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International Payment Systems in 2024: Cross-Border Financial Services for Individuals and Businesses

People who know precious little about financial technologies and services often believe that payment systems are only necessary for businesses when a company faces difficulties in opening a bank account.  As a result, businesses are typically recommended to choose a traditional bank account as a reliable financial tool if they happen to need such an instrument.

When we talk about services targeting regular people, the situation is not much different. Payment systems for individuals are mainly seen as a way to buy from international online stores or to work for foreign clients as freelancers. The common belief is that for daily transactions, a normal credit or debit card is enough, and it can be easily obtained from any bank.

International Payment Systems

Why choose foreign payment systems when traditional financial tools are available for both businesses and individuals? A standard bank account seems to satisfy the needs of most clients. It is easy to use and comes with few issues when used legally.

We don’t mean to say that a bank account is outdated. It still works well for many daily transactions. But why limit yourself when there are modern and easy-to-use alternatives that are equally trustworthy and effective? International payment systems don’t substitute a bank account. They enhance it instead.

In our article, we address these key questions: 

  • How and when did payment systems for businesses and individuals emerge?
  • What popular types of international payment systems are available today?
  • What are the main differences between payment processors, money transfer services, and mobile payment providers?
  • How do international payment systems differ from traditional banks?
  • Why should you choose payment systems to set up an account with as carefully as traditional banks?

Payment systems for businesses and personal use come with essential benefits:

  • Fast Payments: Payment systems enable transactions in seconds, unlike bank transactions, which may take 2 to 3 days.
  • Few Restrictions: Modern international payment systems have few limits and bans on users. As long as you have a stable internet connection, you can access your money anytime and anywhere.
  • No Bank Visits: Payment systems function in a remote mode, so you don’t need to visit your bank’s branch in person.

Top jurisdictions to set up an account: United Kingdom (both personal and corporate accounts).

  • Security Level: Both major financial institutions and modern payment systems have similar security levels. They offer attractive high-level security features, including multi-layer encryption, two-factor authentication, biometrics, and more, whether you use a bank card or a smartphone app.
  • Convenience Level: Traditional banks offer various services to their customers such as credit issuance, precious metal investments, currency exchange, and money transfers. With international payment systems, you will enjoy the same offerings but with more convenience. The only downside is the lack of credit options.
  • Lower Maintenance Costs: Businesses need to make agreements with banks and open separate accounts to accept payment cards. Customer funds go to these accounts first before reaching the corporate bank account. In this situation, payment systems are usually cheaper to maintain.
  • Shift Away from Cash: Going electronic is an efficient solution for both consumers and companies. It lowers the need for security measures, reduces cash collection, and makes financial reporting easier. It also helps your company improve its credit history.
  • Contactless Services: The COVID-19 pandemic was a perfect illustration of the negative impact that global risks have on businesses. If they opt for international payment systems, individuals don’t need to visit bank branches or stores. You can buy goods or pay invoices from the comfort of your home and agree on delivery terms remotely. Still, most payment systems don’t offer lending services as of early 2024.

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Evolution of payment systems

The origins of next-generation financial systems go back to the 1950s when this technology was considered experimental and not meant for mass use, as potential clients never requested it. Only in the 21st century did payment systems become a possible alternative to traditional banks. However, slow internet speeds and the lack of devices like modern smartphones slowed down the adoption of the new technology.

Experts believe that payment systems started turning into a valid financial tool in 2018 when the ABLV Bank from Latvia went bankrupt. This was because of the valid accusations by FinCEN (a.k.a. Financial Crimes Enforcement Network) of money laundering and helping North Korea to finance its nuclear program. It became clear then that an alternative to traditional banks was much needed and wanted.

Top jurisdictions to set up an account: Hong Kong.

By the end of 2022, there were over 900 payment systems worldwide, and this number keeps growing. Analysts claim that as far as financial services are concerned, their supply far exceeds the demand. This means risks of bankruptcies or major financial problems remain high.

With this in mind, you should be very careful when choosing international payment systems. In this situation, more does not mean better, and there is still a big chance of losing money or dealing with dishonest service providers. This factor is less important when you open a personal checking account. However, it is vital if the payment system designed for individuals or businesses is used to protect and diversify assets.

In terms of regulation by national financial authorities, payment systems are like traditional banks. Some countries have the same government agency for both, while others employ separate ones. However, the common belief that the state does not control how these financial instruments work is far from being true.

In the modern world, payment systems are very similar to banks. Customers do not see much difference between the two except for the lack of physical branches. Yet legally banks and payment systems are different financial entities. The latter usually come with limited licenses and are not allowed to perform certain functions, e.g., issuing loans and opening deposits. However, in 2024, you may already find payment systems that offer these services.

Payment systems and their types

For the moment, no standard classification is available for payment systems. They are usually called Payment Service Providers (PSPs). In the early days of this sector, a PSP was a company that processed card payments. Simply put, PSPs used to be mainly payment gateways for reliable and easy Internet acquiring operations. This was their only meaningful difference from traditional banks back then.

In the early 21st century, the first payment systems appeared. They allowed clients to have personal IBAN accounts and make transactions between people and businesses (both locally and globally). These services keep adding more functions and thus resemble traditional banks more and more with each coming day.

