LTP Research

Unveiling the True Cost of Cross-Border B2B Payments:

How Freelancers & Businesses in India Can Reduce
Payment Fees

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

Table of Contents

Overview of Cross-Border B2B Payments in India

Overview of Wire Transfers

Fees and issues associated with wire transfers

Cross-Border B2B Payments

Problems faced by merchants while receiving cross-border payments

Reviews of customers regarding issues with cross-border transactions

Business Comparison of PayPal and Payoneer

Comparison of Payment Fees

5

Scenario I: Working with an international client directly

Scenario II: Working on a freelance marketplace

Conclusion

Appendix

Introduction to Payoneer and its Point of Differentiation

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

Executive Summary

LTP has always had a great interest in B2B transactions, especially in the cross-border
transaction scenario. Cross-border payments have become a critical part of millions of
lives as we moved towards a more globalized world and multicultural societies.
The segment represents a massive market, great opportunities and very promising
players. Cross-border B2B payments have become more common, and merchants are
looking for the most convenient, cost-efficient and transparent options. This is driving
more of these transactions to the Web and mobile channels vs. traditional agent-based

and bank-based options.

India provides enormous opportunities for B2B players, both domestic and foreign.
Compared to other developed markets, India is largely under-penetrated with a huge
potential for growth in the cross-border B2B transaction market.
The following white paper is focused exclusively on covering solutions for Indian
businesses or professional service providers that need to get paid by their
international clients (the US, EU and UK) or freelance marketplaces expecting
payment for their services from abroad.
Our research has been funded by Payoneer, but the views expressed in this paper are
those of Lets Talk Payments, reflecting our independent analysis.
To evaluate the various options and players available in India for B2B cross-border
transactions, we conducted transactions to compare the actual fees and currency
conversion rates offered by the players. Here are the two scenarios evaluated by
us:
Working with an international client directly, i.e., where an Indian company bills a
US-based company directly
Working on a freelance marketplace
The players involved in our comparison are Payoneer, PayPal and banks.

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

Overview of B2B Payment in India

In 2015, the total value of B2B payments in India was estimated at $20 billion.
Consumers

Businesses

Cross-border payments have become a

critical part of millions of lives as we moved
towards a more globalized world and
multicultural societies. The segment
represents a massive market, great
opportunities and very promising players.

India is considered to be one of the fastestgrowing nations in the B2B Payments and
provide enormous opportunities for B2B
players, both domestic and International.

Total Online Cross-Border Spending in India

(in $ Billion)

In India, B2B payments was

estimated at ~$20 Billion in 2015.

78.5%
15
8

2015

2016

Industry estimates says that there will be

more than 50 trillion dollars in the crossborder business volume by 2020 globally.
Thats 20 times larger than cross-border
retail P2P volume.

Payment Methods Used for CrossBorder Transactions in India

E-banking
International Cards

25%
75%

Source: BCG

Drivers of Cross-Border B2B Payments:

Connectivity: The number of opportunities for a business to find (and be found by) potential
customers has exploded.
E-commerce platforms: The rapid development of e-commerce platforms, particularly B2C and
B2B e-commerce marketplaces, is changing the way businesses go to market and find
customers. The entire distribution model for a business to get to customers is being radically
transformed.

Infrastructure: The increasingly available global infrastructure is the grease that enables the
wheels of cross-border commerce to keep spinning faster and faster.
Cloud-based software: The availability of new cloud-based software tools is enabling
businesses to go more digital, for more of what they do, more quickly, simply and cost-effectively
than ever.
4

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

Overview of Wire Transfers

International payments through wire transfer is time-consuming and

expensive.
Model of Wire Transfers (through banks):
Remitting Country

Beneficiary Country

Sender

Receiver

Corresponding Bank
Relationship
Bank

Payment
System

Bank

Settlement Banks

Bank

Payment
System

Bank

Settlement Banks

Fees Associated with Wire Transfer:

Service tax on Foreign Currency conversion
Transaction fee

Fx spread fee for currency conversion

Major issues associated with wire transfer:

For wire transfer payments, no standard exists for sending remittance information that allows
efficient reconciliation and posting of electronic payments once they are received.
Risk of fraud: Online wire transfers are open to risk by fraudsters who are able to circumvent
online authentication measures.
Time frame: Sending a wire transfer to a bank abroad can take a lot longer. This is problematic if
there is an emergency.

