9 months ago
Freelancers' Global Payment Challenges and Solutions
When freelancers in India get paid by clients from other countries, they often lose money because of fees and exchange rates.
This can happen when the money is transferred from the client's bank to the freelancer's bank.
Some ways to avoid this are using online payment platforms that charge less, negotiating with banks, or using special accounts to keep foreign money until it's needed.
These methods can help freelancers keep more of the money they earn.
Freelancers in India lose up to 7% of income due to conversion and transfer charges on global payments.
Direct bank transfers via SWIFT are common but expensive, with costs up to 4% per payment.
Online cross-border payment platforms offer better rates, with some charging as low as 0.2-0.3% forex markup.
GST on foreign currency conversion adds further costs, with tiered rates up to ₹10,800.
EEFC accounts allow freelancers to retain foreign earnings and convert at favorable rates.
- Who
- Freelancers in India
- What
- Losing a significant portion of income on global payments due to conversion and transfer charges.
- Where
- India
- When
- Recent years, with a growing freelance economy.
- Why
- Multiple entities (banks, intermediaries, payment processors) take cuts, and the difference between mid-market rates and actual received rates results in payment leakage.
Bank Transfers
Online Payment Platforms
Cost
Bank Transfers
Bank transfers can cost up to 4% per payment, including remittance fees, GST, and forex markup.
Online Payment Platforms
Online platforms offer better rates, with some charging as low as 0.2-0.3% forex markup.
Convenience
Bank Transfers
Bank transfers are common and convenient for clients, but can be expensive for freelancers.
Online Payment Platforms
Online platforms offer faster settlement and clearer pricing, but clients may have their own preferences.
GST on Currency Conversion
Bank Transfers
Bank transfers are subject to GST on currency conversion, adding further costs.
Online Payment Platforms
Online platforms route payments through virtual multi-currency bank accounts, avoiding GST on currency conversion.
Key facts
- Payment Methods Discussed
- Direct Bank Transfer (SWIFT), Online Platforms (Wise, Skydo, Payoneer, Winvesta, Salt, PayPal), EEFC Accounts
- Typical Bank Transfer Costs
- 2.5%-4% per payment (including remittance fees, GST, and forex markup)
- Less Expensive Online Platforms
- Platforms tracking close to mid-market rates (e.g., Skydo, Wise) charge around 0.2-0.3% forex markup.
- Expensive Online Platforms
- PayPal and Stripe can cost freelancers 5-7% of earnings.
- GST on Foreign Currency Conversion
- 18% on 1% of the amount of currency exchanged (ACE) up to ₹1 lakh, with tiered rates for higher amounts.
- FIRC/FIRA Issuance Fee
- ₹100-200 charged by some banks as proof of foreign inward remittances.
- Negotiated Bank Transfer Rates
- Freelancers with high payment volumes can negotiate rates as low as ₹0.30-0.5 per USD.
- EEFC Accounts Advantage
- Allows freelancers to retain foreign earnings and convert at favorable rates, benefiting those with recurring international costs.
Quotes
Tushar Mehta
A freelance tech writer
“But it’s hard to get all clients to use them. Some larger organizations have internal policies or banking tie-ups, so they insist on direct bank-to-bank transfers.”
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Akash
A software architect who has been working with global clients for 15 years
“I have been getting my payments at a 40 paise per USD negotiated exchange rate with HSBC. Recently, I checked with my relationship manager at IndusInd Bank to see if they could do better, and they offered 30 paise per USD. I will be using that going forward.”
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Ankur
The founder of online platform for credit card users Card Insider
“Freelancers who remit $2,000-3,000 per month can expect to get ₹0.30-0.5 per USD rate. Freelancers must discuss with multiple banks and select the one which takes the lowest charges and sends digital FIRCs. If the bank is charging 2-3%, it’s better to use the fintech platforms.”
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