Cross-Border Payments

What Are Cross-Border Payments?

A cross-border payment is a financial transaction where the payer and the recipient are based in separate countries. These transactions are the backbone of the global economy, enabling international trade, global payroll, and payments to international contractors.

In simple terms, it’s any payment that “crosses a border.” While it sounds straightforward, these payments are fundamentally more complex than domestic transfers. Instead of a simple transfer from one local bank to another, a cross-border payment often involves multiple currencies, different banking systems, and a complex network of intermediaries.

The Problem: Why Are Traditional Cross-Border Payments So Slow and Expensive?

For any business paying a global team, the traditional cross-border payment process is a primary source of frustration. This is because most international transfers rely on an outdated system of “correspondent banks.”

Imagine you want to send $1,000 from your bank in the U.S. to an employee in Brazil. Your bank doesn’t have a branch in Brazil, so it can’t send the money directly. Instead, the process looks like this:

1. Initiation: Your U.S. bank (Bank A) takes your $1,000.
2. Intermediary 1: Bank A sends the payment instructions via a network like SWIFT to a large international bank (Bank B) with which it has a relationship. Bank B takes a fee.
3. Intermediary 2: Bank B then finds its “correspondent” partner bank in Brazil (Bank C). The funds are moved, and Bank C takes a fee.
4. Final Deposit: Bank C finally transfers the (now-reduced) funds to your employee’s local bank (Bank D), which might also take a fee for receiving an international wire.

Because of this complex chain, traditional cross-border payments suffer from:

• High Fees: Each intermediary bank in the chain deducts its own processing fee, meaning the recipient often gets less than you intended.
• Slow Processing Times: Transfers can take 3-7 business days to clear, making it impossible to run a fast, predictable payroll.
• Lack of Transparency: It’s often impossible to track where the payment is or know the exact amount that will be received after all fees and FX rates are applied.
• Poor Exchange Rates (FX): Banks typically offer uncompetitive currency exchange rates, adding another hidden cost to every single transaction.

How Modern Solutions Are Fixing Cross-Border Payments

Newer financial technology (fintech) solutions and global payment partners (like Topsource) bypass the slow correspondent banking system.

Instead of one-to-one transfers, modern solutions use a “local-in, local-out” model:

1. You Pay Locally: You send one consolidated payment (e.g., in USD) to your payment partner’s local bank account in your country.
2. They Pay Locally: The partner uses their own local bank account in Brazil to pay your employee in BRL.

This process is faster, cheaper, and more predictable because the money never actually crosses a border through the slow SWIFT network. It’s simply a domestic transfer in your country and a domestic transfer in your employee’s country.

Cross-Border Payments in HR, Payroll, and Global Mobility

For a company managing a global workforce, “cross-border payments” is a core operational challenge. It directly impacts your ability to:

• Pay International Employees: Running accurate, on-time global payroll is critical for employee retention and morale.
• Pay Global Contractors: Freelancers and contractors expect to be paid quickly and in their local currency without high fees.
• Ensure Compliance: Every payment must comply with local labor laws, tax withholding rules, and reporting requirements, which is a major compliance risk.
• Manage EOR (Employer of Record): When you use an EOR, they handle the complexity of compliant cross-border payroll on your behalf.

Stop Overpaying for Your Global Payroll

Are you tired of high FX markups, hidden wire fees, and payment delays when paying your international team?

Traditional banking systems were not built for the modern global workforce. Topsource’s global payroll and EOR solutions are. We eliminate the friction of cross-border payments so you can pay anyone, anywhere, on time and in their local currency.

We manage the complexity of local compliance, taxes, and currency exchange, allowing you to manage your entire global team from one simple platform.

Ready to simplify your international payments?

Talk to a Topsource global payment expert today.