In an increasingly interconnected world, businesses need to be able to expand their reach with ease. They need to be capable of seamlessly and securely accepting payments from different corners of the globe. While it’s an exciting proposition, it’s certainly no simple matter.
In this guide to cross-border payments, we break down the basics of these increasingly common—and increasingly essential—transactions. And we discuss common challenges to cross-border payment methods before offering tips to overcome them.
What are Cross-Border Payments?
Cross-border payments, much like they sound, consist of transactions made between entities—individuals, businesses, banks, or financial institutions—in different countries. Although cross-border payments have long been conducted, with the rise of digital technology and fintech, it’s become easier, faster, and cheaper to send money across borders. As a result, cross-border payments of all types are growing rapidly.
Why use cross-border payments?
Cross-border B2B payments are expected to exceed $40 trillion worldwide by next year. Meanwhile, with cross-border shopping booming around the globe in a range of categories, the cross-border B2C ecommerce market is expected to grow tenfold, from $785B to $7.9T, between 2021 and 2030. So, as cross-border payments increasingly become the norm for an array of transactions, offering and facilitating them will only become more essential for businesses.
The Biggest Cross-Border Payment Challenges
For all the opportunities that can be unlocked by facilitating easy cross-border payments, many of the same old challenges remain. When compared with local payments, cross-border transactions still run into critical issues like these:
When a number of intermediaries (each with their own fees) become involved in the transfer of money from one country to another, the costs of doing business are bound to go up. Without adequate control of these costs, the price of your products and services may put off your international customers.
Slower and less reliable processing
When you make a domestic payment, it’s usually processed virtually instantly. Yet a traditional bank transfer made across borders may take several days to process. Although digitization of cross-border payments has sped up this process, international transactions are still inevitably going to be more complex. And when faced with the choice between a slow payment option and a faster alternative, customers are going to opt for the latter much more often than not.
Where complexity and red tape don’t lead to slower processing, they can lead to other issues for those trying to accept cross-border payments. Offering your products and services in new countries means navigating much more than just customer payments—it means new laws, new taxes, and new processes.
Offering locally preferred payment methods
It also means new expectations—not just from local governments, but from customers, too. The worlds of global B2B payments and B2C ecommerce are not monolithic; when it comes to payments, they’re just as diverse as you might expect. Consumers in the Netherlands don’t necessarily have the same preferred payment methods as those looking to buy your products from Japan. In order to facilitate both more payments and better payment experiences, businesses must also cater to varying expectations, which may necessitate acquiring more varied expertise.
How to Accept Cross-Border Payments and Power Global Growth
None of these hurdles are insurmountable, of course. With the right approach—and the right partnership—you can accept cross-border payments and expand your international reach.
Localize and optimize payments
When 80% of shoppers prefer to make a purchase on sites that show prices in their local currencies and 50% would cancel a purchase if their preferred payment method wasn’t offered, businesses need to adopt a flexible and local approach. Otherwise, they’re simply leaving growth on the table—and risking being left behind by both consumers and competition.
Researching popular local payment methods in your target markets to understand consumer preferences is essential. Beyond offering localized payment methods though, you also need to optimize the entire shopping and payment experience. This means automatically showing local currencies and offering localized messaging and assets.
It’s also a matter of processing and routing payments efficiently. As we noted above, customers aren’t likely to stick with slowly processed, unreliable shopping experiences. Failed transactions lead to abandoned carts and lost opportunities. Working with a partner that can serve as a local entity, your business can optimize its global revenue, ensuring payments are swiftly processed and properly routed to maintain maximum speed and authorization rates.
Get help navigating tax and compliance complexity
As if that wasn’t enough to worry about, you also need to keep in mind that much of the complexity of selling globally comes from outside the customer relationship. From ever-changing data privacy laws and export rules to differing tax burdens and requirements, the experience of selling into different countries is never the same. (Even selling into just one other country, the experience is never the same for long.)
If you don’t already have local expertise (and plenty of it) you need to find it in order to facilitate cross-border payments and enter new markets.
Working with a merchant of record like Digital River, however, you can let someone else handle the heavy lifting of selling into new geographies. Rather than searching for the right talent, hiring, onboarding, and at last executing, with the help of a single seamless integration, you can drive rapid, risk-free growth.
Connect with us today and learn more about how you can simplify your global expansion and grow sales like never before.