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Uncover hidden costs and explore alternative payment gateways for Indian freelancers working with UK clients to optimize earnings and streamline transactions.
For Indian freelancers doing business with UK clients, the payment landscape can be as complex as the projects themselves. Traditional banking payment services often have hidden costs that chip away at your hard-earned money. In this post, I want to share some insights on those costs, the New Payments Architecture, and alternative payment gateways that might save you a few bucks.
When it comes to traditional UK bank payment systems, the costs can be surprisingly high, and often hidden. Here are some of the main pitfalls:
Platforms like PayPal and Payoneer charge transaction fees that can range from 2.9% to 3% or more. SWIFT wire transfers are notorious for their sending fees (up to $50) and receiving fees that can range from $10 to $35, not to mention extra charges from intermediary banks. Over time, these costs add up and hit your bottom line.
If you thought you could escape currency conversion fees, think again. Banks have been known to apply a healthy markup on exchange rates. For instance, you might see the market rate as INR 84 per USD but end up getting only INR 83. That's a loss of INR 10,000 on a $10,000 transaction. PayPal doesn’t make it any easier, either, charging a 2.5% fee to convert USD to INR.
Banking payment services also come with delays, sometimes taking days to settle payments. This is a killer for cash flow. If you’re not careful about tax laws and compliance, you could end up facing additional costs and stress.
Smaller transactions often fall prey to intermediary bank fees, which can leave freelancers scratching their heads wondering where their money went.
The New Payments Architecture (NPA) is set to change the payment landscape. It's designed to replace older systems (like Bacs and FPS) with a more modern, ISO 20022-compliant structure.
The integration of NPA with UPI could also make cross-border payments easier. UPI is known for quick and low-cost transactions, which can help Indian SMEs streamline their international business.
To dodge the high fees associated with traditional payment methods, here are some alternative payment gateways you might want to consider:
Formerly known as TransferWise, this service offers mid-market exchange rates without hidden fees. It allows clients to pay in local currencies, which is a bonus for freelancers. Instant transfers and local receiving accounts make Wise a strong contender.
Fast and efficient, Karbon Forex provides competitive rates with minimal paperwork. Quick transfers are a major plus for freelancers needing prompt payments.
If you want to look beyond Payoneer, Skydo offers transparent pricing and zero forex margin. This could be an interesting option for freelancers looking for better deals.
Stripe can be a good option if you're able to access it. Known for lower fees, it's also robust in payment integration.
Platforms like Upwork and Fiverr have built-in payment processing, but they take a cut. There are also options like PingPong for marketplace vendors that offer integrated solutions.
There’s a noticeable difference in transaction speed and cost between traditional and digital payment systems.
Traditional systems tend to be slower. Bank transfers can take 1-3 days, while wire transfers may take even longer. Credit card transactions might be approved instantly but take days to settle. In contrast, digital systems can process transactions almost immediately, which is crucial for cash flow.
Traditional systems usually come with higher fees, while digital payment gateways offer competitive pricing. Stripe has variable fees based on country and payment method, and Braintree's fees are relatively straightforward.
In short, while digital payment systems can be more efficient and potentially cheaper, the specifics depend on your chosen provider.
