How to pay an international invoice: a guide

What are international or cross-border payments?

An international payment is a transaction between banks, financial institutions, businesses, or individuals operating in different countries. Most businesses in the U.S. do business with companies outside the U.S. And when you close a deal with a vendor in another country, they need to know you’re able to send payments.

An international transfer may or may not include a currency exchange. That means, unlike in money transfers inside the U.S., a third party is almost always involved.

5 ways to send cross-border payments

If you want to send money across borders, there are multiple methods to choose from: 

1. International wire transfers: This is a secure way to send funds between banks. It usually takes 1-2 days to process but carries quite a heavy fee. Additionally, your vendor’s bank details are required. It must be noted that they are not the most efficient way to send payments for business-to-business purposes.  
2. Global ACH: Global ACH payments can be made through various entities, but are not carried out via a card network. The downside is they take several days to process. 
3. Third-party payment platform: International transfers via platforms like PayPal carry a high fee and there is no clear policy around them. When choosing a platform to make the payment, make sure it’s one that has low fees and can be used for your other business-related payments. 
4. Prepaid debit card: Prepaid debit cards are processed over a card network and provide real-time payment immediacy, which is great when you need to make a quick payment to a global supplier. However, the transactions often come with a fee for both the customer and vendor, and it has a confusing reconciliation process.
5. Paper checks: This payment method doesn’t always come with a transaction fee–depending on the financial institution. However, it may be weeks before the check is received in the mail and cashed, which can negatively impact your cash flow management. Paper checks are also prone to fraud.

What is the journey of an international payment?

International transactions entail a currency change, foreign transaction fees, and exchange rates. To navigate these channels, banks and different domestic entities work together to transfer funds. 

Let’s review how a transaction looks when performed by a customer:

Because the merchant’s website is offering international services, all Sofia has to do is enter her details. Banks and merchants will do the rest.

The same applies to overseas business payments. Let’s say you’re buying marketing services from a studio in the U.K. If they have a system in place to accept and process payments from abroad–it should be relatively easy. 

However, if they usually work with local customers and accept payments via bank transfers or checks only, you might need to carry the full cost of the transaction. Plus, you’ll need to manage it all yourself. 

Let’s say you choose to send an international wire transfer. You’ll have to go to the bank, pay for the transaction upfront, and provide the following information: 

• The recipient’s name, address, and contact number.
• The recipient’s banking information, including their account number, and sometimes the branch number as well.
• The receiving bank’s information–the institution’s name, address, and bank identifier.

Once your payment is submitted, the information is communicated to your vendor’s bank. Their bank deposits its own reserve funds into the correct account. Along the way, there may be an intermediary bank that acts as a liaison in communication from the ordering institution to the recipient’s bank.

What is the problem with global payments?

Unfortunately, there is no easy solution to sending payments to other countries. Because there are many factors involved in making such a transaction, there are some disadvantages. These include: 

• High fees: Many small businesses find it difficult to afford the high cost of international payments that are the result of both the complexity of the transfer and the foreign exchange rates. 
• Hard to predict: Exchange rates often change on a daily or even hourly basis and are impacted by both the domestic currency value and the foreign currency value.
• Slow processing times: Vendors often won’t deliver a product until they get paid–and by that we mean have the money in their hands (or bank account). International transfers often take a long time to process, which can lead to shipment delays.
• Compromised security: Where money goes, fraud follows. Many banks and other payment processors struggle to adapt their national security operations to cross-border transactions. 

Additionally, some practices used for international payments often lead to reduced productivity, increased labor, and difficulties in relationships with suppliers. 

Why use international vendors in the first place?

Regardless of this, there are a few reasons to choose international vendors. For one, freelancers in countries outside the U.S. may charge less, which can come in handy if you’re short on cash.

Moreover, some products like certain fruits, vegetables, or liquor are just better in other places around the world. Tapping into another country’s products allows you to improve the quality of your own products.

It is important to be aware of things that could risk the relationship with international vendors like high taxes, political instability, and shipping costs.

What are some best practices for international payments?

As you can see, this process can be a lot to handle. But if you still want to and wonder how to pay an overseas supplier here are some things to consider. Let’s break it down. 

To make a payment to an international vendor you may need:

• Their account name.
• Their IBAN or account number.
• Their bank SWIFT/BIC, domestic routing code, or bank address.

Get the payment instructions right: Use correct payment information to avoid returns, delays, and extra costs. 