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

Overview of Wire Transfers

Reviews by Indian professionals/merchants regarding International wire

transfers.
Merchant 1:
Loss of wire transfer while making an international transfer:
Made an international wires to a company in India. The transfer was sent to an intermediary bank in
New York. The problem was that I made the wire online (online banking) and there were not enough
fields available to enter all the details. Therefore, I sent my bank a separate email to explain everything
in detail, but they answered that the wire has been already made automatically. This was six weeks
ago; the receiver did not get the money and it was not returned to me.

Merchant 2:
Delay in wire transfer:
Made a wire transfer using a bank in America to an account in India using SWIFT codes. It has been
two and a half months and it hasn't gone through. The Bank in India has not received any information
regarding this and the bank in America is not willing to help.

Merchant 3:
Unnecessary fees levied on transfers:
Made a wire transfer to India from the US and had the following problems with the bank:
Submitted the request on July 16 and got a specific exchange rate for USD to INR but the bank in
America did not process this till July 19, waiting to get a better rate.
The bank in America used another bank as an intermediary bank for the transfer without request or
consent and the processing got delayed by five days since the intermediary bank had questions.
The amount that eventually got deposited is less than what was promised in the receipt when the
wire was initiated.

Merchant 4:
High transfer fee:
Originator as well as the recipient will most likely be charged a fee by the bank for the wire. So while
the sender bank is charging you $X to send the wire, the person receiving the funds will also get
charged by their bank for the wire.

Source: Quora

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

Problems faced by Indian Companies in Transacting

Cross-Border B2B Payments

Unpaid B2B invoices and time taken for transactions are the major issues
faced.
Sales Made on Credit
Proportion of Sales made on Credit Given to Foreign
Customers
42.5%

39.3%

India

Asia

One of the major issues for the merchants when doing cross-border business. According to a survey,
around 39.3% of the sales are made on credit given to foreign customers.

Unpaid B2B Invoices

Average Proportion of B2B Invoices Unpaid 90+ days

After Due Date
14.5%
11.1%

India

Asia

Late payments of invoices incur financial and administrative costs and can negatively affect cash flow
and business growth. Merchants in India receive payments on foreign B2B invoices around 63 days
after invoicing on an average. The average payment duration for the region starts at 61 days for foreign
ones. The unpaid invoices is one of the greatest concerns for Indian respondents when it comes to
managing receivables and collections.
Source: Atradius

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

Problems faced by Indian Companies in Transacting

Cross-Border B2B Payments

Complexity of the payment procedure is another hurdle faced by Indian

companies.
Time Taken for Transfer
One of the biggest cross-border payment challenges for small and medium businesses is making and
receiving payments of less than $10,000 and time that needs to be allocated for funds to clear. When it
comes to overseas transactions, the complexity of the issue i.e., when businesses find themselves
trying to navigate their way through the correspondent banking model completion of payments (even
low value payments) can often take months and incur a substantial amount of charges along the way.

Risk of Loss of Information

Often payment messages are transferred across banks and across-borders which creates a high risk of
critical information being lost about the payment. Apart from it, difficulty in tracking payment progress
when dealing with foreign businesses, in-payment reconciliation and lack of foreign exchange fee
transparency are also some of the other challenges faced by merchants.

Other Common Issues

When it comes to cross-border B2B payments, apart from late payment of foreign invoices, the issues
most often reported by merchants in India are the complexity of the payment procedure, liquidity issues
and the inefficiencies of the banking system.

Source: Atradius

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

Issues faced by Merchants

Problems faced by professionals/merchants while making B2B cross-border

transfers.
Merchant 1:
Delay in payment:
Facing issues with withdrawal to a bank in India. I withdrew funds from my account on October 8,
which was expected to reach my bank on October 12, and again, on October 15 which was expected
to reach my bank on the October 20. I haven't yet received funds in my bank for both these
transactions.

Merchant 2:
Technical issues when paying to a foreign merchant:
Recently, I came across a problem while purchasing software and plugins for my blog through a
merchant who supported PayPals payment gateway. When I was ready with everything and clicked
Pay it showed a message saying, We were unable to authorize your payment, try with another card.

Merchant 3:
Unaccounted transfer fee:
I transferred $1,050 from my PayPal account to my bank account and due to PayPal issues with RBI in
India, they put this transfer on hold and today, they reverted back that amount into my PayPal account.
The issue here is that in return of my $1050, they reverted back only $965. That means there is no
accountability of the remaining $85 in this transaction.

