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Three Challenges Facing Cross-Border Payments in 2022 and How to Overcome Them

Two paper boats made of two different currency notes to represent cross border payments

Cross-border sales are a great way to boost your e-commerce business. Consumers across Europe are more comfortable than ever before buying from cross-border sellers. But, cross-border e-commerce comes with its own set of challenges. Navigating the sheer complexity of it can be daunting for merchants. Think multiple payment methods, banking relationships, fraud prevention, complex regulations. Merchants taking a DIY approach often find themselves working with so many service partners that it becomes a hassle in itself. This blog examines some of the main challenges to cross-border payments and how merchants can overcome them.

The upside of cross-border sales

In 2020, over 25% of all e-commerce sales in Europe were cross-border. By 2022, cross-border sales will account for 28% of overall e-commerce sales, bringing in nearly € 3 billion. Selling cross-border has distinct advantages. You can reach new audiences and build a loyal customer base beyond your home market.
While more buyers in Europe are opening up to shopping across borders, there are still some reservations in the minds of others. To win them over, brands have to make cross-border shopping smoother. And payments form a big part of offering a great shopping experience to buyers. To appeal to customers in different markets, you have to make cross-border payments as easy and frictionless as domestic ones. You have to design seamless customer experiences that are convenient and flexible. On the other hand, a poor experience can make you lose customers faster. And lost customers don’t come back, and they keep other prospective ones away.

Three Challenges Facing Cross-border Payments

Europe can be a complex market, with many countries, languages, local currencies, and local payment methods. This raises unique issues that need deft handling.

Payment fraud and data breach

56% of businesses cite payment fraud as the primary concern in cross-border payments. Theft of payment data closely follows. Indeed, fraud can have damaging outcomes for your brand. Customer loyalty is hard to come by. Hence keeping payments secure and data safe is on everyone’s list of must-dos.

Longer Payment Settlement times

45% of businesses cite longer payment settlement as an issue in cross-border payments. Suppliers in the UK report waiting seven days more than average to receive such overseas payments. Research from Visa shows that cross-border payments take up to 55% longer to receive than domestic payments. These payments are processed by a complex network of banks in different countries, increasing the time and effort required. It also increases FX costs.

A lack of know-how about FX rates and how cross-border settlement works can lead to higher costs for merchants. A lack of transparency in payment data leads to delays. Many merchants find that not having adequate remittance data makes it tough to reconcile and settle payments on time. Add manual processes and human error to it, and you have the perfect recipe for late payments. Such delays can hurt a merchant’s cash flow and day-to-day operations.

User experience and Local Knowledge

Selling cross-border requires you to craft the right payment mix. This means supporting local payment methods. The more localized your payment mix is, the lesser the chances of declined payments or unhappy customers. But localization is far from easy. Different countries in Europe have different payment methods that local consumers prefer. But how do you decide what is the best mix? Do you open local bank accounts? Work with a local acquirer?

Many merchants can find questions such as these tough to address. Customers expect currencies and payment methods they prefer, and they want seamless and secure checkouts. Hence, less friction at checkout is key to reduce cart abandonment and improve conversion. On top of that, different countries have their own set of legal, regulatory, and banking hurdles. As a merchant selling in Europe, you have to comply with PSD2 and PCI norms to protect your shoppers and your brand.

How to Overcome Them

Alternative payments run on an open banking framework and use open banking APIs. These Businesses must streamline cross-border payments to make them more efficient. The ones who do so will have an edge, especially in times when speed and ease are on everyone’s mind.

Here are a few tips on how to overcome these obstacles:

Adopt AI Risk Management for Fraud Protection

Merchants must use best-in-class fraud prevention measures to secure cross-border payments. AI-based risk management tools help you monitor payments in real-time and keep fraud in check. These tools use advanced algorithms and machine learning to analyze millions of transactions. They constantly keep learning and flag suspicious activity as it happens. You can customize these tools to your business and set up the optimum fraud rules. A robust fraud prevention setup helps you protect your brand against fraud. It improves payment acceptance rates and the user experience.

Use Automation for Faster Settlements

Automation gives you access to data-driven insights to make better decisions. Having access to the right data at the right time can help you speed up your cross-border payments. Automate your accounts receivable and accounts payable to collect payments on time and pay your suppliers on time. You also get access to remittance data on time, ensuring faster payments. Open banking payments such as digital wallets, Request to Pay, and A2A payments are great for quick settlements. Consider adding them to your payment mix. Using AI enables you to perform smart payment routing to improve your payment acceptance rates. It also allows you to perform automatic payment retries and minimize friction in debt collection and dunning. It helps you to increase customer engagement, boost loyalty and improve sales.

Work with an international PSP for local knowledge and expertise

An international payment service provider (PSP) works across different countries and has relationships with local banks and acquirers. They can help you streamline your cross-border payments. They can offer you a single solution for all your cross-border payments, which is much easier than setting up separate payment systems in each market you operate. This lowers costs and boosts your payment success rates. The right partner can help you build the right payment mix based on the markets you are targeting. They can help you perform smart payment routing to enhance your payment success. They also help you navigate complex regulations such as PSD2 and PCI DSS compliance.

How can Novalnet help?

We are a global PSP with deep experience in processing payments for the European industry. Many of Europe’s leading brands trust us to handle their payments. We can help you accept payments seamlessly in 125+ currencies in 150+ country-specific payment methods. Our instant plug-ins get you up and running within minutes and with minimal coding. With our AI-based risk management solutions and advanced analytics, you can securely process payments in a PCI DSS-compliant environment.

Give us a call today to know more about how we can help with your payments and enable you to become the best in your game.

Accept payments globally in 125+ currencies through 150+ payment methods in a highly secure, state-of-the-art environment supported by AI-powered risk management, built for SMEs and large enterprises.

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