How to Pay Overseas Suppliers and Reduce International Payment Costs

Paying overseas suppliers can become surprisingly expensive once foreign exchange margins, transfer fees and intermediary bank charges are taken into account. For businesses making regular international payments, choosing the right payment method and currency can therefore have a meaningful impact on margins.

“International payment costs build up through routine payment decisions rather than obvious fees,” says Shawn Ma, Head of Business Development at WorldFirst UK.

Best ways to pay overseas suppliers

There are three main ways to pay overseas suppliers. To determine your best option, the key is to look beyond the headline transfer fee and consider the total cost of getting the correct amount of money into your supplier’s account.

Specialist B2B fintech platforms

Specialist international payment providers such as WorldFirst are designed specifically for businesses receiving, holding and paying money internationally.

The WorldFirst World Account, for example, lets businesses make payments to more than 200 countries and regions in 100+ currencies, including same-day transfers. Businesses can also hold multiple currencies, meaning they can convert money when they choose rather than automatically exchanging GBP every time an invoice needs paying.

For businesses sourcing from China, there is an additional advantage. WorldFirst says payments can be made instantly, for free, to more than 150,000 Chinese suppliers already using WorldFirst, allowing buyers to tap into its existing Chinese supplier network.

SWIFT bank transfers

Traditional international bank transfers using the SWIFT network remain useful, particularly when sending money to countries or suppliers not covered by local payment networks.

However, payments can pass through several correspondent banks before reaching the recipient. This can mean intermediary charges, less certainty over how much the supplier receives and slower settlement.

They are also expensive as you have little control over the exchange rate that business bank accounts convert currency at.

Digital wallets

Digital wallets such as PayPal can be convenient for occasional or smaller purchases, but businesses should check both the transaction charge and FX rate. Convenience can come at a relatively high cost when large amounts are regularly converted between currencies.

How to reduce international payment costs

For businesses making significant international purchases, combining local-currency payments, multi-currency balances, planned FX conversions and lower-cost payment networks can make overseas supplier payments considerably more efficient.

Pay suppliers in their local currency

Ask suppliers whether they will accept payment in their domestic currency rather than GBP or USD. This can remove the supplier’s need to build its own currency-conversion costs into its pricing and gives you greater control over the FX transaction.

Use multi-currency accounts

A multi-currency account lets you receive and hold currencies such as USD or EUR and use those balances to pay suppliers. This can prevent unnecessary conversions, for example, converting USD revenue into GBP only to convert it back into USD later to pay a supplier.

Lock in exchange rates early

If you know a large supplier payment is due in several weeks or months, consider fixing the exchange rate in advance. This provides certainty over your sterling cost and protects your margin if exchange rates move against you.

To do this you can either buy the full amount of currency at a favourable exchange rate for use later, or use a currency forward contract with just a small deposit, and the balance due on settlement.

Avoid hidden FX mark-ups

Don’t compare providers purely on transfer fees. The FX margin(the difference between the underlying market rate and the rate you actually receive) can be a much higher cost.

Always go with a currency broker or business payments provider that has transparent rates.

For example, WorldFirst’s World Account currency conversion margin is capped at 0.50% for major currencies, with new users enjoying an exclusive discounted exchange fee of 0.3% for the first 180 days. It’s also free to open with no ongoing account fee.

Some providers are known for giving excellent exchange rates to start with and then increasing them without the customer knowing. You can read more about this in our guide to “honeymoon exchange rates”.

Use a business expense card that earns you cashback

For suppliers that accept card payments, another option is the WorldFirst World Card. It links to the World Account and currently offers up to 1.2% uncapped cashback on eligible business spending.

Businesses can also pay directly from supported currency balances without an additional FX fee on those same-currency transactions.

If you’d like to try a World Card you can earn a bonus £100 when you spend £2,000 over 3 months – that’s equal to 5% back. It’s spend you’re already making – on Google ads, AI and platform subscriptions, web hosting and more.