How to collect payments from USD to INR effectively

At the recently concluded Global Fintech Fest in Mumbai, we asked businesses what is the one thing on their international payments wishlist. Unanimously, everyone answered–"Make receiving international payments as simple as domestic payments."

If you are an Indian business invoicing clients in the US, you would know the challenges of receiving USD payments into INR. Longer wait times, lack of transparency, follow-up on compliance requirements, and high costs–often make international payments complex. Does this sound familiar? Then this article is for you. Read to understand how to navigate the challenges when receiving USD payments into INR with practical solutions.

Technological innovations in payment solutions have made it easier, faster, and more affordable for businesses to collect international payments. Here are a few factors to consider that will help simplify the collection of international business payments, including USD to INR:

• Transaction costs: Dig deep into the fees associated with every withdrawal. Some of the costs to look out for are SWIFT costs, FX markup, intermediary bank fees, processing fees, account openings and more. For instance, the SWIFT transaction passes through various intermediary banks between the two countries, adding fees at every stage. These costs depend on the respective bank charges, the countries and the currencies involved. The other is often the foreign exchange (FX) markup used to convert those USD payments to INR. Then, there could be hidden costs, including handling fees, processing costs, and more–all of it, making it an expensive set-up to collect payments. These deductions can surprise you, disrupt your financial planning, and reduce your working capital, making it harder to manage expenses and reinvest in your business.

• Processing time: International wire payments often face delays due to factors. For instance, the number of intermediary banks involved in the transfer can impact the processing speed. As the payment travels through the international banking network, it may pass through multiple banks, each adding processing time. These steps can result in delays ranging from several days to weeks. These delays in processing time can have significant implications for businesses relying on timely payments.

• Compliance and regulations check: Ensuring compliance checks is paramount when navigating the complexities of receiving international payments. Quick access to documentation like FIRA/eFIRA will help close the payment process efficiently.

The good news is that Indian businesses can easily cut back time and costs on receiving USD payments into INR by opting for local payment methods. Is this a magic wand of international payments? Think NEFT or IMPS payment method in India–a quick and reliable electronic funds transfer method–something that most businesses rely on for faster, convenient and cheaper payouts.

The same desire for familiarity extends to international payments. Like NEFT, which provides a quick route for transferring money within India, local payment networks in other countries act as similar direct channels for monetary transactions. Many countries have different payment systems designed specifically for their region. These systems are typically faster, easier to use, and often incur lower fees than traditional bank/wire transfers.

Here's a look at some of the popular local payment methods in the US:

• ACH (Automated Clearing House): The ACH network is a standardized system for electronically transferring funds between bank accounts. Initially established in the United States for domestic transactions, the ACH system's efficiency and security have led to its adoption in numerous other countries. These countries utilize ACH for a substantial portion of their internal electronic payments. Countries participating in ACH benefit from streamlined domestic transactions and smoother international transfers.

• Fedwire: The Federal Reserve Wire Transfer System, commonly known as Fedwire, is a Real-Time Gross Settlement (RTGS) system operating within the United States. Designed for high-value or time-sensitive transactions, Fedwire facilitates the immediate and final funds transfer between banks and other authorized institutions. Unlike standard bank transfers that may take some time to settle, Fedwire ensures that funds are credited to the recipient's account instantly, offering a secure and efficient solution for critical financial transactions.

Offering payment options like Fedwire or ACH in the US to your international clients can significantly lower costs in comparison to other payment methods. Further, payment methods like ACH are almost free for businesses in the US–this means the client making payments to the Indian business will not be charged any amount to initiate the transfer–making it a better experience.

Here's how embracing local payments can significantly boost your business:

• Cost-effective: Local payment networks often boast lower transaction fees than traditional international transfers. The monetary advantage translates to direct savings when collecting business payments from USD into INR.

• Faster transfer: The clearance of local payments is typically much quicker than traditional international transfers. Sometimes, payment transfers can done within a few hours of payment initiation. With this, businesses can receive your funds faster, improving your cash flow and financial stability.

• Seamless client experience: Local payments leverage familiar and convenient methods for your international clients. They can pay using trusted and understood options, reducing friction and frustration during the payment process.

• Building stronger client relationships: By offering local payment options, you commit to a smooth and positive experience for your international clients. The convenience of payment you offer fosters stronger relationships and encourages repeat business, ultimately contributing to your business growth.

Beyond the convenience of modern fintech options that offer the advantage of local payments in different countries, there are also established methods for receiving international payments. These traditional options can be reliable for those who prefer them. Let's explore some popular techniques to find the best fit for your business needs.

• Wire transfers: A well-established method, wire transfers offer a familiar way to send and receive funds internationally. While they may not be the fastest or most cost-effective option, wire transfers provide a reliable solution for specific situations. This trusted system ensures that your international payments reach their destination.

• Digital wallets: Secure and convenient, digital wallets allow you to store, manage, and use funds globally. Payment processing is often faster than wire transfers, making them a preferred choice for faster transactions.

• Card payments: Widely used for online transactions, card payments offer your clients a familiar and convenient option. You'll need a merchant account to accept international card payments, and processing fees may apply.

Evaluate payment service providers by considering fees, exchange rate transparency, settlement times, and ease of use. This thorough assessment will help you choose the provider that best meets your business needs.

Take into account:

1. Fees

- What are the transaction fees associated with using this provider?

- Are there any hidden costs or additional charges?

2. Exchange rate transparency

- Does the provider offer clear and competitive exchange rates?

- Are there any hidden markups on the exchange rate?

3. Settlement times

- How quickly does the provider process payments?

- How does their settlement speed compare to that of traditional banks?

4. Ease of use

- Is the provider's interface user-friendly and intuitive?

- Does the provider offer easy integration with your accounting systems?

5. Localization and compliance

- Does the provider offer local payment methods to collect international payments?

- Easy access to documents like FRIA/eFIRA

In today's interconnected world, attracting US clients requires a seamless payment experience. Imagine closing deals faster, focusing on core business activities, and gaining a competitive edge—all by offering convenient payment options for your US clients. The right payment processor can help you achieve this.