Navigating International Payment Techniques, for Ecommerce

Many ecommerce retailers want to expand internationally. Knowing the preferred payment approaches in different countries is an integral component.

In this post, I will explore a few of the issues involved with accepting credit card and electronic payments from international customers.

Cross-border Fees

The major card manufacturers — Visa, MasterCard, Discover, American Express — bill cross-border charges that trickle down to merchants. These fees are determined by two criteria.

  • Location of merchant. This is the place reported on the payment processor during merchant’s on-boarding procedure. This functions as the merchant’s”national” place; any sales originating outside the domestic country will be subject to cross-border fees.
  • Location of card-issuing institution. Card manufacturers also consider where the cardholder’s issuing bank is situated. If the lender is located outside the merchant’s nation, the issuing bank may also be subject to cross-border fees, which the merchant will finally pay.

Most online payment processing fees are regulated by the credit card issuer, which are rates determined by the major card manufacturers. A merchant’s account supplier pays the interchange rates and assesses fees to the merchant to pay those rates, plus benefit. Interchange rates vary by area and geographical location. The U.S. has two cross-border charges.

  • Domestic cross border fee. This fee is incurred when a transaction occurs in the company’s registered nation but the issuing bank is located in a different country. These are sometimes called International Service Assessment Fees (ISA). As of April 2017, this fee ranges from .60 percent for MasterCard to .80 percentage for Visa. That is in addition to the normal interchange fees — .13 percentage for Visa credit, debit, and prepaid transactions and 0.1275 percentage for MasterCard transactions under $1,000.
  • Australian cross border fee. This fee is incurred when a transaction is processed in a currency other than U.S. dollars. This fee is 1.00 percent for MasterCard and 1.20 percent for Visa.

To provide an example, consider purchasing clothes from a U.S.-based ecommerce merchant using a Visa payment card issued in France but settled in U.S. dollars. The fees are as follows.

  • Fee: Assessment Fee
  • Rate: .13 percentage
  • Description: Assessed to all Visa payment card transactions.
  • Fee: Visa Intl Service Fee — Base
  • Rate: .8 percentage
  • Description: Applicable to transactions settled in U.S. dollars where the merchant’s nation differs from where the card has been issued.
  • Fee: Acquirer Processor Fee Credit
  • Rate: $0.0195
  • Description: Applies to all Visa credit authorizations obtained in the U.S. Whatever the issuer or cardholder’s location.

Using that same example, here are penalties if the transaction were settled in euros.

  • Fee: Assessment Fee
  • Rate: .13 percentage
  • Description: Assessed to all Visa payment card transactions.
  • Fee: Visa Intl Service Fee — Improved
  • Rate: 1.20 percentage
  • Description: Applicable to transactions settled in U.S. dollars where the merchant’s nation differs from where the card has been issued.
  • Fee: Acquirer Processor Fee Credit
  • Rate: $0.0195
  • Description: Applies to all Visa credit authorizations obtained in the U.S. Whatever the issuer or cardholder’s location.

Neighborhood Payment Platforms

Many merchants try to make it easy for cross-border clients by enabling transactions to happen in the local currency. However, it’s important to know the preferences of local customers, who might have payment preference which differ from the U.S.

Below are some examples.

In Japan, while debit and credit cards are the preferred payment method, nearly one-fifth of payments are made via Konbini, a service which permits shoppers to purchase goods online and pay for them at a convenience store.

In France, the most popular card manufacturers are MasterCard, Visa, and Cartes Bancaires, with the latter accounting for approximately one-half of transactions.

German shoppers prefer to pay via bill — purchasing online first and paying later. There are a handful of other popular payment methods in Germany, such as PayPal and three bank-to-bank platforms: GiroPay, Sofort, and Überweisung.

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In Spain, many customers prefer to pay with Sistema 4B, a bank-to-bank transfer method owned by many Spanish banks.

To put it differently, while credit cards are a worldwide type of payment, they aren’t necessarily the preferred form in several nations.

Implementing Cross-border Payments

Implementing localized, cross-border payment choices needs a robust gateway that permits multi-currency and alternative payment choices.

If your gateway provider doesn’t offer payment options that are familiar to your international shoppers or in the event you can’t switch to a different provider, there are numerous companies — Option Payments and Digital River are examples — which offer à la carte local payments and don’t require that you change your merchant account. PayPal and Stripe, too, offer local payment and multi-currency choices.

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