What are cross-border payments? How they work, transfer methods, and how to choose a provider

Key takeaways

• Payment processing is the behind-the-scenes flow that moves funds from a customer's account to a merchant's account. It involves several parties, including payment gateways, processors, card networks, and banks.

• Security, speed, and the range of accepted payment methods are the most important factors when choosing how to process payments for your business.

• Airwallex lets you accept payments from 180+ countries in 160+ payment methods. It offers competitive FX rates, built-in fraud prevention, and like-for-like currency settlement.

Payment processing is what happens every time a customer clicks "buy" on your website. It's the system that moves money from their account to yours. Getting this right can shape your conversion rates, costs, and the overall customer experience.

In this article, you'll learn about the key players in payment processing and how the flow works step by step. You'll also see which payment methods you can accept, what security basics matter most, and how to choose the right solution for your business.

What is payment processing?

Payment processing is a set of steps that moves funds from a customer's account to a merchant's account after a purchase. Think of it like a postal service for money. When you click "buy", your payment details go through several checks before the funds reach the merchant's account. For businesses, doing this well means faster settlement, fewer failed transactions, and happier customers.

Online shopping keeps growing steadily. In 2023, one in every five transactions happened digitally, and forecasts say it'll be one in four by 2027. The global eCommerce market passed US$5.8 trillion in 2023. As this market grows, the tech for safe and smooth digital payments is changing fast too.

Payment processing also happens when someone buys in a shop. A point-of-sale (POS) system captures card details and starts the same authorisation and settlement steps. Online, customers can pay with cards, mobile wallets, buy now, pay later services, and more. No matter which method they use, payment processing is what makes sure the money moves and the transaction completes.

Key players involved in processing a payment

Several parties work together each time a payment is processed. Two roles people often mix up are the payment processor and the payment gateway. Here’s how they differ.

What is a payment processor?

A payment processor is the company that handles the transaction. It passes information between the merchant, banks, and card networks. Think of the payment processor as a translator in a meeting with many languages. It makes sure each party understands the others. The processor you choose affects your fees, how fast you get paid, and how well you're protected from fraud.

What is a payment gateway?

A payment gateway is the tech that encrypts and sends transaction data from the merchant’s website to the processor. It's like a secure envelope that carries payment details. The key difference is simple: the gateway collects and encrypts, while the processor routes and communicates. Some providers (like Airwallex) offer both in one solution.

Other key parties in the payment flow

• Merchant: The business or individual selling goods or services.

• Issuing bank: The financial institution that issued the customer's credit or debit card.

• Acquiring bank: The financial institution that holds the merchant's account and receives the transaction funds.

• Card networks: Organisations such as Visa, Mastercard, and American Express that help process transactions between banks and merchants.

How does payment processing work?

The payment process happens so fast that it's easy to miss what’s going on behind the scenes. Even so, organisations in different parts of the world may need to share data in seconds. The process has three main stages:

• Authorisation: The payment starts and is checked for available funds

• Authentication: The customer’s identity is checked

• Settlement: Funds are moved to the merchant’s account

Authorisation

First, the customer shares their payment information. They might type in card details, use a fingerprint for a mobile wallet, or choose a saved payment method. The payment gateway collects these details and sends them to the payment processor. The processor then sends an authorisation request to the card network, and the card network routes it to the issuing bank.

The issuing bank checks if the customer has enough funds or credit to cover the purchase. It then sends a response back through the card network to the payment processor to approve or decline the payment. At this point, the payment is "in process". It’s started, but it hasn’t settled yet.

Authentication and verification

Before or during authorisation, the customer’s identity may need to be checked. This is where tools like 3D Secure (3DS) help. They add another layer of security by asking the customer to confirm their identity in their bank’s app or with a one-time code. This step cuts fraud risk without adding too much friction for real customers.

Settlement

If the transaction is approved, the payment processor sends that message back to the payment gateway, which then tells the merchant. The customer also gets a notice that the payment has been approved. Next, funds move from the issuing bank to the acquiring bank, minus any transaction fees. For card payments, settlement usually takes one to three business days, although some providers offer faster options.

