International transactions require a change of currency, foreign transaction fees, handling the exchange rate, and coordinating with different domestic entities depending on the country. If you are going to use a cross border debit, as a person or with your SME this is what you need to know.
Online payment tools make it easy and secure for both buyers and merchants to make and receive payments online. It is a fundamental tool for SMEs to place their products abroad through e-commerce.
SWIFT is the interbank messaging system used by many banks around the world to send messages. Find out what it is and how it works.
According to creditcard.com 97% percent of consumers have some type of payment card (debit, credit or prepaid), with 85% owning a debit card. 68% of consumers use a debit card each month, compared to 74% using cash and 63% using credit cards.
Can I use my debit card overseas?
Being such a common saving management tool, the card proves useful also during vacations, but it is precisely at these times when doubts often arise about its use abroad. In what way can we avoid problems and how to get the most out of it?
Taking money abroad is very expensive, so the experts’ advice is to change it in your country before you start your trip. Otherwise, you will have to bear in mind that the operation will become more expensive, due to the commissions involved in withdrawing cash from ATMs abroad.
More specifically, the commission that the card issuer will charge for withdrawing money abroad is around an average of 4.5% of the amount withdrawn.
To this commission must be added another amount for use of ATMs. In this way, another 1% of what we want to withdraw will be pocketed by the foreign entity.
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Cash flow in cross-border debit payments
Debit or credit, does it matter? Users who refuse to buy or withdraw money on credit should have no problem using their plastic in most foreign countries, since it is issued through an international network which, in the case of Spain, will be VISA or Mastercard.
But that’s the theory: in practice, there are companies in certain countries that require the use of a credit card for their services, from hotels to car rental or even clothing and footwear stores, so a debit card can occasionally cause problems.
The credit card is still the most necessary for cross-border transactions. In some cases, it will be possible to pay with a debit card, but the operation will be more complex, as it will require prepayment of the service, something that, for example, we can see in some hotel offers, but not in car rentals.
One of the advantages of credit cards, which sometimes have higher commissions, is that they are usually associated with insurance that can cover certain incidents during the trip.
What are cross-border payments?
What is the cross-border interbank payment system?
It is a payment system that provides settlement services to its users in the process of cross-border transfers and movements in Chinese currency. It is one of the fundamental infrastructures of China’s financial markets.
What is the SWIFT system?
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a messaging system between banks that is used by almost every bank worldwide.
- It provides security in the exchange of information. It is also a cooperative group, which was founded in Brussels in 1973.
- It helped establish a common language for cross-border financial transactions, a shared data processing system and a worldwide telecommunications network.
The essential operating procedure and rules for defining responsibilities were established in 1975.
- The first SWIFT message was sent in 1977. The result is one of the most essential infrastructures of modern international finance.
- This network became a powerful tool known for its efficiency in the integration of services.
- These include interbank payments, investments, transfers, foreign trade, and remittance checks.
It processes around 10 million messages daily, among 8,000 financial institutions, located in over 200 nations. It is available 24 hours a day, 7 days a week. However, in order to use SWIFT services, you need to join its user community.
It brings together the vast majority of the world’s banking institutions and enables fast and efficient communication between them. In some cases, it operates through correspondent banks that act as intermediaries in the various countries. It uses the currency of the country where they are located, as not all financial institutions have interchanged accounts.
SWIFT for electronic funds transfers
Receiving or sending a money transfer through your bank account requires a SWIFT/BIC code. It is a number specifically used to identify banks or financial institutions worldwide.
The bank identification code has the same meaning as the SWIFT code. It enables interbank money transfers and is essential for international transactions.
What’s inside a SWIFT transaction?
SWIFT allows financial institutions to transmit information or issue instructions securely thanks to a system of standardized codes. This code is composed of 8 or 11 characters and has a format that identifies the bank, country, location and branch, as follows:
- Bank code, represented by four bank letters.
- Country code, consisting of two letters indicating the country where the bank is located.
- Location code, consisting of two letters or numbers, indicating where the bank’s main office is located.
Three-digit branch code, that indicates a particular branch and is used for the bank’s main office.
Why is SWIFT dominant?
SWIFT began to form a kind of shared support network as an institution. In the late 1960s, it began as a project related to message exchange. It consisted of the 6 banks with the largest positions in the financial market with headquarters in Luxembourg and Paris.
Its success is linked to the way it continually incorporates new message codes that allow different financial transactions to be completed.
At first it started by sending simple payment instructions, but now it transmits messages for business and system transactions. Fifty percent of SWIFT traffic is still for payments-based messaging, 47% corresponds to securities transactions, and the remainder constitutes traffic flows related to financing, exchange and transactions.
Who uses SWIFT?
The SWIFT system network was designed by its founders with the initial purpose of facilitating the communication process linked to treasury and related transactions. Its robust design has facilitated its scalability, and it has progressively expanded to offer services to the following institutions:
- Stock exchange institutions and trading companies.
- Investment agencies.
- Asset management companies.
- Clearing houses.
- Corporate business centers.
- Treasury market users and service providers.
- Currency and money brokers.
CIPS vs SWIFT
SWIFT is privately managed, highly utilitarian and connects some 11,000 financial institutions in 200 countries. Its goal is to maintain an innovative approach in order to dominate the market.
The CIPS code is an alternative system developed by China for processing cross-border interbank payments. It is used for international transactions between banks in yuans. Its purpose is to strengthen the use of the yuan worldwide. It also intends to offer a payment system different from SWIFT transactions.
Finally, SWIFT has maintained a very dominant position in the global interbank messaging process. It is constantly innovating and is a great, modern and real payment alternative worldwide.
What is cross-border payment regulation?
Cross-border payments can be made under the same modalities as national or local payments. Accepting any type and including those that are native to countries where your clients are staying, is a key issue to consider.
It is a very popular type of payment:
- It may incur a cross-border debit card fee.
- It is the most common form of cross-border debit order in financial transactions of this type.
So, you may often wonder how to find the right cross-border payment method. This requires special attention to ensure it is a seamless payment experience.
Do you want to make e-commerce transactions much more efficient? Then you should find a solution provider that is associated with a large number of receiving banks around the world.
That’s why we, PayRetailers, offer you the solution: we’re your payment platform in Latin America. You can boost your business through our network of payment methods, and you can accept and receive payments from any country you are in.