4 Easy International-Friendly Payments Solutions
Expand your search for talent and services across the whole world with these four easy international-friendly payments solutions.
Published on October 10, 2022
Easy International-Friendly Payments SolutionsAs the world continues to work remotely, your business no longer has to operate locally. Now, you can expand your search for talent and services across the whole world! However, as you work with international employees, contractors, and vendors, successfully making international payments is critical to your operations. The good news is that there’s no shortage of options for sending and receiving international payments, but it can be confusing to figure out which ones are right for you.This rundown will cover four easy solutions for making international payments to foreign contractors and international vendors. Some international payment methods are more effective than others, depending on the specific use case. We’ll go over some of the most common ones, weigh the pros and cons, and offer targeted solutions that can help you simplify your international payments.
1. International wire transfersThe term “international payment” often brings to mind international wire transfers — the process of electronically sending cash from one country to another via bank. While secure and convenient for the recipient, international wire transfers via bank can be costly and inconvenient to the sender.Contact your bank to figure out how to initiate a wire transfer, whether in person, via phone, online, or through their mobile app. Provide your recipient’s bank account information so the bank knows where to send the funds. Your bank then sends your electronic funds transfer (EFT) via SWIFT either directly or indirectly — meaning that your money could pass through multiple banks before reaching the recipient.
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The security of wire transfers is top-tier since your bank takes responsibility for making sure your money is transferred correctly. Wire transfers are also convenient for recipients, who may prefer getting paid via a deposit to their bank in their local currency.The greatest downside to using wire transfers is the cost. Banks charge transfer fees with very little transparency. SWIFT payments tend to go through multiple banks, which can all charge their own processing fees, adding to your costs. It’s difficult to plan for these fees because they can vary, even if the same bank is used again in another similar transaction. In addition, your recipient is charged a transfer fee to accept the payment. Wire transfers can also be unfavorable to currency exchange rates, shorting both you and your recipient.Wire transfers can also be inconvenient. You have to manually submit a request with your bank for each payment. Then it can take anywhere from two to five business days for a recipient to receive the payment, which can be frustrating for your workers.
2. International money transfersYou can also send cash internationally via money transfer services like xe, Western Union, and Wise. Instead of going through the SWIFT network, these transfers go through the provider’s own communication system. Money transfer services offer faster transactions with lower fees and better exchange rates at the cost of convenience and security.Here’s how it works: You choose the amount to send in your currency, seeing how much your recipient will receive in their local currency. You then pay the service provider by domestic bank transfer, debit, or credit card. The provider then transfers that amount to their international partners, who deliver it to your recipient either via bank transfer or cash pickup.
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Because there are no intermediary banks, money transfers benefit from much lower, more transparent fees. These fees are usually a flat percentage of the transaction, like 0.35% to 1.65%, in contrast with the arbitrary fees imposed by banks. Money transfer services also tend to offer better exchange rates, depending on the country to which you’re sending your money.Money transfers are also much faster and more convenient than wire transfers. Depending on the location, you may even send a money transfer for same-day cash pickup. Most money transfer services allow you to set up automatic transfers and request transfers online without needing to visit their in-person branch.Unfortunately, using money transfer services can be risky. For example, Western Union’s terms and conditions state that the company isn’t liable for damages caused by employee negligence. You can’t get your money back if there’s a mistake like accidentally depositing to the wrong account.Additionally, the minimum and maximum amounts you can send can vary by service. You may need to shop around to find the right provider for the amounts you need to send.
3. PayPalYou can also send payments internationally via PayPal, an online global payments processor. PayPal is favored by many international businesses for its ease of use and e-commerce integrations, but it comes with high fees and potential compliance issues.It’s quite easy to send money internationally with PayPal. You can transfer money between more than 200 countries with PayPal, as long as both parties have a PayPal account. If you’re sending money from your PayPal account directly to your recipient’s PayPal balance, the transfer is instantaneous. However, if sending via bank transfer, it can take a few days to deliver.
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PayPal is a great choice for small and mid-size companies that already have a PayPal account. PayPal features built-in invoicing and easy integration with e-commerce services or your website. If you indicate that you’re paying for Goods and Services, PayPal issues 1099-K forms for you and offers Buyer and Seller Protection.Unfortunately, the convenience of using PayPal comes at a cost — literally. PayPal has higher fees — including a currency conversion fee, an international transfer fee of 5%, and a fixed fee depending on the country. Additionally, PayPal charges an additional fee of 2.9% for using a credit or debit card to fund transfers.PayPal only supports 25 currencies for international transfers — otherwise, you have to use its other money transfer service, Xoom, which is only eligible for personal use. Sending money through PayPal also comes with potential compliance issues if you pay someone via "Friends and Family” instead of “Goods and Services,” whether accidentally or not. Additionally, PayPal functions as an e-wallet, which means your contractors will have to deal with hassles, delays, and possible withdrawal fees before finally receiving their money.
4. Accounts payable and payroll platformsAn accounts payable platform for your vendors and a payroll platform for your contractors give you all the advantages of using the above methods — and then some. You gain visibility into the fees per transaction, helping manage costs. Meanwhile, you also ensure all your contractors and vendors are always paid on time in their local currency via automated international payments.Rho, a partner of Pilot, is a complete corporate finance platform that has everything business leaders need in a single view to run their finance operations and save time and money, including savings for US-based companies that conduct foreign transactions. The platform’s built-in AP function automates bill pay from creation to approvals and auto-syncs with your accounting software for faster reconciliation. Translation: You can upload, approve, code, and pay invoices all without leaving Rho.
The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
On the payroll side, Pilot is an international payroll and HR tool that helps you hire and pay contractors all over the globe while prioritizing compliance. Set up payments via domestic transfer from your bank account, schedule the frequency, and let Pilot automate your payments. Both employers and contractors get visibility into payment status, so no one’s left wondering when they’ll be paid.Pilot supports local currencies in over 70 countries, depositing payments directly to contractors’ bank accounts in their local currency. It doesn’t charge employers to send payments or contractors to receive them. As a global HR platform, Pilot offers all the benefits of operating and hiring locally without needing to set up a local entity.When using purpose-built tools like Pilot and Rho, you gain insight into all your payments and know exactly where they are in your pipeline. Set it up once and never think about it again — automation helps reduce the paperwork and administrative tasks needed to handle your accounts payable and payroll every month.Having control over your accounting and payroll is extremely important, especially when using a third party. However, when using tools like Pilot and Rho, you remain in charge of your payments. These tools provide the flexibility to be as involved or as hands-off about those payments as you’d like.
Pick the international payments method that makes the most sense for youWhile we recommend going with purpose-built international payment platforms, other options might fit your needs better. If your business is starting out with just a few contractors or accounts payable, paying through PayPal or one-off wire transfers can be great. As you scale and grow, though, consider automating your international payments with a global HR and payroll platform like Pilot and a complete corporate finance solution like Rho.
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