Payment methods you can process

The payment methods you accept can have a direct impact on conversion. If customers can’t pay the way they want, they’re more likely to abandon their basket. With that in mind, here are the main categories to review.

Credit and debit cards

Payment cards are still the default option for online payments. Credit cards let customers borrow money, while debit cards take money straight from the customer’s account. Major card networks include Visa, Mastercard, and American Express. Online checkouts often let customers save card details to speed up future purchases or manage regular subscriptions.

Digital wallets

Digital wallets like Apple Pay and Google Pay are rising fast in popularity. It’s been estimated that by 2027, digital wallets will make up 49% of all global sales online and at POS. That’s more than US$25 trillion in global transaction value.

A digital wallet is a mobile app that stores payment details in a secure way. It lets people pay from their device without typing in card details each time. This makes wallets a quick and easy way to pay in-store and online.

Buy now, pay later (BNPL)

Buy now, pay later options let customers buy now and pay later, either on a later date or in instalments. Usually, the customer pays a small deposit first. Then later payments can be taken automatically from their account or card. Klarna is one well-known BNPL provider. These services can boost sales, especially for customers who can’t pay the full cost up front.

Bank transfers and local payment methods

Bank transfers, including ACH in the US, SEPA in Europe, and direct debit, are often used for recurring payments and bigger transactions. They often cost less than card payments, but they can take longer to settle.

Local payment methods matter a lot for international sales. WeChat Pay and Alipay are widely used in China, iDEAL is the top non-card method in the Netherlands, and Boleto is common in Brazil. So, a strong payment processor should support these local methods to help raise conversion in each market.

Security and compliance when you process payments

Security is one of the biggest parts of payment processing. There are many ways criminals can try to interfere with the process, including:

• Stealing a credit or debit card and using the details to make purchases

• Attacking payment systems to steal sensitive customer data

• Tricking people into sharing payment details through fake phishing messages

• Asking for a refund for dishonest reasons, like claiming an item never arrived

Key security technologies

Encryption: Customer data is turned into a scrambled string of characters before it’s sent from the payment gateway to the financial institutions that process the transaction. Think of it like shredding a message in a way that only the intended recipient can put back together. This helps make sure no one can read sensitive data while it’s moving between systems. You may have heard of SSL (Secure Sockets Layer) and TLS (Transport Layer Security). These are cryptographic tools used for encrypting and securing internet communications during payments.

Tokenisation: Like encryption, tokenisation replaces sensitive card details with a unique identifier, called a token. It’s like using a nickname instead of your real name. The nickname can identify you, but it’s useless to anyone who steals it. Tokens can also be stored for recurring payments, which cuts the risk from a data breach. When a payment happens, a key is used to unlock the real card details to complete the transaction.

Biometric authentication: As mobile wallets have grown, biometric checks have become common. A fingerprint or face scan takes one touch and is hard for criminals to copy. It’s safe, fast, and avoids the hassle of forgotten passwords.

Artificial intelligence and machine learning: AI and ML can spot unusual transaction patterns and rate the risk of fraud. If something looks suspicious, the system may ask for extra authentication.

PCI DSS compliance

The Payment Card Industry Data Security Standard (PCI DSS) matters for any business that handles payment card data. It requires businesses to protect customers and keep card data safe and private. If you don’t comply, you could face penalties and more liability.

To make compliance easier, many businesses work with a PCI DSS Level 1 certified provider, which is the highest level. The provider runs much of the security set-up, so you don’t need to build and maintain it all yourself.

Managing chargebacks

Chargebacks happen when a customer asks to reverse a payment. The cardholder’s issuing bank looks into the dispute and reverses the transaction if it’s valid. Some chargebacks are genuine, such as when a card is stolen, the merchant makes a mistake, or the customer is unhappy. Other times, a customer may try to reverse a payment unfairly while keeping the item.

If you get chargebacks often, it’s a real problem. You don’t just lose the sale. You may also pay higher processing costs. That’s why reliable payment processors help lower chargeback rates. They do this with tools like 3DS, monitoring for unusual patterns, and pre-chargeback programmes that warn you about disputes before they grow.

