A guide to international business payments: myths vs. reality

Imagine you’re a cricket player stepping up to the pitch for the first time in an international match. The rules seem familiar, yet some nuances and strategies may be entirely new. 

Navigating international payments can feel the same for Indian freelancers and Small & Medium Businesses (SMBs). The intricacies and specifics of international payments are often shrouded in myths and misconceptions.

This blog aims to debunk the myths and provide clear and accurate insights into seamlessly managing and optimizing international payments.

Why this myth exists:

For instance, an international payment using SWIFT can include the following charges:

• Receiving bank charges: Most Indian banks charge between 0.1% to 0.25% of the transfer. Some banks may charge a flat fee instead, typically ranging from ₹500 to ₹1500 ($6 to $18) per transaction

• SWIFT fees: Usually passed to the receiver, the charges can be anywhere between $20-$50 per transaction

• Intermediary bank fees: This can range from $10-$30 per intermediary bank

• Currency conversion fees: If the transfer is not in INR, banks typically charge 1-2% above the mid-market exchange rate.

The Truth

While there is no escaping the cost element in international payments, businesses can choose to look for players that offer them a pricing advantage. 

Modern payment providers have significantly lower transaction costs. Some of these can go as low as 1% or less.

Why this myth exists:

Because of their long-standing presence, perceived security, and established reputation, banks are often considered as the best choice for international payments.

Trust plays a significant role in perpetuating this myth. The familiarity with a bank's services and the convenience of having all financial transactions in one place further solidify the belief that they offer the best option for international payments.

The Truth:

While banks have been reliable partners for international payments, they may not always be the most efficient and cost-effective solution available. Payment providers specializing in international payments exist and usually offer an improved transaction experience at lower costs.

Xflow has also partnered with an RBI-authorized bank to guarantee the same safety and security standards as traditional banking transactions. Furthermore, with Xflow, the transaction value is not limited. This means businesses can compliantly collect high-value payments in a single transaction.

Why this myth exists:

Typically, an international bank transfer through SWIFT and the correspondent bank network takes 2 to 4 working days to process. Since these transfers can involve multiple intermediary banks, there is an increased chance of delay. 

The Truth:

Payment solutions like payment gateways and VBANs can enable faster payments.

With an Xflow Receiving account, clients in the US can use local payment methods like ACH (Automated Clearing House) or Fedwire, enabling faster settlements (within 1 business day!)

Why this myth exists:

With SWIFT transfers or standard bank wire transfers, there is a lack of visibility on the status of an incoming payment.

The Truth:

Follow-ups aren’t always the norm when it comes to receiving international payments.

Some VBAN providers send email notifications the moment a payment has cleared and are ready for withdrawal into your INR account. Since there are fewer to no intermediaries, the likelihood of a payment getting ‘stuck’ is lesser.

In addition, VBAN providers like Xflow offer comprehensive services to ensure transparency and compliance. For instance, a Foreign Inward Remittance Advice (FIRA) is issued within 24 hours of fund withdrawal--thus providing clear documentation and visibility of the transaction.

Why this myth exists:

This perception stems from the complexities associated with international payments, such as:

• Managing and reconciling different currencies
• Staying on top of regulatory requirements
• Ensuring compliance with both international and local laws

The Truth:

Modern payment providers have managed to simplify the complexity associated with international payments.

VBAN providers like Xflow are bundled with useful tools like a dashboard and invoice generator, making it easier for businesses to manage international payments without dedicating additional manpower. Additionally, with Xflow, freelancers and SMBs can take complete advantage of the marketplace support integration. Xflow offers ease of payment collection on platforms like Upwork, Toptal, Fiverr, Freelancer.com, Deel and others – helping freelancers and SMBs save costs and time.

Can businesses accept international payments with an Indian bank account?

• Yes, businesses can accept international payments using an Indian bank account. The most common method is through wire/bank transfers. However, these are expensive and take time.

Do businesses get charged for receiving international payments?

• Yes, businesses typically incur charges for receiving international payments. These charges include transfer fees, foreign currency exchange rates, and intermediary bank fees. However, businesses can save on these charges by opting for modern payment providers like Xflow.

What is the best way to receive international payments in India?

• Payment platforms specializing in international payments are the best option. These platforms charge lower transaction fees, process payments faster, offer near mid-market exchange rates and provide additional tools to help with invoicing and compliance.

What are the advantages of using a VBAN?

• Lower transaction costs, faster processing times, email notifications, simplified compliance and documentation. Click here to learn more about VBAN

What are the requirements for receiving international payments using Xflow?

To receive international payments using Xflow, businesses need to:

• Sign up for an account for free (And it takes <5 mins)
• Provide necessary business and banking information (KYC and AML)
• Share their VBAN details with the client
• Finally, once the client initiates local bank transfer the funds can be collected into the INR account in 1 business day

Does Xflow provide an e-FIRA?

• Yes, Xflow provides an electronic Foreign Inward Remittance Advice (e-FIRA) within 24 hours of fund withdrawal. This document serves as proof of receipt for international transactions and is important for compliance and record-keeping.

Do freelancers need a business registration to receive international payments?

• To put it simply, no. Freelancers can use their existing bank account or use a payment provider like Xflow to receive international payments.