Globally e-commerce is on the rise. This is because many businesses are expanding into new emerging markets. Moreover, these companies are starting to accept a variety of payment methods, making it easier for people to shop across borders. More revenue, new customers, and a significant growth opportunity, of course, cross-border trade has its benefits. But what about the challenges of cross-border payments?
Challenges of Cross-Border Payments
Cross-border payments involve more risks and are more complex than domestic payments. Some of the problems that businesses face when they operate on international shores are:
- High Costs – Running a business in a foreign territory tends to become more expensive. This is because there are extra costs like foreign exchange (FX) charges, delivery costs, local distribution costs, taxation, and other legal costs, etc.
- Slow Transactions – Longer payment settlement time is another issue with cross-border payments. As most of these payments are processed by a complex network of banks and intermediaries, it prolongs the process.
- Security Issues – There is always the risk of cyberattacks and payment fraud in cross-border payments. Unless service providers in both countries use high-security standards, it results in massive financial loss for one or both parties.
Thus, it is vital for a merchant to understand how cross-border payments work so as to run an efficient business.
What is an Acquirer?
In any e-commerce transaction, the role of an acquirer and an issuer are vital. The acquiring bank or acquirer is a financial institution that facilitates card payments on behalf of the merchant. It does so by providing them with a merchant account. Acquirers strictly adhere to PCI DSS guidelines and are liable for protecting you from data breaches and other risks. They ensure payments are processed in a smooth and secure manner.
What is a Local Acquirer?
For any business that wants to sell abroad, it has to work with either a local or an international acquirer. A local acquirer is a financial institution working in a specific market where a business operates. There are several benefits of working with a local acquirer for any cross-border business.
How Working with a Local Acquirer Benefits Cross-Border Payments
Working with a local acquirer is one of the keys to running a successful cross-border business. They can provide you with a more competitive edge in a global market. They ensure a higher authorization rate (which is around 70% – 90%) as compared to an international acquirer. But that’s not all! It also reduces bank declines, cuts down extra costs, and reduces the chances of payment fraud.
Here’s a look at some of the benefits of working with a local acquirer:
1. Leverage Local Market Knowledge
Staying abreast with changing rules and regulations of a country is vital in cross-border commerce. Working with a local acquirer ensures you get the right info at the right time. Moreover, there is less friction at the check-out. It also helps you improve the customer experience by offering a more localized experience to your customers.
2. Stronger Fraud Prevention
A better understanding of your customers and the specific market you operate in makes it easier to implement stronger fraud prevention measures. By using a single dashboard, you can apply the right configuration to payment connectors, compare your payment KPIs, use proper authentication methods, and have more suitable performance metrics. This makes it easier to spot risks and helps you take immediate action. Working with the right PSP gives you access to an integrated fraud prevention solution. They also protect your data and ensure that you are complying with all required regulations.
3. Lower Costs
There are different types of charges and fees in cross-border commerce. Local acquiring enables merchants to deal with these in a cost-effective manner. This is because the charges are comparatively lesser. It also helps you get rid of cross-border fees since both the issuing and acquiring banks are in the same region. As such you gain greater control over how you manage your cash flow.
4. Higher Conversion Rates
Local acquiring eliminates extra costs, reduces settlement time, lets you offer local payment options, and builds greater trust with customers. This allows you to reach more customers and boost the conversion rate. If you plan to run your business in more than one country, then working with a single payment provider with local expertise in different regions is the best option. You will gain access to a single platform for all payment-related info, detailed insights into trends, timely reports, etc. Plus, you can offer the right mix of payment methods for each region to ensure a better customer experience.
Keep Your Cross-Border Payments Simple with Novalnet
Working with a payments partner you trust is vital. As a global PSP, Novalnet works with multiple acquirers across Europe in local territories. We help you get the benefits of multi-acquirer relationships but with the ease, flexibility, convenience, and costs of a local supplier. We serve as your singular point of contact for all things payments – so that you can focus on your business and leave the rest to us.
Novalnet is a global PSP, trusted by Europe’s leading brands to handle their payments. Our state-of-the-art technologies – from our instant payment plug-ins to our AI-based risk management tools – help you accept payments globally. And with our global acquiring solution, we take care of all your payment needs right from the start. Reach out to us today to know more.
Jose Augustine is the Chief Business Development Officer at Novalnet with extensive experience in European payment industry and a knowledge powerhouse.