Earthmeta Earthmeta

What Are Cross-Border Payments?

UTC by Osaemezu Ogwu · 6 min read
What Are Cross-Border Payments?
Photo: Depositphotos

While cross-border payments are gaining popularity, for a great number of potential users they still seem quite unclear. This guide will provide you with all the necessary information regarding this payment option.

Quite a number of businesses and commercial enterprises have folded up due to geographical differences, or low revenue as a result of inaccessibility or inadequacy of interaction with prospective customers and payment methods. The cross-border payments present an easy way to send funds between territories regardless of language barriers and other potential issues. It has a lot of benefits and disadvantages, and this guide has set out to explain it in detail.

Understanding of Cross-Border Payments

Cross-border payments can simply be defined as financial transactions whereby the payer and the recipient are in different countries. These financial transactions consist of both wholesale, retail payment and remittances which involve money that people send home.

Simply put, Cross Border Payments means making payments or the transfer of funds across borders or separate territories.

How do Cross-Border Payments Work?

Cross-border payments do not involve the use of the conventional and physical mode of transfer of currencies. The currencies are closed-loop systems. What this means is that the funds are not physically deposited in the corresponding bank account. Rather, what happens is that banks or financial institutions provide an account for the foreign counterparts, while their foreign counterparts also make provision for an account with them for the former.

These corresponding accounts make it possible for payments to be made in foreign currency. Therefore, when a cross-border payment needs to be done, the physical transfers of money are not done but they are simply debited from one account and credited in another account.

Let’s take for instance financial transactions made between Bank X which is located in Country Y, and Bank A which is located in Country B. Bank X will hold an account with Bank A in its location, while Bank A also holds an account with Bank X. Therefore anytime Bank X needs to make a payment for a customer, Bank X will instruct Bank A to credit the customer’s account from Bank X’s account in Bank A’s location. Bank X account will therefore be debited so as to credit the customer in Bank A’s location, while Bank X also credits the account Bank A holds in its location.

Types of Cross-Border Payments

Cross Border Financial transactions can be made in several ways, which include but are not limited to:

  • Credit Card
  • Bank Transfers
  • Alternative Payment Methods
  • International Wire Transfers
  • International ACH
  • Prepaid Debit Cards
  • PayPal
  • Paper Checks
  • E-Wallets (through the use of cryptocurrencies)
  • B2B Cross Border Payments

The above methods are the prevalent ways at which a cross-border payment can be made. Similarly, there are also 2 primary types of Cross-Border payments which are listed below:

  • Wholesale Cross-Border Payments
  • Retail Cross-Border Payments

Wholesale cross-border payments typically refer to payments or the transfer of funds that are made between financial institutions. These payments are made with a view to either support customer’s activities, or the financial institution’s cross-border activities i.e. foreign exchange, trading of equity and debt, commodities and security, derivatives, borrowing and lending, etc.

The wholesale transfers of money between non-financial institutions are to support business transactions and financial services for the company which involve the transfer of funds across subsidiaries, cash management in support of the company’s liquidity. Also, governments perform large transactions with other governments and foreign businesses through the wholesale markets.

On the other hand, retail cross-border payments can be defined as payments or transfers of funds that are made between individuals and businesses i.e. from individuals to businesses, individual to individual, and businesses to business.

Popular Regional Payment Options

Cross-border transactions will be dependent on the territory one is located in. The location determines the type of payment options to be used, based on what is prevalent over there. It could be through any of the payment options earlier mentioned; Credit Cards, and Debit Cards. Credit Cards and Debit Cards, as they are the most widely used, and you can also make effective use of it.

There are also Alternative Payment Methods (APM) which is also prevalent in some region such as Eastern Europe, Russia, Latin America, China, etc. In China, the use of E-wallets is widely in vogue and generates millions of revenue especially in 2019. Places in Russia and Eastern Europe make use of Web Money’s eWallet, while in Latin America prepaid cards like Astro pay are worth considering.

Using payment options that are not popular with that region could result in a loss of revenue. Therefore, to avoid this, you can attract local partners that have a good understanding of the landscape, and also adopt multilingual services by hiring local translators.

Benefits and Risks of Crypto Cross-Border Payments

Crypto cross-border payments simply mean the transfer of cryptocurrencies held in a secure wallet to another wallet in another territory.  After it reaches the recipient account, it can then be withdrawn after being converted to fiat.

Crypto cross-border payments unlike making remittances are very easy and less expensive. They are cheap and fast and help to reduce the risk of money laundering. Cross-border payments through cryptocurrencies help in the realization of the United Nation’s Sustainable Development Goals target of 3% by 2020 as regards the slashing of the remittance cost off an average fee of 6.5%.

Deloitte also reports that blockchain transactions help in clamping down on the finances of terrorists, and money laundering, because many cryptocurrency platforms now make use of the Know Your Customer Checks to verify users. More importantly, it also covers places that are unbanked; a geographical location where a financial institution is not available.

Nonetheless, crypto cross-border payments are not without their shortcomings. The cheapness and affordability of the crypto cross-border payments depend on the type of the digital asset that is being used. It can be quite expensive to make transactions through Bitcoin, Ethereum, and some other cryptocurrencies.

Over time, it is has been reported that some cryptocurrencies are too volatile and inconvenient for fiat onramp and offramp. Moreover, blockchain technology is somewhat complex for an ordinary person to understand. Also, it is not comprehensively possible to monitor the crypto market, and this is because there are various types of digital assets available.

Most Popular Cryptos for Cross Border Payments

Examples of some of the most popular cryptocurrencies used for cross-border payments are highlighted below. Thet are:


Cryptocurrencies that can be used for cross-border payments are not limited to what has been highlighted above. Therefore, if you are considering expanding your coast, then it is high time you considered the cross-border payments and also acquaint yourself with more cryptocurrencies that can be used for cross-border payments.

Today you can ease the stress for yourself and your customers and avoid hurdles of the conventional physical use of funds and consider cross-border payments including those that presuppose the use of crypto.

Exploring Popular Meme Coins May 29th, 2024

This guide explores the top meme coins, including Dogecoin, Shiba Inu, Dogwifhat, Floki Inu, Pepecoin, Bonk, Meme Coin, and Notcoi...

Understanding Meme Coin Basics May 3rd, 2024

Meme coins' popularity is driven mostly by influencers' activity on social media platforms. In this guide, we will discuss in deta...

Introduction to Meme Coins April 18th, 2024

In this guide, we will introduce you to the concept of meme coins, their origin, evolution, branding, unconventional nature, and c...