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How Does Global Payment Processing Work?

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Last editedFeb 20222 min read

A global payments system is a means for companies and merchants across the world to send and receive payments in different currencies. In order to streamline the process and avoid hefty conversion fees, this is usually done by way of a global payment processor.

In order to carry out business in multiple countries, as well as onboard employees transnationally, you will need to be clued up on how global payments work. In this post, we’ll define the role of global payment processing companies, and take you through how the process works as a whole.

What is global payment processing?

Global payment processing is the transfer of money to either a supplier, a vendor, an employee or a business affiliate, whose bank account is set up in a foreign country. In the past, making global payments required burdensome date inputting and involved multiple fees, including currency conversion fees. However, today the process is easier and more cost-effective thanks to global payment processing companies.

What is a global payment processor? 

A global payment processor functions as an intermediary between two parties from different nations. This may be “merchant to foreign customer”, for example.

As with a regular payment processor, when a customer uses their card to make a purchase, the processor receives the transaction details and relays them to the issuing bank. The difference with global payment processors is simply that the issuing bank is in a different country to the merchant account, meaning a process of conversion is required.

How global payment processing works

Global payment processing is a multi-step process.

It first requires that a legal entity be established in every country that a company operates in. As a British company hoping to operate in the United States, for example, you are first required to set up a legal entity in the States. Failure to do this can result in punitive civil penalties and fines.

Next, the money must be transferred internationally, which incurs charges. This will vary depending on the transfer provider.

In order to pay employees abroad, the money must first be transferred to a local bank account then processed for payroll. This stage is facilitated by global payment processors who can make payments directly into employee bank accounts. This in turn reduces transfer fees as fewer transfers are involved.

Without a global payment processor, companies are responsible for ensuring pay rates are accurately calculated. With constantly wavering exchange rates, this can be tricky. Global payment systems automatically convert currencies which ensures recipients receive the correct sum.

What are the benefits of using a global payment processor?

Global payment processors eliminate some fees involved in making international payments. They also offer enhanced security, maintaining confidentiality with regards to bank account information and transaction amounts. They also offer built-in fraud detection and automated conversion.

Global payment processors are classed as SaaS (Software as a Service) companies and offer global payment processing solutions for companies issuing international payments. The cost of using these processors will depend on the rate of transactions involved, as well as the frequency.

Global payment with GoCardless

GoCardless enables businesses to receive international payments from 30+ countries at the real exchange rate (REER). The REER refers to the weighted average of a currency in relation to other currencies it trades with.

GoCardless does this by offering a local bank debit option in each of the supported countries. Plus, thanks to GoCardless’s global payment network, no foreign business bank is required to make international payments. Another great perk to consider is the fact that the service involves competitive transaction fees too.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.

Over 85,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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Interested in automating the way you get paid? GoCardless can help
Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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