What are the challenges of integrating international payment options in India?
Regulatory and RBI Restrictions
- International transactions must comply with RBI’s FEMA and LRS (Liberalised Remittance Scheme) guidelines.
- Indian payment gateways need special approval to enable cross-border payments and currency conversion.
- Banks may delay or reject foreign settlements if documentation (like invoices) isn’t clear.
- OPGSP (Online Payment Gateway Service Provider) rules govern limits and conditions for such payments.
- International gateways must route payments through authorized Indian banks.
Limited Gateway Support
- Not all Indian gateways (like Instamojo or Paytm) support international cards or currencies.
- Businesses may need to integrate with global providers like PayPal, Stripe, 2Checkout, or Razorpay International.
- These providers often require extensive KYC, business verification, and export declarations.
- Small businesses may struggle to get approval for international payment modes.
- Local banks supporting settlement from international gateways are fewer in number.
High Transaction Fees and Currency Conversion
- International payments attract 3%–5% per transaction, significantly higher than domestic rates.
- Currency conversion fees and exchange rate fluctuations reduce final settlement value.
- Gateways may hold payments for longer periods (7–14 days) before settlement.
- Refunds on international transactions take longer and are more costly.
- Foreign payouts often require manual reconciliation and invoicing.
Technical Integration Complexities
- Cross-border gateways require additional security protocols, PCI-DSS compliance, and dual-layer authentication.
- Checkout flows must support multiple currencies, language preferences, and tax calculations.
- Custom tax, import/export classifications, and country-based restrictions may apply.
- Integrating with global providers may involve tokenization, recurring billing, and anti-fraud APIs.
- Managing chargebacks or disputes internationally is more time-consuming.
Legal and Documentation Challenges
- GST invoices and export documentation must clearly define place of supply, especially for services.
- Some platforms require Import-Export Code (IEC) or FEMA declarations.
- Invoices must be compliant with SEZ, export, or B2B international transaction rules.
- Businesses must ensure DPDP and GDPR alignment for handling international customer data.
- Settlement of international payments must be reported in foreign income disclosures during tax filings.
