Special Report | Progressing Payments: The State of Payments for B2B -
Special Report | Progressing Payments: The State of Payments for B2B -
Thanks to technology, accessibility and the Internet, our world has gotten smaller. We can easily communicate, work and even sell across borders. As businesses look to expand, introducing products and services to new geographies is the natural next step.
International selling is the future of commerce. It’s true that domestic eCommerce is growing, but cross-border eCommerce is exploding. Consider these statistics to see how enabling cross-border payments could put your growth in hyperdrive.
33% international growth in eCommerce traffic; 12% in domestic 7
To grow effectively on an international scale, you need a good way to manage cross-border payments – transactions that involve an exchange of money across the border of a country or region – while avoiding unnecessary fees and the pitfalls of global compliance.
And to accomplish that, you need the ability to process cross-border payments as though they were local payments, making it easy for international customers to purchase your product or service while reducing your business’s costs.
This guide walks you through cross-border payments, highlighting the benefits to expect and risks to avoid. You’ll also learn what features you need in a cross-border payments solution to fully capitalize on the growth of global commerce.
Cross-border commerce is experiencing unprecedented growth, and it’s projected to continue. Yet only half of leading US retailers ship outside North America. Why have so few businesses capitalized on this opportunity? Because cross-border payments are challenging.
Numerous complex factors impact cross-border payments, including the need to:
Processing cross-border payments is a fine balancing act that’s more challenging than it initially appears.
The number-one reason cross-border payments fail is that your payments aren’t optimized for your target buyers, their payment preferences and their location.
Potential buyers will be more comfortable purchasing from a checkout page that displays their language. For example, consider someone from England purchasing video editing software from a German company. If the checkout page is in German, the customer cannot be sure they’re fully understanding what they’re buying and being charged. This can lead to checkout abandonment.
When a buyer doesn’t see the final prices and charges in his own currency, it is hard for him to understand exactly what he’ll be paying for your goods or services. Remove friction in the checkout process by displaying the checkout page in your buyers’ local currencies.
The best way to meet your audience’s global needs at checkout is to use a cross-border payment processing provider that can detect buyers’ locations and then display in the appropriate languages and currencies
Different payment methods are more common in different areas of the world. A German buyer may prefer Sofort or Giropay, someone from the Netherlands may prefer iDeal, and another from buyer from the UK may want to pay via SEPA Direct Debit. Offering preferred payment types based on location is essential to converting sales – buyers will abandon at checkout if they don’t see the expected local payment options.
Be sure your payment processing provider offers the popular payment methods for the countries you sell in today, as well as for those geographies you may want to expand to in the future. Without this foresight, you could cause your company to have to onboard additional payment providers in the future, which could lead to challenges related to measuring performance, reconciliation and technical integrations.
When customers pay by card, the card information is passed along with an authorization request to an acquiring bank – an institution that processes credit or debit card payments on your behalf. If the transaction is processed in a region other than where the card is issued, then the payment is seen as a foreign transaction and has a higher probability of being declined or flagged for fraud.
You can improve your authorization rates by selecting a cross-border payment provider that uses numerous acquiring banks around the globe. A gateway with multiple acquiring bank partners can send your German shopper’s card approval request to a bank in the same region, which will see it as a local transaction and approve it.
Processing card payments comes with associated fees. When you process cross-border card payments, additional fees are charged on top of them. Over the last year and a half, the card networks have increased interchange fees up to an additional 1% for cross-border transactions. BlueSnap CEO Ralph Dangelmaier puts it this way:
“Consider the real price of up to a 1% increase in fees for an online retailer:
If an eCommerce store sells $200 million worth of goods and 25% of its sales are considered cross-border, then $50 million of that revenue is subject to the cross-border interchange fee, meaning they are paying, on average, up to $500,000 in fees that could be avoided.”
But additional interchange fees aren’t the only fees associated with cross-border payment processing. Online businesses might also see foreign exchange fees when a customer purchases in one currency but then your bank settles the transaction in another currency. For example, if a French customer shops on your US website and makes a purchase in US dollars with his Visa card issued by a French bank, he may have to pay a foreign exchange fee, which over time will discourage international buyers from using your business. If you choose to mitigate this by allowing customers to pay in their local currencies, then the bank will charge you a fee to convert the money to your domestic currency.
If your payment processor isn’t built to manage cross-border payments, it will be up to you to struggle to minimize those fees. But they are absolutely avoidable.
You need to identify a payment provider that can help you process your payments as is if they were local – helping you to align where the card is issued with where it is processed, and then aligning your local entity with where you are processing. And doing it all in the right currency to help you avoid additional fees.
The more regions you choose to sell in, the more regulations you need to consider. That includes local taxation laws, data privacy laws and payment processing laws.
We’ve identified six key regulatory categories:
These rules vary depending on a transaction’s location and payment method. The easiest way to know that you are managing all the tax and regulations issues is to work with a payments partner that understands them. And for cross-border payments, your partner must understand them for every region around the world.