Source: Quora

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

Comparison of Major Cross-Border B2B Transfer

Companies in India

PayPal and Payoneer are the two significant companies working in this
sector.
Business Comparison
Year of establishment

1998

2005

No. of active customers

More than 179 million

(2015)

3+ million (all B2B)

Global presence

More than 200 markets,

withdraw funds to their bank
accounts in 57 currencies
and hold balances in their
PayPal accounts in 26
currencies.

Service

Operates as an acquirer,
performing payment
processing for online
vendors, auction sites and
other commercial users.

Provides solutions for

professionals and
businesses to send and
receive payments globally.

Leaders

Daniel Schulman

Scott Galit

Total funding raised

$220 million (listed as a

public company)

$90 million

Transaction limit in India

$10,000

$10,000

Sending payments to more

than 200 countries and
territories in 150+
currencies.

Source: Quora

10

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

Comparison of Payment Fees

Scenario I

Working with an international client directly, i.e., where an

Indian company bills a US-based company directly.

1. Through Bank Transfer

LTP made a payment from US to India through a wire transfer. Here are the findings of the payment
made:

Sender bank: Bank of America

Receiver bank: Kotak Mahindra Bank
Amount transferred: $70
Wire transfer fee: $35 (transfer fee + transaction fee)
Currency conversion fee: 2.6% above the mid-market rate
Total time taken for transfer of Payment: One working day
Total amount transferred:
Mid-market rate: 1 USD = 66.38; Currency conversion rate charged by bank = 64.65 (2.6% above midmarket rate)
Currency transferred in USD = $35
Hence, $35*64.65 = INR 2,262.75
Pros: Same-day transfer, seamless process as it does not require any middle platform
Cons: Very high wire transfer fee

2. Through PayPal transfer

LTP made a payment transfer from PayPal (US) a/c to PayPal (India) a/c. Here are the findings of the
same:

Sender: PayPal US
Receiver bank: PayPal India
Amount transferred: $70
Fee charged to receiver: 4.4% of the amount transferred + 0.30 cents
Currency conversion fee: 2.5% above the mid-market rate
Total time taken for transfer of payment: 35 working days
Total amount transferred :
Mid-market rate: 1 USD = 66.38; currency conversion rate charged by PayPal = 64.72 (2.5% above the
mid-market rate)
Currency to be transferred in USD = $66.62
Hence, 66.62*64.72= INR 4,311.64
Pros: Low transfer fee, no fees charged to the sender
Cons: Delay in payments due to technical and regulatory guidelines
11

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

Comparison of Payment Fees

3. Through Payoneer
LTP made a payment from US to India through Payoneer ACH transfer. Here are the findings of the
payment made:
Sender: Payoneer US
Receiver bank: Local Indian Bank
Amount transferred: $70
Receiving fee: Nil
Currency conversion fee: 2% above the mid-market rate
Total time taken for transfer of payment: 24 working days
Total amount transferred :
Mid-market rate: 1 USD = 66.38; currency conversion rate charged by Payoneer = 65.05 (2% above
mid-market rate)
Currency transferred in USD: $70
Hence, 70*65.05 = INR 4,553.50
Pros: Best currency conversion rate offered
Cons: The payment is routed through ACH transfer which delays the transfer

LTP Factors for

Assessment

Bank

Ease of Payment
flow

High

Medium

Medium

Processing time

Low

Medium

Medium

Total Fee charges

High

Low

Medium

Conversion fee
charges

Medium

Low

Medium

Note: The processing time for wire transfers will differ according to the sending and the receiving country
as well as the banks involved in the transactions. The time involved can vary from one working day to five
working days. The time taken above for the comparison is specific to the transaction made through Bank
of America to Kotak Bank in India.
12

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

Conclusion

Scenario: Direct International Transfer

Receiving Country:

Sending Country:

Transferred Amount: $70

Cases

Fee
Charged

Conversion
fee
charged
(% above
the midmarket rate)

Time of
processing
(No. of
working
days)

Final
amount
transferred
(in INR)

Wire transfer
fee ($35)

