Accepting international payments for your goods and services if you’re an online seller or a small business can be costly, so looking at alternative payment options are essential. Also, sticking with one online payment option can put your cashflow at risk should anything unexpected happen to your funds coming in.
Even if you’re receiving money for personal reasons, extra charges for receiving international payments and hefty exchange rates can make transactions more expensive and means less money in your pocket.
If you haven’t already started looking around for a low-fee payment provider to help you with your incoming transactions, here is a guide showing you 5 of the best payment options:
Using PayPal is one of the most popular and easiest ways for your clients to pay you for your goods and services overseas, but it is not necessarily the best option.
Why, you ask?
- PayPal is actually expensive. Although they have no set-up fees, they provide terrible exchange rates, a fixed fee and a $25 monthly fee for online payments for small business owners. Bad exchange rates and additional transaction fees can add to the overall cost of transferring money to you, meaning you’ll have less money in your pocket. Potentially these extra unknown costs can also create confusion over the final amount you should charge your client for your goods and services.
- Not all clients will be willing or able to make PayPal payments. They might be located in an area that PayPal does not accepts payments from, or they might have unsupportive accounting systems. Or perhaps the client just wants a more suitable platform to make their payments from after having a negative experience.
- PayPal is known to frequently freeze accounts and has notoriously poor customer service. This means you won’t be able to receive payments or access your funds until they unblock you. Uncertainty from a lack of cashflow can be risky for your business
The Currency Shop Says:
If you are receiving payment from someone for smaller amounts (under $1000) Paypal is generally cheaper than using a bank. This is because they don’t charge a bank transfer fee, which can range between $18 and $32. However, for big-ticket payments, the fees for PayPal can certainly chip away at your profits.
We think you can do better with some of the other international payment providers, especially on those larger transactions. If you want to stick with PayPal, read our PayPal Review for more information.
2. Online Payment Gateways (like PayPal)
PayPal has some serious competition. Other online payment gateways are just as transparent, easy to use and provide extremely quick access to funds. But more importantly these payment gateways can be less expensive than PayPal and certainly cheaper than banks for smaller transaction amounts. This is because fees are commonly percentage-based plus a small transaction cost, combined with NO exchange rate or conversion fees.
Apart from fees, it’s important to check out their technology and other supported features. Most payment gateways allow integration with third-party services and apps, and provide multiple payment options. This includes credit or debit cards, various currencies and even Bitcoin. In addition, they feature subscription services, point of sale support and recurring billing services. These features are key to understand if you're deciding between online payment gateways.
For starters, here are the top 5 most popular online payment gateways and receiving fees:
- Stripe. Flat fee of 2.9% for every transaction, plus 30c per transaction. Also accepts international cards with a 1% conversion fee applied.
- Google Pay. A simple and free way to accept payments. No fees
- Amazon Payments. Domestic: Flat fee of 2.9% plus 30c per transaction; International: Flat fee of 3.9% plus 30c per transaction; Authorization Fee: 30c
- Shopify Payments. No transaction fees if you have Shopify Payments enabled. However, credit card rates apply depending on your Shopify plan (Basic, Premium and Advanced). Basic is 1.75% + 30c for Australian Cards and 2.9% plus 30c for International/AMEX per transaction
- Payoneer. Free from another Payoneer customer; International, virtual bank accounts is free for many currencies and 1% fee for US dollars; Receiving payments via credit or debit card fee is 3%
- Braintree (subsidiary of Paypal). 1.75% + 30c per transaction; 3.9% + 30c per transaction for currency other than AUD
The Currency Shop Says:
With fees usually percentage-based plus small additional transaction costs, using online payment gateways like Stripe are good for receiving payments from international clients for smaller amounts (under $1000). However, they may charge additional fees for the use of credit and debit cards or for international transactions, which can make pricing your product or service a bit tricky.
Before you go ahead with an online payment gateway, we think you might benefit from cheaper deals for bigger transactions with some of the other options listed below.
3. A Borderless Account
Using an account like the TransferWise’s Borderless account, allows you to hold funds and make payments in multiple currencies without the need to open multiple bank accounts overseas. It’s basically an online bank account giving you the ability to receive local currencies and have a “local” presence in the US, UK, Eurozone and Australia - which means better exchange rates, faster transactions and generally more convenience.
The key advantages of using an account such as The Borderless Account are:
- TransferWise is a regulated, reputable, and reliable money transfer and currency exchange provider.
- They make opening an account with multiple currencies very quick and easy.
- The Borderless Debit Card is available in the UK and Europe, and hopefully soon in Australia and the US.
- TransferWise offers competitive exchange rates. TransferWise give you the interbank, or the "real" exchange rate for all conversions and transfers.
- You can receive payments from clients from anywhere in the world and in different currencies.
- There are no setup fees or monthly charges and no charges to receive payments.
- You can receive payments into your bank account within 2-3 days of being paid.
However, there are still some disadvantages including:
- TransferWise’s coverage for currencies and countries is limited when it comes to the Borderless Account. But this will most likely change as the product evolves.
- In addition, there are some limits on the amount of money you can receive into your Borderless Account.
- The Debit Card is not yet available in Australia or the USA.
The Currency Shop Says:
The Borderless Account is an excellent product if you want a fast, simple and low cost way to send and receive money. However, it is only really necessary if you’re making frequent payments in the US, UK, Eurozone or Australia, it’s not something you’ll need if you’re making a one off payment. This innovative tool will only improve as it is introduced to more countries and currencies.
4. A Bank Transfer Minus the Bank
A bank transfer allows you to send money from your domestic account to another bank account overseas. There are international companies that specialise in doing exactly the same thing, except with much lower fees and better exchange rates and are commonly known as ‘non-banks’. Some examples include World First, TorFX , OFX and Western Union.
The advantages of using a non-bank for receiving your international money transfers include:
- Very quick set-up backed up with excellent service over the phone
- Better exchange rates than traditional banks
- Low fees (often free when you transfer over large amounts)
- 24-hour customer service
But there are still some disadvantages including:
- Sometimes no transfers under prescribed minimum amounts
- No credit cards, cheques or cash are accepted in a lot of cases
- They do not offer foreign currency accounts
The Currency Shop Says:
If you are receiving more than $1000, ‘non-bank’ money transfer companies are cheaper because their fees are lower and their exchange rates are more competitive. Transfer fees vary between $10-$15 for small amounts. Most companies offer fee free transfers for amounts over $10,000.
You can use Bitcoin as a method to receive payments from customers, but be aware that it can be quite complicated to set up - particularly if you are not familiar with using digital currencies. You’ll have to create a Bitcoin wallet that you and your client agree on, like Coinjar. Only then will you be able to receive the Bitcoins, and be able to convert it into your local currency. Another critical problem with Bitcoin is timing - you’re likely to be at greater risk to exchange rate moves and may get less money at the end of the transaction.
The Currency Shop Says:
Bitcoin transactions costs are much lower, because you don’t have to go through any banks to send the funds. The exchange rates are better than a bank, but you add some exchange rate risk because you are converting currency twice overall instead of once.
How to Find the Best Way to Receive Money From Overseas
The total cost of the transfer comes down to 2 things:
1. Transfer Fees
Every Australian bank and money transfer company will charge you a different fee to send money overseas. Usually it’s between $10 and $32.
2. Exchange Rate Margin
There is no “standard” exchange rate. Each bank will offer you a different exchange rate based on the currency you want to send overseas and the amount you need to send.