International Payment Processing 101

March 28, 2024

Chris Algie

Head of Business Development

Businesses today are no longer confined by geographic borders. With the rise of global trade and better online card processing solutions, the need for efficient and reliable international payment processing has become increasingly important. 

Whether you’re a small local business looking to expand internationally, or a global enterprise operating across multiple countries already, navigating the complexities of cross-border payments can be a challenge – but we’re here to help.

In this comprehensive guide, we’ll delve into the world of international payment processing, exploring what it is, how it works, and the key considerations for businesses looking to optimise their global transactions. 

Ready to unlock new opportunities and expand your global reach? Let’s start with the basics.

What Is International Payment Processing?

International payment processing, or global payment processing, refers to the seamless transfer of funds between businesses and customers across different countries and currencies. It encompasses the entire process of accepting, processing, and settling international payments for goods or services.

In essence, international payment processing allows businesses to conduct transactions with customers located anywhere in the world, enabling them to tap into new markets and expand their customer base beyond their domestic borders. This is particularly crucial for ecommerce businesses, which rely heavily on online transactions and digital payments to drive sales and revenue.

The Challenges of International Transactions

Of course, one of the key challenges for businesses using international payment processing lies in dealing with the complexities of cross-border transactions, including currency conversion, exchange rates, and compliance with local regulations. Additionally, businesses must ensure that their payment processing systems are equipped to handle a wide range of payment methods and preferences, including credit cards, digital wallets, and local payment methods specific to certain regions.

What Is a Payment Processor and How Does It Work?

A payment processor is a crucial intermediary in the international payment processing ecosystem. It acts as the bridge between the merchant’s bank and the customer’s bank, facilitating the authorization, processing, and settlement of transactions.

Here’s how it works:

  1. Authorization: When a customer initiates a payment, the transaction details are securely transmitted to the payment processor. The processor then communicates with the customer’s bank to verify the availability of funds and obtain authorization for the transaction.
  1. Processing: Once authorization is received, the payment processor routes the transaction data to the appropriate networks, such as Visa or Mastercard, for further processing. This involves verifying the card details, checking for fraud, and ensuring compliance with regulatory requirements.
  1. Settlement: After processing, the payment processor facilitates the transfer of funds from the customer’s bank to the merchant’s bank account. This settlement process typically occurs within a few business days, depending on the payment method and banking regulations.

Payment processors play a critical role in ensuring the smooth and secure flow of funds in international payment transactions, enabling businesses to accept payments from customers worldwide and expand their global reach. Find out more about payment gateways for ecommerces here.

The Importance of Advanced Security Measures for International Payments

As mentioned, international payments can involve various risks, including fraud, identity theft, and unauthorised transactions. To mitigate these risks and ensure the security of transactions, advanced security measures are essential. 

Here are some key security features we employ for international payment processing:

  • Encryption: All sensitive data transmitted during international transactions, such as credit card numbers and personal information, are encrypted using advanced encryption algorithms to prevent interception and unauthorised access.
  • Tokenization: Tokenization replaces sensitive card data with unique tokens, reducing the risk of data breaches and protecting cardholder information from theft or compromise.
  • Fraud Detection: Sophisticated fraud detection algorithms analyse transaction patterns and behaviour in real-time to identify suspicious activity and prevent fraudulent transactions from being processed.
  • Two-Factor Authentication: Two-factor authentication adds an extra layer of security by requiring users to verify their identity using a combination of something they know (password) and something they have (e.g., a mobile device or authentication token).
  • Compliance Standards: Compliance with industry standards such as PCI DSS (Payment Card Industry Data Security Standard) ensures that businesses adhere to strict security protocols and practices to safeguard payment data.

How Does Bank Authentication Work for Global Payments?

Bank authentication is a crucial aspect of global payment processing, ensuring the security and legitimacy of transactions across borders. Naturally, there are a few more steps involved when payments happen to involve different currencies, exchange rates et cetera:

  1. Verification: When a customer initiates an international payment, the payment processor sends the transaction details to the customer’s bank for verification. This includes verifying the customer’s identity, checking for sufficient funds, and confirming the authenticity of the transaction.
  1. Authentication: The customer’s bank employs various authentication methods, such as two-factor authentication or biometric verification, to ensure that the transaction is authorised by the legitimate account holder.
  1. Authorization: Once authentication is successful, the customer’s bank provides authorization for the transaction, indicating that it is valid and can proceed to processing.
  1. Secure Transmission: Throughout the authentication process, sensitive customer data, such as account numbers and personal information, is encrypted and transmitted securely to prevent unauthorised access or fraud.

A robust payment gateway and powerful bank authentication mechanisms help businesses ensure the security and integrity of their global payment transactions, mitigating the risk of fraud and providing customers with peace of mind when conducting international transactions.

How Does Currency Conversion Work in International Payment Processing?

Currency conversion is a fundamental aspect of international payment processing, enabling businesses to accept payments in multiple currencies and facilitating cross-border transactions. Here’s how it works:

  1. Dynamic Currency Conversion (DCC): With DCC, the payment processor automatically converts the transaction amount from the customer’s currency to the merchant’s preferred currency at the point of sale. This allows customers to see the transaction amount in their own currency and choose whether to proceed with the conversion.
  1. Multi-Currency Pricing: Some businesses offer multi-currency pricing options, allowing customers to pay in their preferred currency at checkout. The payment processor calculates the equivalent amount in the merchant’s currency based on current exchange rates and processes the transaction accordingly.
  1. Exchange Rates: Payment processors use real-time exchange rates provided by financial institutions to determine the conversion rate for international transactions. These rates may fluctuate based on market conditions and can impact the final amount charged to the customer.
  1. Conversion Fees: In addition to exchange rates, conversion fees may apply to international transactions to cover the costs associated with currency conversion. These fees vary depending on the payment processor and may be charged to either the customer or the merchant.

What Is the Best Technology for Global Payment Processors?

When it comes to global payment processing, leveraging the right technology is crucial for ensuring seamless transactions across borders. Multi-Currency Payment Gateways like Fibonatix support multiple currencies, allowing businesses to accept payments from customers worldwide in their local currencies. This enhances the customer experience and eliminates the need for currency conversion fees.

Using a cross-border payment platform also streamlines international transactions by connecting businesses with a network of financial institutions and payment processors across different countries. These platforms facilitate secure and efficient fund transfers, reducing processing times and costs.

Get in touch with us if you’d like to learn more about the specific technologies we use across our payment processing platform, and any of the relevant payment gateway integrations for global payment processing.

Fibonatix: Your Partner for Global Payments 

As your trusted global payments partner, Fibonatix offers cutting-edge payment processing solutions tailored to meet the unique needs of businesses operating in diverse markets worldwide. With our advanced technology and expertise in international payment processing, we empower businesses to streamline their cross-border transactions and optimise their global payment operations.

Our comprehensive suite of payment solutions includes multi-currency payment gateways, cross-border payment platforms, and API integration capabilities, enabling businesses to accept payments from customers around the globe seamlessly. We prioritise data security and compliance, employing state-of-the-art encryption and tokenization technologies to protect sensitive payment information and ensure regulatory compliance.

With Fibonatix as your global payments partner, you can count on reliable and secure payment processing solutions that drive revenue growth, enhance customer satisfaction, and support your business expansion initiatives across borders. 

Experience the power of seamless global payments with Fibonatix today!