicious transactions.

• Proactive fraud control: Choosing a certified service provider with fraud controls and risk management framework in line with international standards ensures that you benefit from robust fraud control as well as transaction monitoring. It showcases their dynamic approach to preventing financial loss. As a result, you can feel more confident and secure about your international payments.

If your payments provider offers visibility into the entire payment lifecycle, including costs, time to the transaction, alerts about fund movement, and overall minimizing of the uncertainties associated with international transactions, then be assured you are in good hands.

Pro tip: Navigating risks and transparency in international payments requires due diligence, awareness, and a good understanding of what you need to get the most out of cross-border transactions. You can safeguard your business and mitigate potential losses by understanding the risks associated with international payments, from fraud to compliance issues and FX costs.

International payments can add rocket fuel to global business, but the best results happen when you choose the right partners and insist on authenticity, transparency, speed, and affordability. Here's a quick look at the various options available in India to receive international payments.

• Virtual bank account number (VBAN): A virtual bank account number lets businesses receive international payments in their preferred foreign currency quickly and efficiently without setting up their business overseas. VBANs are gaining popularity among large and growing enterprises. For growing businesses and startups in India, this can mean quicker payment processing, enhanced cash flow, and greater convenience without the hassle of setting up international bank accounts or manually handling foreign currency accounts. In India, opening a VBAN enables businesses to receive payments from international clients in different currencies. You can receive and manage these currencies within the same account. A VBAN helps simplify the process of receiving international payments, eliminating the need for separate bank accounts for each currency.

• Wire transfer is one of the world’s most common and oldest methods for receiving international payments. To initiate a transaction, you must provide a SWIFT code or IBAN (International Bank Account Number). The traditional way of receiving international payments is typically managed via the SWIFT network. The Society for Worldwide Interbank Financial Telecommunication, popularly known as SWIFT, is a messaging system that enables the exchange of information and instructions between banks. So, how does SWIFT work? The SWIFT system is a network of multiple banks, and this interconnectedness impacts processing time and costs. The time and costs can change as per the specific bank's requirements. However, SWIFT transfers usually take 2 to 4 working days to process the amount. The costs to receive international payments in India via SWIFT could be between $10 to $50. Further, your financial institution may apply a foreign exchange markup plus GST when the funds reach the INR account. (Please note: GST is not optional, and it remains fixed across all the payment providers)

• Digital wallets help simplify cross-border transactions between buyers and sellers. However, the downside is that buyers and sellers must have accounts with the wallet provider in order to receive international payments in India. In most cases, operating via digital wallets can be expensive. For instance, some digital wallets charge transaction fees as high as 5% to 8% on international payment transfers.

Xflow:  Xflow simplifies international payments for Indian businesses and freelancers with fast transfers within 1 business day, real-time exchange rates, and no hidden fees or forex markups. It ensures FEMA compliance by providing digital FIRAs for every transaction, simplifying regulatory processes. XFlow offers secure, hassle-free payments—faster and cheaper than traditional banks.

Wire transfers: While safe and compliant, they involve high fees (SWIFT charges, forex markups, and FIRA issuance fees) and longer timelines, often up to 5 business days.

Some other players include Wise, Payooner, Skydo that help businesses collect payments in India.

Pro tip: 6 best practices to help you choose the right service provider for your business: 

1. Ability to offer local payment methods: Accept payments without worrying about cost or processing time. And, a bonus: offering your clients their preferred payment method helps boost customer relationships. 
2. Access to multiple currencies: Expand your reach confidently and accept payments as if you have a local bank account in the currency of your choice.
3. Ease of invoicing: Simplify collections for you and your customers. Add a Pay button for easier payouts. 
4. Faster bank transfers: Improve reliability and look for speed when selecting your payment provider. At Xflow, with no intermediary banks between your customers and your receiving account, your funds are settled in 1 business day. 
5. Transparent pricing and fee structure: Feel empowered by understanding the precise INR amount you’ll receive in your INR bank account.
6. Secure and compliant payments: Reduce the complexity of receiving payments in India for you and your teams. Look for partners with value-added services, such as receiving eFIRA for every withdrawal, which can easily be solved for documentation.

You can confidently manage the complexities of receiving international payments in India—start by prioritizing speed, costs, transparency, compliance, and security.