Payment Gateway Rails: How Does Cross Border Checkout from Singapore to India Work?
All eCommerce transactions take place digitally via a whole slew of online payment methods hosted by all sorts of online payment platforms. Whether you’re a buyer or a seller, you are bound to make an international transaction at least a few times, regardless of B2C and B2B context.
In fact, these international payments happen in immense volumes on a daily basis and it all appears to be as easy as a few clicks here and there to the average layman. However, as a discerning merchant, have you ever wondered how these cross-border payments actually work? Take for instance, a transaction from a Singaporean buyer to an Indian seller. The process might look as straightforward as adding a product into a cart, confirming then checking out, but what goes on beneath the hood is anything but. Even from the checkout page itself, the process has already begun.
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Online Checkout: Accepting the Singaporean Buyer’s Payment
Whenever a buyer or client makes a transaction with any seller in the digital market, they always have to pay via the seller’s payment platform of choice. What payment gateway the buyer pays into is dependent on the payment platform itself. In any checkout tailored to the Singaporean market, the platform would ideally have multiple localised payment methods for the convenience of the buyer. This includes local collection methods such as Singapore’s Paynow QR and Paylah. It is expected that such cross-border checkouts would see Paynow be utilised more often since they both provide P2P funds transfer services and allow for payments via QR code. If the cross-border payment was conducted the other way around, expect to see India’s UPI being used more often.
Regardless of which payment gateway the platform uses, once the payment is made, the payment gateway then begins processing the payment in earnest. How exactly this payment is processed is itself dependent on the payment method chosen by the buyer. For instance, a buyer opting for bank redirects via QR code or local bank transfer will have their payments transferred to the payment provider’s local bank account before being moved to the seller’s foreign bank account in India, though the former is often faster than the latter due to being processed in real-time rather than reconciling the funds from an asynchronous payment.
Card and wire transfers, on the other hand, mean that the funds will be sent through the card or wire payment rail respectively as opposed to being held in their local bank account.
Cross-Border Payment: Sending the Payment from Singapore to India
The cross-border payment process is essentially the process when the payment is being sent from the payment provider’s Singaporean bank account or payment rail to their Indian account. For bank transfers, this process is commonly conducted through SWIFT-based wire transfers, and usually the part of the cross-border transaction that incurs additional fees. All payment rails would also have FX costs added on top of the payment transfer from one country to another, and it is these fees that would contribute to the overall total cost of using a payment platform.
However, how that cost is calculated varies from platform to platform. Some payment providers, like Tazapay, may even have specialised local payment partners in the markets they operate in to ensure that the costs are kept low, effectively transferring the savings from the payment platform to the users.
However, platform fees are only one part of the equation since payment methods also incur their own costs. As a general rule of thumb:
- Bank Surcharges: Affects payment methods directly linked to the banks themselves, surcharge varies from bank to bank.
- Card Surcharges: Depends on the card network. Can be as high as 4%.
- Wire Transfer Costs: Cheaper for local transfers, exponentially more expensive for international transfers. Varies from bank to bank.
So you’ll need to bear these costs in mind when you offer and handle cross-border transactions with your buyers.
Payout or Disbursement: Sending the Payment to the Indian Seller
The payout is typically the final step of most eCommerce transactions, since the seller receives the payment they’re owed and the buyer has most likely already received their product. If the seller’s eCommerce shop is built and run in-house by the seller themselves or alternatively by an eCommerce solution that builds brand.coms like Shopify, they can expect to receive their payment within a few days to a week depending on the payment method the buyer has chosen to use. For example, if a buyer chooses to pay via bank redirect or card, the seller should be receiving their payment, at most, within a few hours since bank redirects and card payments are generally instantaneous transactions, or it would take one business day for the payment rail’s operators to process. Wire transfers and local bank transfers, however, can take anywhere between 1 to 4 days to process those payments since both have a stringent, if not time-consuming, verification process.
On the other hand, if the payout is instead orchestrated by a marketplace or platform, then the funds are first sent to the marketplace or platform’s account before finally being transferred to the seller’s own account based on the date of payment as typically outlined in the terms and conditions of the marketplace or platform. For instance, an eCommerce marketplace could state that all sellers will receive their total payout between the 21st to the 25th of every month to take into account transactional delays from different payment methods.
Legislative Matters: Obtaining a FIRA/FIRC
Beyond any cross-border payment processing, the merchant based in India must be in possession of a FIRA or FIRC. The FIRA and FIRC are both documents that help prove to the local authorities that there is inward remittance into an Indian bank account. This is because these documents are part of the RBI’s instruments in the prevention of money-laundering and fraud.
While it may be a minor papercut, the process to obtain an e-FIRC for eCommerce merchants is supposedly as simple as requesting one from any of the AD1 major banks in India such as HDFC Bank, State Bank of India, ICICI Bank, Kotak Mahindra Bank, IndusInd Bank, Yes Bank, Punjab Bank, Bank of Baroda, and Bank of India.
In short, AD1 (authorised dealer category 1) banks typically issue FIRC and FIRA documents, though payment platforms can request for them on behalf of their users.
Now that you know how cross-border checkouts from Singapore to India work, it should impress onto you the importance of having a payment provider with multiple payment solutions. These solutions can range from multiple payment options to checkout, to passing savings to you as an eCommerce business via local payment partners. They go a long way into making the eCommerce experience seamless for your buyers and help lower cart abandonment rates too.
If you’re considering a payment provider that can provide you with those tools, why not give Tazapay a spin? With operations in over 173 countries all over the world and localised payment methods in over 70 of those markets, dare to make the world your personal marketspace today.
Payment Gateway Rails: How Does Cross Border Checkout from Singapore to India Work?
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