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Key Cross-Border Considerations for Payment Providers

There’s a big difference between ‘could’ and ‘should’

Although technology has made it possible to reach consumers in far-flung corners of the globe, it remains critical for any payments business or merchant that is thinking of pursuing a cross-border strategy to differentiate between ‘could’ and ‘should.’

There is a desire to expand beyond the domestic market to secure new revenue streams, as global eCommerce has exploded and the world has effectively shrunk. ISOs and payment service providers (PSPs) are eager to follow their merchants into new markets. Payment providers have to work on many fronts simultaneously; regulatory and compliance issues, technical connectivity to local acquirers, and enabling locally-preferred alternative payment methods. This varies on a country-by-country basis, and sometimes also between market verticals. And merchants need a clear strategy of how they will carve out market share, and must consider – if selling physical goods – how to handle warehousing, shipping, and other logistics. Local shopping habits also need to be taken into account.

Take Europe as an example. Places like Ireland, the Netherlands and Nordic countries are very pro-business, and have simplified bureaucratic processes. These established markets lack the growth potential of China or LATAM, but the benefit is ease of market entry, and the ability for cross-border entrants to compete alongside domestic players. Because payment providers should price in local currencies (i.e. through dynamic currency conversion) and support multiple languages, Ireland – due to common language – can be a good starting point for North American businesses establishing a foothold in Europe.

Payment strategy is a core part of a cross-border eCommerce strategy

Simply put, shoppers want to pay with their preferred payment method. Now, this does not mean integrating every esoteric payment method under the sun, but rather being strategic about what payment methods are enabled on each channel (mobile and desktop each require a different approach).

In the U.S., credit cards are still well entrenched, but in many global markets, so-called ‘alternative payment methods’ are actually the incumbents. In the Netherlands, for example, iDEAL (online bank transfer) is preferred by 84% of shoppers.

In the neighboring DACH region (Germany, Austria and Switzerland), there is an expectation of ordering now, and paying later. Offering payment by open invoice and direct debit involves risk for the merchant, but the fact the two-thirds of all shoppers have broken off the purchase process because these preferred methods were not available, indicates just how important it is cater to local expectations. Payment providers also need to think beyond relevant payment methods for each market, and support in-app payments via mobile SDKs, as well as enabling one-click checkout and recurring billing.

Safety first!

The diversity of payment methods on a global scale requires a tailored approach to risk management. In the card-dominated U.S. market, chargeback management solutions help companies manage fraud and avoid penalties from card schemes. But what about in Germany? 29 percent of online purchases are completed by open invoice (compared with just 10 percent for credit cards). Accepting open invoice payment may increase conversions and drive revenue, but it also brings the risk of payment default.

Local partners can help manage this risk, which can be especially beneficial for international players that want to come in and compete in the DACH region. For example, PayProtect is a service that performs an invisible background risk check, to determine whether a shopper should be offered open invoice or direct debit payments when they reach the checkout. PayProtect also guarantees payment, taking on collection duties on behalf of the merchant in the event of a payment default.

It takes two (or more) to do the cross-border tango

China is the international market that many payment businesses are eyeballing, but the regulatory environment presents challenges in moving money in and out of the country. However, the key to understanding the regulatory landscape in China is understanding not just the language, but also the culture.

Cultural insight is not available at the flick of the switch, so rapid international expansion typically requires local partners with local knowledge. Brazil, the biggest market in Latin America and another popular choice for U.S. businesses, is a perfect example. The regulatory environment – in particular taxation laws – is complicated, so local expertise is essential in turning opportunity into profit. Collecting PSPs, such as allpago Intl., have carved out a niche as specialist partners that do exactly this.

Keep an open mind (and be willing to work with ‘open’ technology)

Global eCommerce is moving fast, and the underlying payment technology needs to enable, and not restrict, companies that want to keep pace. The speed of innovation has left some payment providers with legacy systems that are costly and time-intensive to upgrade. RESTful API architecture is becoming the standard-bearer for greater technological openness, as it allows for innovation and individualized solutions. While this is applicable to payments generally, it is particularly pertinent when operating in multiple international markets.

ACI’s interactive list of global coverage:

Public Relations Director

Chris joined ACI Worldwide in 2015 by way of the acquisition of PAY.ON, bringing a specific eCommerce and mobile payments focus to ACI's PR activities.