An interconnected world means the gig economy has reached global heights. Gone are the days when freelancing meant that a writer had to depend on local businesses, sometimes working not directly with businesses but rather passing through an intermediary. This is amazing in some ways, but also difficult in others; with payment getting at the top of my list. In this piece, we walk you through the cross-border payments landscape and suggest what financial products are most impactful for freelancers who work across borders.
The Challenges of Cross-Border Payments
First, we need to know the barriers an international freelancer has to pass through.
The Effect of Currency Exchange Rates: The changing exchange rates can easily put a damper on earnings.
Transaction Fees: Foreign money transfers cost a lot from both banks and intermediaries.
Processing Times: A traditional bank transfer can sometimes take days to complete.
Compliance Issues: International money transfers are subject to rules and regulations in different countries.
Region Payment Preferences: Some regions may prefer specific payment methods.
In this post, we will discuss some of the budget-friendly tools and services that can be great assets to freelancers.
Online Payment Platforms
PayPal
Currently, PayPal is one of the most widely used and easier to work with payment options for international freelancers. It accepts multiple fiat currencies and offers instant cross-border transfers. That being said, watch their fee, especially for currency conversion.
Pros:
Widely accepted
Easy to use
Provides seller & buyer protection
Cons:
High fees, most likely currency conversion fees
Partial functionality in a few nations
Wise (formerly TransferWise)
Wise has grown to become the go-to exchange platform for freelancers due to its clear fee and competitive rates of 459 currency routes, spread across 55 countries including Japan. So it provides you with a local bank account in multiple countries where someone pays into the virtual accounts locally.
Pros:
Excellent exchange rates
Transparent fee structure
Local Bank Details In Multiple Countries
Cons:
Not Nearly As Accepted As PayPal
Additional verification is needed for amounts possibly over $1,000
Cryptocurrency Solutions
Bitcoin and Other Cryptocurrencies
Cryptocurrencies are a viable solution to traditional banking systems. They are quite risky but offer really quick and cheap international transactions.
Pros:
Cheap international transactions
Fast processing times
No need for bank accounts
Cons:
High volatility
This could be a technical barrier to entry
Might not be universally agreed upon by all clients
Stablecoins
Stablecoins— like USDC or USDT—are a category of cryptocurrencies that are pegged to the price of an underlying asset, such as the U.S. Dollar. eval(instances[i]. All but the most abstract stablecoins can offer many of the key benefits that come along with using cryptocurrency without exposing their holders to so much volatility.
Pros:
Stability of value
Fast and low-cost transfers
Convertible to other Cryptos or Fiat
Cons:
A bit advanced, needs some crypto skills
Possibly regulatory uncertainty in certain states
Specialized Freelancer Platforms
Payoneer
Payoneer (it’s good for global payments, Used by freelancer and digital nomad). They provide you with services like prepaid Mastercard, and local receiving accounts.
Pros:
Ideal for freelancers and small international businesses
Provides you with local receiving accounts in different currencies
Guarantees a prepaid Mastercard to give you instant access to funds
Cons:
Fees add up, especially for smaller transactions
Only customer support in certain regions
Deel
Deel is quite a newcomer and aims to be the end-to-end solution for hiring & paying your international staff/contractors. Compliance, Taxes, and Payments — all on one platform.
Pros:
Manages compliance and tax documents
Support for multiple payment methods
Just offers fixed contracts and time-tracking
Cons:
Better for ongoing relationships than one-off work.
Simpler payment solutions are likely to be less expensive.
Traditional Banking Solutions
International Wire Transfers
Though it is typically much more expensive and slower, a traditional bank transfer can also be used for larger payments.
Pros:
They are more widely accepted and known.
Suitable for large transfers
Favored by mature businesses
Cons:
High fees and minimums — Until the price of Bitcoin transaction fees dropped in recent months, sending small amounts was cost-prohibitive.
Slow processing times
Need for a lot of paperwork
Multi-Currency Accounts
There are a few banks that offer multi-currency accounts, so you can have and manage more than 1 currency in one. This is especially great for freelancers who work with clients abroad.
Pros:
Currency conversion fees are minimized
Easier handling of multiple currencies
Frequently includes other benefits such as trip insurance
Cons:
Possible high maintenance costs
Countries like the United States are not included
Could still charge for transferring internationally
Choosing the Right Tools for You
Your financial toolkit will be different from others depending on your:
Your Top Countries
Average transaction volumes and sizes
How Your Clients Like To Pay Their Invoices
Technology Comfort
What your business specifically needs
Therefore, typically you should use a mix of these tools to get the most flexibility and lowest cost possible. So, you use Wise for clients in various countries — PayPal for the rest (or cost per head) and standard bank transfer payments infrequently.
Conclusion
Cross-border payments…as an international freelancer this can be a tad bit of a nuisance to deal with but it doesn’t have to. So, by also realizing what you have available and picking the remedies that are appropriate for your needs — you can concentrate on how to raise a global business and affect real value everywhere else.
Keep yourself updated on the latest trends in international payment solutions as this sector is rapidly maturing. There is a set of new solutions and services that keep popping up, all vying to provide even better tools and more efficiencies in managing your global freelance finances.