2.6%

2,262.75

4.4% of the
amount
transferred +
0.30 cents

2.5%

47

4,311.64

Nil

2%

24

4,553.50

Case I

Case II

Best option

Case III

Out of the three given options, Payoneer offers the best currency conversion fee of 2% above the
mid-market rate and is the best option for making cross-border transactions. Transfers made
through Payoneer allows customers to save on forex conversion & transaction fees.
Payoneer offers a great service called the Global Payment Service (used by LTP for making a
direct international transfer) which provides users with local US, EU, JP and UK receiving account
numbers. Funds paid into these accounts are received into the users Payoneer account and then
transferred automatically to the users local bank account in INR which keeps the cost of
transferring money low and efficiency high.
The option of direct wire transfer between banks is a very expensive and has the probability of the
transfer being delayed or getting lost. PayPal is another option of direct transferring of money but
charges a landing fee as high as 4.4%.
13

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

Comparison of Payment Fees

Scenario II

Working on a freelance marketplace

Freelance marketplaces are a great way for Indian freelancers, consultants and businesses to expand
their global client base by connecting with companies around the world who require their skills. There
are a number of freelance marketplaces that are popular in India. This analysis is based on tests on
one popular marketplace but the comparison between bank transfers, PayPal and Payoneer is very
similar for all others.

1. Through Local Fund Transfer Provided by the freelance marketplace

LTP received a payment for services provided through the freelance marketplace. Marketplaces
typically present the freelancer or service provider with several options of how to withdraw (transfer)
the funds out from their freelancer account.
Withdrawal method used: Local fund transfer
Receiver: Freelancer in India
Amount transferred: $55
Fees charged to sender: Nil
Fees charged to receiver: Marketplace fee (10% of the earnings) + marketplace withdrawal fee
($1.99) + marketplace currency conversion fee (2.3% above the mid-market rate)
Total time taken for the transfer of payment: 57 working days
Total amount transferred: Mid-market rate: 1 USD = 66.38; Currency conversion rate charged by the
marketplaces = 64.85 (2.3% above the mid-market rate)
Currency transferred in USD: $47.51
Hence, 47.51*64.85 = INR 3,081.17
2. Through PayPal Transfer
LTP made a withdrawal of payments through PayPal. Here are the findings of the payment made:
Withdrawal method used: PayPal
Receiver: Freelancer in India
Amount transferred: $55
Fees charged to sender: Nil
Fees charged to receiver: Marketplace fee (10% of the earnings) + withdrawal fee ($1) + PayPal
fixed fee (4.7% ) + PayPal currency conversion fee (2.5% above the mid-market rate)
Total time taken for transfer of payment: 5-7 working days
Total amount transferred: Mid-market rate: 1 USD = 66.38; currency conversion rate charged by
PayPal = 64.72 (2.5% above the mid-market rate)
Currency transferred in USD: $46.06
Hence, 46.06*64.72 = INR 2,981.39

14

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

Comparison of Payment Fees

3. Through Payoneer
LTP made a withdrawal of payment through Payoneer platform. Here are the findings of the payment
made:
Withdrawal method used: Payoneer
Receiver: Freelancer in India
Amount Transferred: $55
Fees charged to sender: Nil
Fees charged to receiver: Marketplace fee (10% of the earnings) + marketplace withdrawal fee (Nil)
+ Payoneer currency conversion fee (2% above the mid-market rate )
Total time taken for the transfer of payment: 13 working days
Total amount transferred:
Mid-market rate: 1 USD = 66.38; Currency conversion rate charged by Payoneer = 65.05 (2% above
the mid-market rate)
Currency transferred in USD: $49.5
Hence, 49.50*65.05 = INR 3,219.97

LTP Factors for

Assessment

Local fund
transfer

Ease of payment
flow

Medium

Medium

Medium

Total processing
time

High

Low

Medium

Total withdrawal
fee charges

Medium

Low

High

Conversion fee
charges

Medium

low

High

15

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

Conclusion

Scenario: Working on a Freelance Marketplace

Receiving Country:

Sending Country:

Amount Transferred: $55

Cases

Marketplace
withdrawal
fee

Other
landing fee

Conversion
fee
charged (%
above the
mid-market
rate)

$1.99

Nil

2.3%

3,081.17

$1

4.3% of the
amount
transferred
+0.30 cents

2.5%

2,981.39

Nil

Nil

2%

3,219.97

Final
amount
transferred
( in INR)