The EU, a hefty market in our global economy, has its own rules dictating online transactions. And it’s vital to have a payment solution that meets them if you do any business in the European Economic Area (EEA).
PSD2, effective December 31, 2020, is one of the EU’s most important regulations for merchants to consider. It requires Strong Customer Authentication (SCA) via three levels of identification for every transaction, from card numbers to texts with authorization codes.
3-D Secure 2 was designed to satisfy the SCA mandate. It is an advanced authentication solution that reduces fraud by identifying a cardholder’s identity in real-time. This additional layer of security helps to prevent the unauthorized use of cards and protects the seller from fraud. When payments are successfully authenticated using 3-D Secure, there is a liability shift, in which liability for fraud shifts from the merchant to the issuer.
Without PSD2 compliance, any payments processed through the EEA could be declined — so you need a payment processor offering features, like 3-D Secure, that enable PSD2 compliance.
Optimizing your payments means creating both an ideal experience for your customers and an ideal operational setup for your company.
According to BigCommerce, merchants that sell to international customers boost sales by 10% to 15%. That’s because they have access to a much wider audience than those that only deal locally. Similarly, platforms that can onboard new clients in international markets expand their reach exponentially.
The catch? There’s a big difference between just accepting cross-border payments and optimizing them.
Optimizing your payments means creating both an ideal experience for your customers and an ideal operational setup for your company. This requires taking all the factors below into consideration for every transaction:
When you merely accept cross-border transactions, you can grow your business — but you could fall prey to any of the above challenges. However, when you get cross-border payments right and locally optimize payment processing, you unlock the door to many more rewards.
By optimizing your cross-border payments, you’ll see higher ROI on each transaction. In particular, by taking steps to lower the costs associated with each payment, you’ll be able to boost your margins.
That’s especially important now because of the recently increasing card processing and interchange fees. Cross-border payments that process locally (for instance, a French credit card that processes in the same region rather than in the US) avoid many of these fees. The better your payment processor can minimize cross-border fees, the more ROI you’ll see.
Did you know 63% of US retailers have customers shopping from another country? If retailers don’t optimize their websites for cross-border payments, prospects likely won’t see their preferred language, currency or payment types – and this creates friction, leading to checkout abandonment.
On the other hand, if you design an eCommerce experience with cross-border payments in mind, you can offer the ultimate checkout experience for every shopper, particularly by incorporating localized payment types. By meeting your customers where they are, you can remove all possible obstacles to purchase and ensure that global customers enjoy an experience on par with domestic buyers.
For instance, a shopper in Amsterdam who sees your checkout page in Dutch with prices and taxes calculated in euros and the option to pay with iDEAL (an online bank transfer system that’s the number one online payment method in the Netherlands) is far more likely to convert than a shopper who’s forced to operate within a US-centric payment experience.
Properly implemented cross-border payments are highly efficient and effective. For instance, processing cards locally helps transactions get authorized much more quickly. Similarly, a payment solution that optimizes payments by automatically adapting to a local region’s needs ensures you don’t lose transactions to false declines.
Centralizing your cross-border payments in one global payment processor also streamlines your internal operations. You no longer need to operate multiple accounts across regions within one provider or work with a net new provider in each region you enter. That means fewer issues with data, a single source for reconciliation and less manual work on integrations.
business also gives you access to superior reporting and analytics. When you process payments through multiple local payment providers, it’s difficult to correlate data across those different solutions, causing you to struggle to compare insights from different markets.
Reconciliation can often be a challenge when selling into multiple countries and using multiple payment providers to do so. However, a single source of payment analytics creates a positive feedback loop of operational efficiency by helping you make more strategic decisions. With a single global payments processor and accompanying reporting, you’ll be able to understand the impact of fees in different regions and take action to redress them. You’ll understand why payments don’t go through or what your fraud patterns truly look like in different countries.
Not every cross-border payments tool comes with advanced reporting via one centralized account, but those that do help you grow more effectively and leverage rich data insights.
Unlike domestic payments, cross-border payments must address numerous regions’ fraud patterns. A one-size-fits-all approach won’t work: fraud prevention must be optimized for cross-border or it risks missing new types of fraud as well as inadvertently denying transactions that aren’t fraudulent.
Here’s an example: in London, 12 transactions coming through one IP address is a red flag for fraud that a processor should stop. In Nairobi, where many access the internet via cybercafés, 12 transactions from a single IP address is common and more likely to represent individual purchases.
The benefit of understanding these nuances? Processors designed for cross-border payments take regional idiosyncrasies into account to ensure your protection from regional fraud types while letting the right purchases go through.
Cross-border payments are complex, but the promised potential of success is enormous.
While you could cobble together a number of integrations — one for each region — to enable cross-border processing and be able to do business globally, you’d sacrifice most of the benefits discussed above and would struggle with a messy bundle of providers.
To sell everywhere and truly get the most out of cross-border payments, you need a solution that enables you to process locally around the world within one central platform.
That’s exactly what BlueSnap’s All-in-One Payment Solution is designed to do.
