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Guest Commentary: How online brands and retailers miss the mark on cross-border payments

BY Rob Keve

Knowing which payment methods are popular in an overseas market is a fundamental question online retailers need to consider when selling cross-border.

Online sales conversion rates improve dramatically when the right payment methods are offered. While the Internet offers customers the ability to purchase products from foreign markets, these shoppers are still at the mercy of local payment methods for actually completing the transaction.

International credit card penetration is high in many Western markets, but is lower in developing markets where alternative methods and local credit cards are more popular. It is also lower in Western markets where local payment methods have historically been dominant, such as Germany, Scandinavia, and Brazil.

Paying for goods online should be straightforward, but merchants will have challenges around fraud, limits on the currency leaving a country and chargebacks. These are all realities that could negatively impact any cross-border e-commerce.

Many brands and retailers might be unaware of the challenges associated with cross-border payments. Here are a few of the main pitfalls and how to avoid them.

1. Failing to offer popular local payment options to customers
In order to maximize the revenue you generate from global customers, it is important to offer payment methods that are deemed the norm in most markets.
When deciding which alternative payment methods to offer, it is critical to understand which alternative methods are relevant to customers in each region or country.

2. Not indicating if credit cards are unable to be processed in certain countries.
Even though many credit cards are underwritten by Mastercard or Visa, numerous local credit cards issued by local banks can’t be processed when a cross-border business relies on their existing payment processor to acquire these transactions.

Even if they can be processed, often additional security steps are required to determine the legitimacy of a consumer. Forcing a customer to fill in countless fields at checkout and then providing a limited list of approved international credit cards creates a poor user experience, and can cause checkout friction resulting in poor sales conversion rates.

3. Failing to display prices in the local currency that matches customer expectations
Displaying product pricing that is local and rounded leads to an increased opportunity for conversion, as it mirrors a domestic shopping experience for shoppers in that market. Providing prices in the local currency for customers in each market is the first step. It is vital for online retailers to ensure that once a price is converted to a local currency, it will be displayed in a way that reflects local pricing convention in that market.

4. Not ensuring that local pricing is what consumers are actually charged
Merchants need to ensure that the local price seen at checkout is the actual price consumers are charged and see on their credit card statement. If a site is just displaying local currency but not charging in local currency, then the consumer will likely be unpleasantly surprised to see that they were charged in a different currency and different amount that was displayed on the site, and the card or bank will be applying their own currency conversion rate on that purchase.

Solving for these issues, in turn, will further reduce customer complaints on mismatched charges after checkout and hence improve repeat purchase rates.

5. Adding more steps to the payment process
Many brands and retailers believe that adding additional steps to the payment portion of a transaction reduces fraud. While this may be true in some cases, imposing these additional steps may also prevent honest customers from converting because a sale cannot be completed online.

Localized payment options and checkout experience enable consumers to transact in a manner similar to what they are used to on local websites. As they use payment methods they already trust and are familiar with, the opportunity for a sale is higher.

In order to capitalize on cross-border payments, businesses should consider several factors. First, they should ensure that they offer the local payment method recognized by consumers in specific markets. Additionally, providing multiple payment methods that are clearly communicated on the website will create trust with the customer. However, online retailers must continuously test which payment methods generate the most conversions and payments.

Lastly, it is crucial for online merchants to control fraud settings to ensure that consumers are not automatically marked as fraudulent. Adding extra steps to check out and having to send a photo of a credit card via email address, for example, create friction and result in a poor customer experience. This will make the transaction much more challenging to complete for the customer and can increase checkout abandonment.

Rob Keve is the co-founder and CEO of Flow.

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