Navigating Cross Border Payments
Cross border payments are between buyers in one country and sellers in a different country. There are complexities to consider when trying to collect money from another country. Let’s first talk about using Cards where you need to consider:
cross border fee charged to sellers by Visa/MasterCard;
payment currency;
international processing fees from buyers’ banks;
foreign exchange (FX) fees impacting buyers and sellers;
impact on payment success rates and cost.
How do you avoid or reduce the impact of these complexities to achieve less friction for both buyers and sellers?
*Local Acquiring* is the first and foremost way to eliminate most of the complexity. This requires having a merchant account in each region where you sell. Due to card brand rules, you will need a local entity in each region and a payment provider with banks in each region. With local acquiring, the seller avoids the ~1% cross border fee and can improve the chance of payment success. The buyer avoids an international payment fee that their bank may change.
*Local currency* offers the buyer the ability to pay in the currency of their card. The buyer will have a better checkout experience, avoid FX fees with their bank, and can have a better chance of their payment succeeding.
*Local payment methods” outside of Cards can offer the buyer a better checkout experience. Many local payment methods do not require the seller to have a local entity to take advantage of them. Local payment methods include among others: Bank Transfers including Wire Transfers or EFT such as ACH in the U.S.; Online banking such as iDEAL in the Netherlands; Cash/Electronic Vouchers such as Boleto in Brazil, Digital wallets such as Apple Pay, and local Direct Debit.
In summary, my experience has been that a cross border payment solution as described above provides the seller not only the opportunity for reduced cost and improved payment success rates, but also international reach to increase sales, a better experience for the buyer, and a consolidated location for Reporting & Reconciliation globally.