Global payment processing: How does it work?
In today’s global economy, money crosses oceans in just a moment with the tap of a card and a buzz. But behind every seamless digital transaction is a complex mechanism—global payment processing. It’s an intricate system that enables businesses to thrive in the international market.
Just how does a cross-border payment overcome the hurdles of currency exchanges, different banking systems, and international regulations?
In this guide, we’ll uncover the invisible workings of global payment processing, talk about its indispensable role for small businesses, evaluate solutions, and learn how Expensify fits into the worldwide payment ecosystem.
What is a global payment processor?
A global payment processor acts as an intermediary in financial transactions, especially when payments need to cross borders and multiple currencies and regulations are involved. It enables both parties to handle international payments processing smoothly by providing a secure pathway for funds to move from one bank account to another.
These processors ensure transactions are not only seamless but also secure from fraud and errors. They also handle all the little details involved in currency conversion, compliance with confusing international finance regulations, and authentication of those involved in the transaction.
How does global payment processing work?
Global online payment processing begins when an international transaction is made, and payment information has been submitted. To give an easy example of how this works, let’s say you’re in Oregon and you’ve just bought limited edition Pokemon cards from France. Your payment details are encrypted and sent to the seller’s payment gateway.
Next, the transaction details are forwarded to the seller’s bank, which routes the information to the card association (Visa, MasterCard, etc.) and your credit or debit card’s bank to approve or decline the transaction.
Once approved, the issuing bank sends the money to the seller’s account, typically via a payment processor that handles the currency conversion, if necessary, to finalize the payment.
Why your business needs global payment processing
Global payment processing offers many advantages, whether you want to expand beyond your local market or hire an international team. And trust us, we know what that’s like!
Here are some of the reasons you should incorporate global payment processing into your business:
Increased reach: By accepting payments internationally, your business can tap into new markets and consumer bases.
Currency conversion: Simplified currency exchange processes encourage customers to purchase without worrying about additional fees or conversion rates. It also means international employees, contractors, or partners can be reimbursed in the currency they use.
Security: Reliable global payment processing companies offer secure transactions, gaining the business's and its customers' trust.
Convenience: Streamlined operations through global online payment processing offer customers easy and quick payment methods.
Better talent: If your business would benefit from international employees, consultants, or contractors, global payment capabilities give you a much bigger pool of talent.
What challenges do small businesses face in global payment processing
Small businesses looking to expand into international markets often encounter several obstacles in global payment processing, such as:
Navigating currency exchange
Daily currency exchange rates can impact the final amount received after conversion. This affects pricing strategies, profitability, and who you want to reimburse. It also creates a challenge when preparing expense reports.
Compliance and regulation
Adhering to varying international laws and processing standards is complex and mandatory to avoid legal issues.
High costs and fees
Traditional banks and some global payment processing companies may charge high fees for international transactions, meaning you’re the one who loses out.
Security concerns
The risk of fraud and data breaches increases when dealing with international payments. That’s why the proper security measures need to be in place.
Limited payment methods
Not offering preferred local payment options can limit your market reach and customer satisfaction. It also makes reimbursing employees, contractors, or partners in other countries more challenging.
Global payment processing solutions for small businesses
Addressing these challenges with effective strategies and tools helps small businesses thrive internationally. Here are some solutions to consider:
Partnering with global payment processing companies that specialize in catering to SMBs.
Using global payment processing solutions that manage currency risk and offer competitive exchange rates.
Implementing strong security protocols and working with providers known for prioritizing data security.
Offering an array of payment options to meet diverse customer preferences.
How to choose the right global payment processor
Naturally, choosing a global payment processor for a small business requires careful consideration of many factors. It involves researching and comparing the options that are out there. Here’s what to think about before you commit to one:
1. Payment methods supported: A diverse range of payment options caters to customers' preferences or needs across different regions.
2. Currency handling: Look for processors that handle multiple currencies to ease global transactions, along with your foreign exchange accounting.
3. Security protocols: Prioritize companies implementing strong security measures to protect financial data.
4. Transaction fees: Compare processing fees because they can significantly impact your business's bottom line.
5. Settlement time: Find out how quickly funds will be available after transaction processing.
6. Integration with existing systems: Ensure the processor integrates seamlessly with your current platform or software.
7. Customer support: Go for processors with a reputation for excellent, responsive customer service.
8. Regional compliance: The processor must adhere to international and local regulatory standards. In particular, it helps to ensure they have proper accreditations like PCI or SOX compliance.
Remember, the right choice will enhance your global online payment processing capabilities, contributing to your overall business growth. It will also make it easy to manage your global expenses and reimburse anyone abroad.
Does Expensify offer global payment processing?
Expensify is a spend management software that offers global reimbursements and streamlined expense management. We make reimbursements and expense management on an international level hassle-free, so you can focus on what matters most, i.e., your business. In other words, we support global payment processing through our software solutions.
Here’s what you can expect from our global payment reimbursement solution:
Be accurate: While using Expensify, you’re eliminating the potential for errors when you manually enter financial information. Because it’s important to have the correct amount and not overpay or underpay.
Save time: Gone are the days of collecting receipts and entering them manually into clunky software. Our automation tools take on the brunt of the work, which means you can take that extra coffee break guilt-free.
Save money: With a Collect or Control subscription, Expensify’s global reimbursement solution is available at no extra cost.
Eliminate headaches: Don’t stress about converting currencies or daily exchange rates. Our automated system handles all those little details for you.
At Expensify, we currently support deposits to 190+ countries and bank withdrawals from 24 countries in USD, EUR, CAD, AUD, and GBP.
Are you or an employee traveling internationally for business? Use the Expensify Card to eliminate any foreign transaction fees and automatically import your transactions to your expense reports.
Global payment processing FAQs
What are the steps in global payment processing?
The process involves multiple steps starting from the initial transaction initiation by the buyer to the final settlement into the seller’s account. Here are the basic steps:
Transaction initiation
Information encryption
Verification by payment gateway
Approval request to issuing bank
Currency conversion (if required/needed)
Fund transfer to receiving account
What does global payment do?
Global payment systems ensure that transactions are conducted seamlessly regardless of currency differences, geographical distances, and varying local financial regulations.
Why use global payment processing solutions?
Businesses use global payment processing solutions to:
Access a wider customer base internationally
Provide customers with convenient payment options
Reimburse international employees
Handle different currencies
Ensure secure transactions
Minimize payment delays and errors
Whether you’re looking to expand your business internationally or you’re already there but need to manage your expenses on a global scale efficiently, Expensify has the solution. From multi-currency support to tax compliance, we’ve got your back.
Ready for a better solution when it comes to expense management for your cross-border operations? Enter your information below, and we’ll take it from there.