The existing payment systems are grouped into two categories as of early 2024:

  • Authorized Payment Institution (API): These entities mainly handle payments. They offer nearly the same services as traditional banks, e.g., transactions, currency exchange, acquiring, card issuance, as well as personal and corporate accounts. These activities are strictly regulated, especially in the European Union under the PSD2 Directive (2015/2336/EU).
  • Electronic Money Institution (EMI): EMIs provide services similar to APIs. However, unlike APIs, they are authorized to issue electronic money. Electronic money is not the same as cryptocurrency or other digital assets. To start an EMI business, you need a corresponding license. Besides, be prepared to meet tough criteria, such as satisfying minimum capital requirements. The EMI Directive (Directive 2009/110/EC) is the main document that sets legal rules for EMIs in the European Union.

Top jurisdictions to set up an account: Kazakhstan (accounts for international companies).

Payment processors, money transfer services, and mobile payment providers

Payment systems have evolved without a clear classification, which makes them less transparent for users. Many people who don’t know much about modern financial technologies have trouble finding the right services for their needs. Despite some improvements in this field lately, progress is still slow.

With no single classification to stick to, payment systems evolve at the expense of transparency for users. As a result, an average Joe who is not well-versed in modern financial technologies often has trouble finding the right services. Despite some improvements in this sector lately, the progress is still slow.

Payment processors

As users see it, a payment processor is nothing short of a traditional banking service that uses bank cards to make transactions. Payment processors help all parties involved, including the buyer, two banks, and the seller.

This banking service uses merchant accounts. Popular examples include PayPal and Stripe, but there are more. The payment system works well for everyone, but if you want a banking-style service, you may want to look for other options.

Money transfer services

Payment systems mainly handle money transfers, both local and global. Other functions like lending, investing, and financial products for protecting and diversifying assets, are less important. Typically, they are executed formally, i.e., on the most basic level. Experts have seen a merging of functions among different payment systems, which makes the boundaries between them fade. For information purposes, Western Union and MoneyGram are some of the best-known money transfer service providers.

Mobile payment providers

Mobile payment providers were not valued much when the market just emerged. Later, however, people realized that full-scale traditional banking services were less popular with regular clients. Also, the main reason against them, namely, not enough user terminals, was not valid anymore, as smartphones were capable of performing those functions. FYI: Common examples of mobile service providers include Apple Pay and Google Pay.

Payment systems vs. traditional banks: features and benefits

Consumers may not see much difference between banking services and payment systems for card payments and online transactions. For businesses, however, it is a different story. Still, even in this case, by far not all companies need all the available banking services.

The best scenario is to use two financial tools that work well together. So, it is not quite right to say that a bank account is better or worse than an account opened with a payment system. The key is to find what suits your needs best.

Top jurisdictions to set up an account: Lithuania (IBAN accounts).

Registration and identification procedures

Payment systems make the process easier, with no need to go to the bank’s physical branch. You can just scan your passport and take a selfie with it. In contrast, banking rules require a personal visit, which often appears to be time-consuming.

High-risk businesses

The banking sector barely works with such companies in 2024. So, if you are into cryptocurrencies, Forex, gambling, or adult products, payment systems for businesses are the only option you have.

Accounts for customers from sanctioned countries

As things stand, it is challenging or even next to impossible to open an account for clients from Iran, North Korea, or other troubled jurisdictions. There is a super-high chance of being rejected, considering the strict scrutiny of potential clients. In this case, payment systems remain almost the only option for people who need a full banking service and come from any of such states.

Currency restrictions

It is no secret that many financial institutions avoid USD transactions because they fear secondary sanctions and the potential loss of correspondent accounts. International payment systems offer an appealing alternative as they can handle USD transfers. However, if you do need such a service, you’d better consult International Wealth experts about your options first.

Top jurisdictions to set up an account: Mauritius.

Account opening timeframes

It can take a really long time to deal with a foreign bank, even if they agree to work with you. Oftentimes, you may have to wait one or two months, and it may be even more challenging if your case is somehow tricky or complicated. Payment systems are faster and easier to open accounts with, let alone that you don’t need to be there in person.

Payment processing speed

Cross-border transactions typically take several days to complete. Sometimes, funds get stuck for weeks when you are transferring them to or from the USA. The reason for the delay is hard to find out as banks often blame regulations or compliance checks. Domestic transfers are much faster; they are completed almost immediately by payment systems, except for a few rare cases that take a few hours.

Account access

Online payment systems used to have a big edge over traditional banks as far as account access is concerned. Now, however, most major banks also have mobile apps. So, both banks and payment systems are accessible 24/7. However, in the case of payment systems, their financial software is usually more user-friendly and functional.

Choosing the best payment system for your needs

It isn’t technically difficult to set up an account. The main challenge here is choosing the right payment system, because they have different target audiences. You need different features for daily purchases, online shopping payments, or cryptocurrency trading. So, we recommend you be very careful when selecting the payment system for your needs.

Here’s what you should do to choose the right payment system:

  • Check whether the payment system you have eyes for holds the necessary licenses.
  • Make sure it is in a trustworthy jurisdiction (some exceptions may apply).
  • Check its reputation (for that purpose, use forums and feedback from your contacts).
  • Test their mobile app for convenience.
  • Review the compliance procedure for strictness.
  • Make sure the payment system’s requirements suit your needs.
  • Compare their service fees for account maintenance.
  • See if basic services are available.
  • Find out if you can order a card.
  • Evaluate the communication level offered, i.e., whether you will have a personal manager, how efficient their technical support is, and how fast they respond to transaction queries.

Top jurisdictions to set up an account: Netherlands.

You may feel overwhelmed by all this information. But don’t let that stop you from opening a personal or corporate account with a payment system! At International Wealth, we will answer all your questions, help you with the registration documents, and guide you in choosing the best services. So, go ahead and contact us for an individual consultation!

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