Forex
Payment Gateways vs Bank-to-Bank Transfers: Which is Best for International Business Transactions?
Whether you’re a small e-commerce business or a multinational corporation, the need for efficient and cost-effective international transactions is crucial. This article looks into two main ways of handling international payments - payment gateways and bank-to-bank transfers.
Read on to discover the differences between payment gateways and bank-to-bank transfers and the ideal use cases for each.
What is a payment gateway?
A payment gateway is a tool that lets businesses take payments online using methods like credit cards, debit cards, digital wallets, and bank transfers. It works as a link between the buyer and the business's bank. The gateway safely sends payment details and checks if everything is okay for the transaction. Payment gateways are important for online stores and services. They give customers an easy and safe way to pay for things without going to a real shop or bank.
How do payment gateways work?
The process of a payment gateway in international transactions involves several key steps:
Customer Initiation: A person from another country picks products or services on the website and goes to pay. They give their payment info like credit card details or pick a digital wallet option.
Currency Conversion: The payment gateway handles the currency conversion, changes the money into the store's currency at that day's exchange rate. Each side can use their own money.
Data Encryption: The payment system scrambles the customer’s payment info and sends it safely to the store’s bank to check. This way no one can steal the important details.
Transaction Authorization: The store’s bank sends the encrypted payment request to the customer’s bank. The customer’s bank checks the info to see if the payment is real and if there is enough money.
Approval and Settlement: When approved, the payment gateway sends a confirmation to both the customer and the business, completing the transaction. The money goes into the store’s bank usually in 1-3 business days depending on rules and what currencies are used.
List of International Payment Gateways in India
Here is a quick international payment gateway list for India. Visit their respective sites to learn more.
- PayPal
- Stripe
- 2Checkout (now Verifone)
- Authorize.Net
- Razorpay
- CCAvenue
- PayU
- Worldpay
Understanding Bank-to-Bank Transfers
A bank-to-bank transfer, often referred to as a wire transfer, is a method of moving money directly between bank accounts across borders. Wire transfers help businesses send large amounts directly.
Unlike payment gateways that facilitate digital payments primarily for online businesses, bank-to-bank transfers are designed for direct and often high-value transactions between businesses.
How do Bank-to-Bank Transfers Work?
A bank-to-bank transfer follows these steps:
Sender Initiates: The sender tells their bank to send money. They provide the recipient's name, account number, and the bank's SWIFT code or IBAN.
SWIFT System: The sender’s bank connects to the recipient’s bank through the SWIFT network. The SWIFT code makes sure the money ends up in the right place.
Intermediary Banks: If the banks cannot connect directly, they may use intermediary banks. These banks help transfer the money but will add fees and time.
Currency Conversion: For international transactions a currency conversion fee is included.
Settlement: Once the recipient's bank receives the money, it deposits it into the recipient’s account. This process can take several days, depending on the banks involved.
Notification: Both the sender and recipient receive a notification when the transfer is completed. Some banks also allow tracking of the transfer status.
In summary, bank-to-bank transfers serve as a secure method for international payments, especially for larger sums.
Payment Gateways vs Bank-to-Bank Transfer Comparison Table
Which should you choose - payment gateways or bank-to-bank transfers?
The ideal use case for each payment method differs significantly. Payment gateways are more suited to fast, small transactions. They are perfect for e-commerce businesses or freelancers. Bank-to-bank transfers are more suited to high-value transactions, due to the added security and government oversight.
The main drawback of bank-to-bank transfers is the heavy documentation and processing times taken. The fees and hidden charges by banks can also be really inconsistent. This is the exact problem that Karbon Business solves. We guarantee the lowest mark-up fees, meaning you can make large international business transactions for less than a 1% fee. We also help/guide you through the documentation required. Get in touch with us today and let’s figure out the best solution for your business.
The views expressed in the blogs on this page are solely the opinions of the authors and do not constitute expert advice. While we strive to provide accurate and up-to-date information, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk. We disclaim any liability for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in connection with, the use of this website.
Similar posts
.png)
