Cross-border Payments in E-commerce
The appetite for cross-border e-commerce has been steadily growing. And since the start of the pandemic, it has picked up across markets in Europe and across the world. In 2020, more than a quarter of all e-commerce sales in Europe came from cross-border. By 2022, this number is pegged to increase to over 28%, bringing in nearly € 3 billion.
Consumers today are more comfortable buying things cross-border than before. But they demand the same convenience in cross-border transactions as in domestic ones. Hence, e-commerce merchants selling cross-border have to focus on building seamless customer experiences, spanning everything from payments to supply-chains to customer service. But Europe is a more fragmented market, with many countries, languages, local currencies and, local payment methods.
Why are payments an important part of the cross-border e-commerce experience?
To reach customers in different markets across Europe, you need to make cross-border payments as easy and frictionless as domestic ones. A lot of friction comes from customers not being able to pay with methods of their choice. A poor experience can make you lose customers faster. Lost customers don’t come back and keep other prospective customers away. Research data shows that 36% of customers shop elsewhere after having a bad experience with one merchant, while 60% of millennial customers share their bad shopping experiences with others.
Why do cross-border payments e-commerce fail?
Complex global banking processes – Cross-border transactions go through a complex network of global banks. The acquiring bank (the one requesting the payment) and the issuing bank (the customer’s bank), both in different countries, have to communicate with one another and run fraud checks to verify if transactions are legit. Sometimes, a payment request made by the merchant’s bank may not be recognized and rejected by the customer’s bank. Research shows that 25% of retailers in the UK saw 15% of their cross-border orders declined by issuer banks due to suspected fraud.
Incorrect or incomplete payment information – Payments often fail when customers enter incorrect or incomplete payment credentials. Hence, ensure you collect the correct customer payment info. The info you need to collect can vary based on the country you sell in and the payment method used for the transaction – this could include account numbers, card numbers, CVV/ CVC codes, email IDs, phone numbers, etc. Non-EU-based e-commerce retailers also need to collect additional customer details for SCA and 3DSecure verification.
FX and Currency conversions – Accepting payments in only one currency when selling in multiple markets can lead to payment declines. Currency conversion becomes an added step in the process. Issuing banks in one country may not accept payments in a different currency. Some smaller banks use a third-party (usually a larger bank) for currency conversions, but this adds more complexity to the process as more banks get involved. On top of that, customers may be charged extra FX conversion fees by their banks, leading to surprise costs and possible chargebacks from customers.
How Can Merchants Increase Cross-border Payment Acceptance Rates?
Here’s how you can reduce payment declines and improve your cross-border payment acceptance rates.
Bank with local acquirers
One way to reduce declines is to bank locally. Many e-commerce companies take this route, opening local bank accounts in the markets where they operate. For example, if a UK merchant selling to customers in the US used a local acquirer in the US, the chances of transactions getting approved would be higher. Why? Because the acquirer would be more likely to have a relationship with a customer’s issuing bank, meaning a more trusted transaction.
Work with an international PSP
Work with a global payment service provider (PSP) that works with multiple acquirers in different countries. They can facilitate your payments and be your single point of contact with acquirers in different markets. This is much easier than setting up separate business entities in each market and makes cross-border payments smoother for you and your customers.
Charge in local currencies
Customers tend to trust merchants that allow them to pay in their local currency. Charging in local currencies increases your payment acceptance rates significantly. A global PSP like Novalnet can help you accept payments globally in 125+ currencies in 150+ automated country-specific payment methods.
Collect correct and up-to-date payment info
Collect up-to-date and correct payment info from your customers. Set parameters for the data you need to collect, for example, date format, card number length, and CVC/ CVV. Thus, if customers enter incorrect or outdated payment details, the system will notify the customers to input the correct payment info.
Stay abreast of local regulations like PSD2, SCA
Security should be on the top of your mind when handling international payments. Stay up to date on local regulations and laws in the different markets you operate. For example, merchants selling to customers in Europe need to apply SCA as per revised PSD2 guidelines. You also need to comply with local laws and PCI DSS rules when collecting, storing and processing sensitive payments data of your customers.
How Can Novalnet Help?
Expanding into global markets is much more than offering customers the preferred payment methods. It involves a much complex set of procedures – from dealing with separate agreements, legal and regulatory requirements, technical integrations, testing, and maintenance. As a global PSP, we can help you solve the complexities arising from supporting multiple payment methods in different markets.
With Novalnet’s technology, you can accept payments globally in 125+ currencies in 150+ automated country-specific payment methods. We can help you set up your payments within minutes with our instant payment plug-ins, with minimal coding required. With our AI-based risk management solutions and advanced analytics, you can design the best payment experiences for your customers, and all of it in a PCI DSS-compliant environment.
Speak to us to know more about different payment methods and how you can develop the best strategy to take your business global.
Jose Augustine is the Chief Business Development Officer at Novalnet with extensive experience in European payment industry and a knowledge powerhouse.