Case I
FREELANCE
MARKETPLACE

Case II
FREELANCE
MARKETPLACE

Best option
FREELANCE
MARKETPLACE

Case III

Bank transfer is currently one of the most popular options by freelancers as it does not charge any
landing fee, but conversion fees are high. Payoneer is a great way to receive payments from
freelance marketplaces and is already popular among many freelancers.
According to LTP analysis, Payoneer is the best option available in India when withdrawing money
from freelances marketplace with zero landing fees and the lowest conversion fee.
Payoneer offers a dynamic discount on the conversion fee based on profile and volume of
transactions processed by the customer.
$2 withdrawal fee from the marketplace to Payoneer is waived for customers in India
16

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

Introduction to Payoneer and its Point of Differentiation

Payoneer empowers global commerce by connecting businesses,

professionals, countries and currencies with its innovative crossborder payments platform. In today's borderless digital world,
Payoneer enables millions of businesses and professionals from more
than 200 countries to reach new audiences by facilitating seamless,
cross-border payments. Additionally, thousands of leading
corporations including Airbnb, Amazon, Getty Images, Google, and
Upwork rely on Payoneer's mass payout services.

Payoneer provides its services to businesses in over 200 countries and territories that are looking to
connect to their international trading partners, and get paid in new and better ways for their crossborder sales.
Ranked in the top 100 of the Inc. 500 Financial Service companies, Payoneer is regulated in the US,
Europe and Asia, has offices worldwide from Silicon Valley to Bangalore and Tokyo and is gaining a
strong momentum among customers and business partners in India, SE Asia, Latin America and
Eastern Europe.

Payoneers unique capabilities enable it to process millions of applications annually. Data security is
more critical now than ever. The company handles billions of dollars and manages many different types
of risk. Its customers trust them because they know that their business isnt just about having cool
technology and a good sales pitch its about protecting customers and protecting the banking system
while empowering entrepreneurs and facilitating global growth.

Unique Point Of Differentiation:

Free collection service: It is free to receive payments when using Payoneers Global Payment
Service.
Low currency conversion fee: Payoneer transfers payments from a local bank in India in INR,
which provides a good conversion rate
Real-time money transfer facilities: One of the main advantages of Payoneer is that it allows you
to withdraw your money faster. Even on verified accounts, PayPal still takes three to five days to
process withdrawals. On the other hand, funds are usually made available within 24 hours when
using Payoneer. Some transactions even take minutes to be prepared.

Zero landing fees and very low conversion fee of 2% with further reductions available based on
usage.

*For the analysis of the transactions conducted by LTP, we have taken a constant mid-market rate of
1 USD = INR 66.38 (as on April 7, 2016)
17

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

About LTP:
LTP is a global research and content platform for innovation in emerging financial services
and commerce, now broadly called FInTech. LTP has been at the forefront of bringing the

most current topics and strategies for FinTech innovation to a cross-section of stakeholders
via its proprietary research, the daily industry newsletter and MEDICI, a FinTech discovery
and engagement platform. LTP products and services are designed to provide deep domainspecific depth and comprehensive coverage in an easy-to-consume format for today's
rapidly changing open innovation environment.
MEDICI, powered by LTP, allows FinTech startups, banks & other financial institutions,
investors and strategic stakeholders to discover, engage and interact with each other on a
rich, contextual, digital platform, that is curated by LTP analysts. MEDICI is a subscriptionbased offering to the industry and is currently available by invitation only.
LetsTalkPayments.com is the fastest growing global destination for news, insights & datadriven research in emerging financial services. LTP defines and embraces the New Global
FinTech. With engaging interactive content covering daily news, analytical opinion, podcasts,
webinars, interviews, research reports and even e-books, LTP has been called the watering

hole for industry insiders, business leaders, FinTech investors and entrepreneurs.
Contributors to LTP are spread out globally to publish stories as they unfold, from various
segments of this interconnected space, ranging from consumer financial services, lending &
banking to mobile- and cloud- enabled payments & commerce, also including the latest
shopping-related innovations in advertising, fashion technology, smart devices and
wearables. LTP subscribers rate its content as fiercely independent, thought provoking and
always up-to-date, in a way that continues to inform, engage and inspire everyday. To join

the 50,000 subscribers of the daily newsletter who will visit LTP 5 Million times this year.
Subscribe for free now: letstalkpayments.com/subscribe
LETS TALK PAYMENTS, LLC
PO Box 473944
Charlotte, NC 28247

USA

18

Lets Talk Payments, LLC | Copying or distribution without written permission from Lets Talk Payments is prohibited

Phone: +1 (202) 552-5998