How to choose a payment processing solution

eCommerce platforms like Shopify often provide their own payment options. Still, working with a dedicated payment processor can help you get better rates, more payment methods, and stronger fraud tools. The best choice depends on your business model, your customers, and your plans for growth.

What to evaluate in a payment processor

• Global payment method coverage: Can you accept the payment methods your customers like best, including local options like WeChat Pay or iDEAL?

• Security and compliance: Look for PCI DSS Level 1 certification, encryption, tokenisation, and advanced fraud detection.

• Pricing transparency: In addition to subscription and transaction fees, check for extra costs like chargeback fees and FX mark-ups.

• Integration options: Does it work with your current eCommerce platform, accounting software, and other tools?

• Scalability: Can the processor handle more transactions as you grow? Does it support new markets if you expand?

• Reporting and analytics: Strong reporting helps you understand customer behaviour and improve sales.

Learn more about the key features to look for in a payment processor here.

Process payments globally with Airwallex

Airwallex helps customers around the world pay as if they were in the same country as the merchant. You can collect one-off and recurring payments in the customer’s preferred currency and with their preferred local payment methods.

That’s why businesses of all sizes, from eCommerce marketplaces to online shops, use Airwallex. It helps them grow internationally, cut unnecessary currency fees, and protect against fraud.

With Airwallex, you can:

Accept payments everywhere:

• Accept payments from 180+ countries and regions

• Offer 160+ payment methods including cards, digital wallets, and local options

Save on FX and settlement:

• Settle like-for-like in 12+ currencies straight into an Airwallex

  Global Account

• Avoid double conversions and hedge against currency fluctuations

• Enjoy competitive FX rates — just 0.5% to 1% above the interbank exchange rate

Protect against fraud:

• Reduce chargebacks with our pre-chargeback programme and retry logic

• Improve payment acceptance rates with machine-learning powered Checkout optimisation

• Protect against fraud with our 3DS fraud engine

Integrate and scale:

• Choose from flexible integration options, from plug-and-play to fully customisable checkout

• Integrate with Shopify, Magento, and WooCommerce

• Sync with your accounting software for easy reconciliation, including Xero, QuickBooks, NetSuite, and more

• Streamline bookkeeping with end-to-end expense management

Frequently Asked Questions (FAQs)

How long does it take to process payments?

Most card and digital wallet payments are authorised in seconds. However, settlement is when the money actually lands in the merchant’s account, and that usually takes one to three business days. Here’s a quick breakdown:

• Credit and debit cards: Authorisation is near-instant; settlement takes one to three business days

• Digital wallets: Same as cards — one to three days for settlement

• Buy now, pay later: Merchants usually get funds in one to three business days (the BNPL provider pays you up front)

• Bank transfers (ACH/SEPA): ACH payments in the US usually settle in one business day or less, and same-day ACH is widely available. SEPA transfers in Europe usually settle within one to two days

• Wire transfers: Domestic wires complete within hours; international wires can take up to five days

What's the difference between a payment processor and a payment gateway?

A payment gateway encrypts and sends your customer’s payment details. Meanwhile, a payment processor routes that information between banks and card networks so the transaction can be approved or declined. Think of the gateway as the secure envelope and the processor as the postal service that delivers it. Some providers, including Airwallex, combine both roles into a single solution.

What does "in-process payment" mean?

An in-process payment is a transaction that’s started but hasn’t finished settling. The funds are moving, but they haven’t reached the merchant’s account yet. At this stage, the payment has been authorised (the customer has enough funds), but the transfer between banks is still being completed.

What should I look for in a payment processing provider?

The most important things are security certifications (like PCI DSS Level 1), clear pricing with no hidden FX mark-ups, support for the payment methods your customers prefer, and easy integration with your current platform. You should also think about:

• Scalability to support growth and international expansion

• Reporting tools that give insight into customer behaviour

• Chargeback management and fraud prevention features

• Settlement speed and multi-currency features