Understand local rules: Be sure you have the required documentation for international payment in countries with controlled currencies and central bank reporting, including China, India, and Brazil.

Avoid cross-border checks: Electronic payments can reduce fraud risk and be processed much faster.

Verify compliance with global payment rules: Make sure you are sending the payment according to all applicable global payment rules.

How do international payments work at Melio?

Once you are required to pay an international invoice, you can send it in the vendor’s local currency, from the same dashboard you use to send payments inside the U.S. You can send the payment from anywhere (including your phone), and you don’t need to rely on bank hours. You send U.S. dollars and your vendor receives the payment in their local currency–and doesn’t even need a Melio account.

Melio has 15 available currencies, and you can check out the full list here. 

Every country has a different banking network system regulating and verifying transactions between countries. For example, Canada uses a SWIFT code network to verify transaction details whereas the U.K. uses the IBAN network. 

Depending on the country you send payments to, you’ll need different information. Usually, you’ll find the code on the invoice sent by your vendor. Otherwise, ask your vendor for their number.

How to make international payments:

Make sure you have the payment instructions received from your vendor.

After you sign in to Melio.com, there are two ways to pay globally: add a bill or add a vendor. 

When adding a bill:

1. Create a bill. 
2. Enter the name of the vendor or select a saved international vendor.
3. Select the vendor’s currency from a dropdown list. You’ll see the converted amount in USD and the conversion rate.
4. Select the due date and enter optional information (such as the invoice number, invoice date, etc.)
5. Choose Bank transfer or Credit card (+2.9% fee) as your payment method. 
6. Add your global vendor’s details. Vendors receive payment directly to their bank account.
7. Attach an invoice and choose the payment purpose. 
8. Review the details and schedule the payment.

When adding a new vendor:

1. Add a vendor and choose International Transfer as the receiving method.
2. Add your global vendor’s country, their currency and their bank details.
3. Click New payment and choose the global vendor you want to pay. 
4. Click Save and Add Bill to be directed to the page where you can enter payment details (such as the amount, etc.). There’s no need to click New Payment in this case.
5. Alternatively, you can save the vendor details without making a payment. If you choose to do so, you can select New Payment or Add Bill later.
6. Enter the payment amount in their local currency. You’ll see the converted amount in USD and the conversion rate.
7. Choose Bank transfer or Credit card (2.9% fee) as your payment method. 
8. Choose the payment purpose. 
9. Review the details and schedule the payment.

To learn more, visit our help center.

What countries are open to international payments through Melio?

You can pay vendors in over 70 countries, including China, Canada, Vietnam, and many more. Check out the full list here. 

How long does it take?

When paying international vendors, payments arrive to your vendor’s bank account within up to 4-5 business days. The speed of payment is based on amount and payment method. 

What currencies are available through Melio?

Melio offers international payments in 16 different currencies: 

How much does it cost?

Melio has a $20 flat fee per transaction for paying international vendors in USD. This fee covers payment processing, foreign exchange, bank deductions, and other related costs, staying the same regardless of the payment amount. When paying with a credit card, an additional 2.9% fee applies.

When making an international payment in foreign currency, processing and conversion fees are included in the conversion rate, so there are no extra international fees. However, other fees, like payment method fees, may still apply.

Can my vendor have an international and local delivery method?

A contact can’t have both domestic and international delivery methods. To pay a vendor who requested payment to their international office, you’ll need to have two separate vendor contacts—one for domestic payments and one for international payments.

What is an IBAN?

IBAN stands for International Bank Account Number, which you use when making or receiving international payments. It’s commonly used for international transfers in the UK and Europe.

​​An IBAN number is used when sending bank transfers or wiring money from one bank to another across international borders. It’s a code of up to 34 letters and numbers that help banks verify and process transactions between customers in different countries.

Each set of characters represents a different bank account detail. For example, a UK Bank Account IBAN number looks like this: GB29BUKB60161131926819.

What’s a SWIFT code?

SWIFT codes, also known as bank identifier codes (BICs), allow member institutions to easily and safely communicate, share information, and transfer money across borders.

You can think of a SWIFT code as a bank’s ID number, allowing all parties to know they are in touch with the right institution.

A SWIFT code is composed of eight or 11 digits or letters and contains the bank code, country code, location code, and branch code.

Just to give you an idea, a JP Morgan Chase SWIFT code looks like this: CHASUS33XXX, with the Xs representing the branch information.