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Manage your business 13 April 2022

A comprehensive guide to international payments

Living in the digital age means that your business can reach a wider audience, making it so much easier to connect with clients and business partners from all over the world. While this may sound exciting, it can also be intimidating if you do not understand how international payments work, but with our International Payment Solutions, your business can reach even greater heights in 2022 and beyond.

What is an international payment?

An international payment is a money transfer that crosses national borders and usually involves 2 different currencies, for example, rands and pounds (GBP), rands and US dollars (USD) or rands and Australian dollars (AUD). These payments are governed by Exchange Control Regulations and include the following key elements:

  • SWIFT: International payments are made between banks using the electronic communication system Society for Worldwide Interbank Financial Telecommunication (SWIFT).
  • Foreign exchange (FX): FX is exchanging one country's currency for another. The FX rate is the rate at which one currency is exchanged for another.
  • BoP reporting / exchange control: All international payment transactions performed by South African residents are subject to the Exchange Control Regulations. The Financial Surveillance Department of the South African Reserve Bank (SARB) is responsible for the administration of exchange controls applicable on cross-border transactions. SARB has issued the Currency and Exchanges Manual for Authorised Dealers (CEMAD), which contains the permissions and conditions applicable to cross-border transactions that may be undertaken by authorised dealers (i.e. Standard Bank) on behalf of their clients (i.e. business entities and private individuals). Where Standard Bank is not empowered to approve the cross-border transaction, a suitably motivated application must be submitted to SARB for their consideration and approval. Our exchange control portal provides a helpful guide to BoP reporting.

Telegraphic transfers

Telegraphic transfers (TT) are used for all international payments and can be divided into 2 categories: inward and outward TTs. Outward TTs involve the electronic transfer of funds from your account to an overseas account; inward TTs involve the electronic transfer of funds from an overseas remitter/sender to your account, so if you need to pay a supplier, you would do an outward TT, but if a customer needs to pay you, it would be an inward TT.

All international payments incur fees, depending on the type of transaction you are making. When making an outward TT, you will be charged a commission fee as well as a SWIFT fee.

An inward payment incurs fees from the sending bank, the beneficiary bank and an intermediary bank if the payment could not be sent directly to the beneficiary bank.

FX currency solutions

Buying and selling currency, also referred to as foreign exchange, can be done in 2 ways: spot cover transactions or forward exchange contracts.

  • Spot cover transactions involve an agreement between 2 parties to buy one currency against selling another currency at an agreed price, for settlement within 2 business days. The exchange rate at which the transaction is done is called the spot exchange rate.
  • A forward exchange contract, or forward cover, is a contract between a bank and its customer whereby a rate of exchange is fixed immediately for the buying and selling of one currency for another, for delivery at an agreed future date. A forward exchange contract is an effective hedging tool, tantamount to an insurance policy, in that it protects traders and clients from unfavourable exchange rate fluctuations.

There are 3 types of FX contracts that are designed to suit the specific needs of your transaction:

  • Fixed contracts: The rate of exchange is fixed and specified for a future date, known as the maturity date. The delivery of the foreign currency takes place on this date and at the exchange rate specified in the contract. This contract is suitable if you know the exact date on which a transaction will take place.
  • Partially optional contracts: The terms of the contract are fixed from the establishment date until the option start date. After the option start date, the delivery of the foreign currency at the exchange rate specified in the contract can take place at any time before the maturity date. This contract would be suitable if you are certain that a transaction will not take place prior to the option start date, but you may need some flexibility thereafter.
  • Fully optional contract: The delivery of the foreign currency can take place at the contract rate at any time during the existence of the contract. These contracts may be utilised either in whole or in part, at any time between the establishment date and the maturity date of the contract.

Book your FX rates online

Standard Bank has an advanced, cross-asset electronic trading platform called eMarketTrader that combines market intelligence and research, real-time pricing, trade execution and post-trade services through a single web-based platform to fulfil your trading style and needs. The platform also has a mobile app, which enables you to leverage the power of mobile to support your business activities, allowing you to track market movement and buy or sell currency directly through the app (both spot cover transactions and forward exchange contracts).

Our International Payment Solutions for businesses are designed to help your business reach even greater heights. Our international payments webpage has a wealth of information that will guide you on how to make or receive International Payments. You can also speak to your business banker who will introduce you to our team of specialists who are available to assist you with structuring solutions that meet your specific business needs.