BlueSnap’s solution is built to handle global payments as easily as local ones, all via one simple integration.
Your cross-border payments are processed seamlessly no matter where they originate. Our Intelligent Payment Routing technology considers the card type, where it was issued, the currency and the transaction amount. It then routes the transaction to a bank that will regard the transaction as a local one. Because we have a network of 30+ local acquiring banks around the world, you don’t need multiple gateways — we can localize almost every payment. This minimizes both cross-border interchange fees and declined transactions as much as possible.
While BlueSnap can process global payments around the world, we offer local acquiring in more than 40 countries to help you increase authorization rates and reduce avoidable fees. Local acquiring is available in the US, Canada, EU, UK, Australia, Latin America, Israel, India and China. Plus, we’re always adding more regions and countries.
You can offer your shoppers options from 110 unique payment types, including specialized choices popular in specific countries or mobile-based wallets, like Sofort, AliPay, Boleto Bancario, Apple Pay, Google Pay and more. BlueSnap accepts over 100 currencies and can display in local languages to provide the optimal user experience and boost conversions.
BlueSnap’s global payment solution handles all compliance and regulation needs for you. By choosing BlueSnap, you gain a partner that specializes in cross-border transactions, with the ability to advise on payment optimization or even help you set up a legal entity in a new region.
Access BlueSnap’s worldwide network of banks through a single global payment solution. You don’t need to manage multiple integrations and source local acquiring banks. Plus, we take care of the necessary updates and compliance requirements.
Increase successful transactions and reduce costs with local acquiring in more than 40 countries and Intelligent Payment Routing.
More ways to pay, more ways to profit. Accept more than 100 currencies and 110 payment types, including popular eWallets like Apple Pay, Google Pay and PayPal.
Multi-currency reconciliation doesn’t have to be hard. BlueSnap can payout into your account in 100+ currencies, 16 like-for-like.
If you’re processing cross-border payments via banks, you need to form a relationship with a new bank in every region you enter. That means much more work on your end, without the ease of a centralized integration.
With BlueSnap, you gain immediate access to one of the largest networks of acquiring banks anywhere — no work required.
When it comes to cross-border payments, BlueSnap’s platform dramatically outperforms competitors like Stripe and Braintree for one simple reason: you gain all of these benefits and can process payments in every corner of the world with one account and one integration.
Other solutions require you to set up separate accounts and integrations for every region in order to benefit from local payment processing. BlueSnap’s single integration has everything you need for cross-border payments built in, including local bank relationships, local payment types, local currencies and more.
Cross-border payments are any exchanges of money that cross the border of a country or region, starting in one jurisdiction and ending in another. For smooth international payments, the payment provider must partner with numerous acquiring banks around the world. The provider can then route payments to banks more likely to approve them, such as those within the card’s issuing country or region.
Every payment goes through a complex journey. This illustration depicts a typical journey for a card purchase, though the journey is comparable for other payment types as well.
Cross-border payments occur when the merchant’s acquiring bank/processor and the shopper’s issuing bank are in different countries or regions. In this depiction of a typical card purchase, you can see where the geographies differ.
And all of this happens in about a second.
While the process is the same for cross-border payments, they can encounter more complexities. For example, cross-border payments are more likely to:
The best way to avoid those obstacles is by working with a payment processor that can work with multiple acquiring banks to route the payment locally.
For instance, BlueSnap’s technology considers the card type, where it was issued, the currency and the transaction amount. Based on that data, the transaction is routed to a bank that will regard the transaction as local and have the highest likelihood of approval. With a network of 30+ worldwide banks, BlueSnap can localize most payments. We call this Intelligent Payment Routing.
Cross-border payments can take any of the same forms as domestic payments, from eWallets and card payments to bank transfers. It’s important to be able to accept all types of payments, including types native to particular countries you are operating in. That way, customers from around the world find it easy to pay. Shoppers in different countries also have different purchasing habits, such as on mobile vs. laptop.
Perhaps the most traditional form of cross-border payment is an online card payment. This is a transfer of money via a card issued by a financial institution, typically a bank, that gives an individual access to their own funds or a line of credit.
In cross-border payments, card transactions must consider where the card was issued, the FX fee, and currency conversion fees, the potential that the card is being used for fraud and so on.
Bank transfers are a direct electronic relay of money from one bank account to another. They are processed within 24 hours. Because this form of transfer is largely dependent on the banks involved, fees applied and transactions declined typically come from the banks themselves.
eWallets, or digital wallets, are a type of software that stores an individual’s payment information for multiple payment methods and platforms. They are often used for mobile payment systems, such as smartphones or tablets. Their goal is to eliminate the need to carry a physical wallet.
For cross-border payments, eWallets function much the same as they do for domestic payments — as long as your payment processor is localizing the transaction. Otherwise, fees may apply.
As international commerce grows, B2B cross-border payments are vital, but they often lag behind B2C payments in terms of customer experience, transaction speed, amount of manual effort required and more. B2B companies that choose a payment processor optimized for cross-border transactions have seen a 25% uptick in conversion rates.