Bank operated cross-border payment are more complex than most people realize. For a bank to perform a cross-border transaction, they have to follow a variety of steps. First, they must have both currencies in their possession or a way of purchasing the foreign currency for the transaction. Big banks typically have liquidity in certain currencies. They also maintain relationships with foreign banks to obtain other currencies for cross-border payments. Small banks, in contrast, often do not hold foreign currency and rely on relationships with larger banks to perform cross-border transactions.
For a customer or business that needs to execute cross-border transactions on a regular basis, cross-border payments through a bank can get expensive fast. Instead, using independent payment platforms offer a more sustainable and scalable solution for dealing with cross-border fees.
Advantages of Independent Cross-Border Payment Options
- Global Payment Reach: Moving funds from country to country has been made easier with cross-border payment services. More than 100 countries worldwide are connected to these services.
- Lower Overseas Transfer Fees: This is because a bank wire transfer involves the sending bank, the receiving bank and the wire process system of both banks. Using a cross-border payment provider is usually less expensive or sometimes even free because they are processed within the same system.
- Easier & Faster Payment Processing: Cross-border payment options are easy to use and fast. The transaction process typically takes a few minutes and a few days to fully complete.
- Set Exchange Rate: Cross-border payment providers usually provide locked-in exchange rates. These rates fix the value of a country’s currency against the value of another country’s currency. This keeps the exchange process stable and avoids dramatic fluctuations in currency.
- Ease of Access: Independent cross-border payment providers make it easier for fraudsters to perform criminal activities such as identity theft or money laundering.
It is imperative for cross-border payment providers to meet stringent know your customer (KYC) compliance and anti-money laundering (AML) requirements. These laws and regulations will ensure that the payment providers create a secure customer experience while reducing risk. Failing to meet regulations can result in large fines.
Banks regularly deal with these types of fines. In 2015, the Financial Conduct Authority (FCA) of the United Kingdom issued $1.3 billion in fines against banks around the world. That same year American regulators such as the Office for Foreign Asset Control (OFAC) with the United States Department of Treasury have also imposed $600 million in fines. The reason for the fines varies, such as performing transactions with politically exposed persons (PEP) or business from countries on the OFAC watch list.
Identity verification tools allow risk management teams to know more about their customers. They determine who is and who is not being truthful before they are onboarded. This allows payment providers to meet KYC and AML compliance by mitigating risk and fighting fraud. Providers should ensure that the identity verification solutions they use provide a frictionless customer experience. Payment providers need to find a balance between performing the proper checks for KYC and AML compliance while also maintaining customer satisfaction.
IDMkyc and can help meet these goals.
Top 10 Cross-Border Payment Providers Who Perform KYC Checks in North America
PayPal was established in 1998 and is a well-established player in the online payments space. It is owned by eBay. With over 200 million users, in 2017 alone, Paypal made 7.6 billion payment transactions. Paypal performs transactions in over 100 currencies and is a part of over 200 markets. PayPal owns digital wallet Venmo—it allows you to share money with your friends and family—and is a recognized payment provider for many major retailers such as Nike, Home Depot, Target, and Apple.
Stripe is a business online payment platform formed in 2010. It is based in San Francisco and enables businesses in 23 different countries to accept payments online from anywhere in the world. It allows transactions to be performed in over 130 different currencies including Bitcoin. When available, merchants are able to receive their payments in their local currency.
Hyperwallet was first launched in 2000 with the goal of developing simple and flexible mass payment solutions. Starting in 2006, Hyperwallet began offering global bank deposits and international wire transfers. They did this by building a network of financial partners around the world. It has a variety of different payout options including prepaid cards, debit or credit cards, cash, and checks. The Hyperwallet payment network is available in over 170 countries and contains more than 150 currencies.
Braintree is a payment platform that was first founded in 2007. It provides a software development kit (SDK) that developers can easily integrate into websites and applications. Online merchants are able to accept payments from PayPal, Apple Pay, Android Pay, Bitcoin, and credit and debit cards using the Braintree v.zero SDK.
WePay began in 2008 with the idea of making an app that is easy for friends to pool money for shared expenses, like travel expenses. WePay has since moved into providing payment services for platforms. The company has found a lot of success creating payments for platforms like Meetup, GofundMe, and Constant Contact.
Square is a payment provider formed in 2009. It is best known for it’s Square Reader. A Square Reader turns any iOS or Android device into a mobile point-of-sale system. When plugged into the headset jack of a smartphone or tablet, the Square Register POS app allows business owners to perform transactions with their mobile devices. Mobile devices become portable cash registers, record purchases, and issue receipts when connected to the Square Register POS app. In the near future, Square will be introducing a reader that supports the EMV chip that is now a standard in all American credit cards.
Payfirma was established in 2010. It was first launched in Canada and has since begun accepting US payments. Like Square, Payfirma provides point-of-sale solutions for smartphones and tablets. Payfirma also is able to accept payments using traditional credit card payment terminals.
Elavon is a provider of payment services for small businesses and enterprises that began in 2011. It is also a provider of market and industry payment solutions and loyalty programs. They are one of the top global payment providers who process more than 3 billion transactions globally a year, amounting to over $300 billion in payments. Elavon specializes in providing payment solutions for the airline, hospitality, healthcare and retail industries. It also helps the public and education sectors.
Apple Pay is a payment service that was launched in late 2014. It is available in the US, Canada, the UK, and Australia. More countries are expected to be added over time. Using Apple compatible devices—Apple Watch, iPhone or iPad—consumers can easily pay for purchases holding up their device to a contactless reader. They can also pay for purchases online on their iOS devices within mobile commerce apps. Apple Pay is available for most major banks and credit cards in the US.
Cross-border payments will continue to dominate global transactions as the world continues to become a truly global economy. Understanding how cross-border payments work and the platforms that allow these transactions to occur will help you ensure that your transactions are secure, protected and verify. We must make every effort to mitigate risk and follow laws and regulations set forth by policymakers to ensure our customers have a secure, frictionless and fraud-free experience.