Your PSP and receiving international payments

by | Feb 23, 2021 | Blog

Online merchants working with the right Payment Service Provider (PSP) can access a secure, global payment gateway 

Offering your online customers – in B2B or B2C – a secure payment service is one of the most valuable marketing tools you have. Customers want to feel that their privacy is important to a merchant and secure payments are one of the easiest ways businesses can reassure their customers.

A payment gateway is a conduit between the customer, merchant and the bank. By encrypting sensitive payment data, the gateway passes the data for validation between the three players on a secure network.

However, choosing the right gateway requires a real understanding of your business growth opportunities, market and scalability. For some merchants, it might be more important to choose a PSP that offers a wide range of payment options and settlement currencies to service a broad market. Customers prefer to pay for purchases in their local currency, so having a PSP that accepts a range of currency options is better for your conversion rate. Transparent pricing is key to cart conversion. If a customer is shopping on a US site from the eurozone, they don’t want to spend time converting costs, adding VAT and delivery and costs and then discover the cost is more than they want to spend. If the conversion and costs are done automatically when the customer is processing their cart, it is more likely that they will complete the purchase.

Partnering with a qualified cross-border PSP can help make purchasing seamless for customers and easier for merchants. It eliminates the need for a merchant to have multiple bank accounts, lowers costs and improves payment processing rates.

If you are ready to open your online business to cross-border payments, there are a few things that you should seek out from a PSP.

Working with a local partner

If you are entering a new market that you are unfamiliar with, partnering with a local can ease you into the market. A local partner will be knowledgeable about the culture, social structure, business customs, consumer preferences, logistics, infrastructure and legislation. In some regions, a local partner is a legal requirement, but it often offers other benefits and exemptions when you work with such a partner.

Offering regional payment options

Before launching in a market, it is prudent to research the local market. Some regions most commonly pay online using credit cards, while others prefer debit cards, and others still choose payment apps or prepaid cards.

For example, if you are entering the China market, offering Visa as a payment option is pointless as the card is not accepted in the region. However, offering access to WePay would be attractive as it is one of the most common payment methods used in the region.

Alternative Payment Methods (APM) like eWallets and WePay have gained traction in China, generating about US$43 billion in revenue in 2019, while the rest of the world collectively only generated US$22 billion in revenue in the same year. Ignoring this payment preference for those entering the China market would likely result in high cart abandonment rates and possible failure to launch in the market.

Adopt the local language

Your PSP should be multilingual. When you speak with your customers in their language it not only boosts their confidence in your brand, it also generates brand loyalty. When people are researching and shopping they are more likely to choose to make a purchase from a site in their own language, because it feels more secure and comfortable.

You should use native-language speakers and local translators to proof-reader and edit your website content and ensure that it is relevant to the local audience. The 5 most common languages used online include*:

  • English (1,186,451,052 users or 25.9{d1a1694403c5660430dc420b8f142668f13097a51a1c1fc172179b975fdf78b3} of internet users globally)
  • Chinese (888,453,068 users or 19.4{d1a1694403c5660430dc420b8f142668f13097a51a1c1fc172179b975fdf78b3} of internet users globally)
  • Spanish (363,684,593 users or 7.9{d1a1694403c5660430dc420b8f142668f13097a51a1c1fc172179b975fdf78b3} of internet users globally)
  • Arabic (237,418,349 users or 5.2{d1a1694403c5660430dc420b8f142668f13097a51a1c1fc172179b975fdf78b3} of internet users globally)
  • Portuguese (171,750,818 users or 3.7{d1a1694403c5660430dc420b8f142668f13097a51a1c1fc172179b975fdf78b3} of internet users globally)

                                    *Survey March 2020

Cross-border payment types

Credit card payments, bank transfers and APMs are the most popular cross-border payment types. Customers prefer to pay using the method that is most familiar to them, and they like those choices to be tailored and assured of the security of their payment data. Merchants need to offer choices and make the payment process as seamless as possible.

eWallet

An eWallet, or digital wallet, is a software-based electronic APM that can be used online or instore. Popular eWallets include Paypal, Neteller, Skrill, Alipay, Apple Pay and Google Pay. They allow customers to store funds in a secure location that is not linked to their bank account or credit cards.

Some eWallets allow users to perform transactions in multiple currencies, and to transfer funds between wallets online. When funds are withdrawn from an eWallet and transferred to the merchant’s bank account, it is then classified as a cross-border payment.

Credit card payments

Credit cards are a go-to for most people making online purchases and make up the bulk of cross border payments. Front-facing, it is a simple and efficient way to make payments. For PSPs the transaction has many more secure steps to process a transaction in two different currencies, incurring fees that are mostly passed on to the consumer and built into costs, but sometimes absorbed by the merchant.

Bank transfers

International bank transfers require cooperation between banks and financial institutions. Even major banks hold limited amounts of foreign currency funds. This means that when a customer makes a payment through bank transfer it requires some inter-bank cooperation to complete the transaction, which comes at a cost to the customer who pays fees to facilitate the transaction.

B2B cross-border payments

The total value of B2B cross-border payments is expected to top US$35 trillion in 2022, a growth of 30{d1a1694403c5660430dc420b8f142668f13097a51a1c1fc172179b975fdf78b3} compared with a low of US$27 trillion in 2020. The pandemic has impacted B2B sales, but are now starting again as vaccinations have been launched worldwide.

The simplification of cross-border payments is driven by B2B innovation online. The benefits have been transferred to B2C payments, and fintech has adapted at a rapid pace to facilitate B2B payment processing.

Cross-border payments regulations

While each country and region has its own rules and regulations, if you are trading in the eurozone, you need to understand how online payments are facilitated.

EU cross-border payments

The Single Euro Payment Area (SEPA) was created by the EU to make payments between member states faster and easier. In March 2018, the EU proposed an amendment to the Regulation on cross-border payments which enabled non-euro area Member States to benefit from cheaper payments within the EU, meaning that rates and fees have been lowered for non-members to improve trade and competition. The revisions also demand a higher level of transparency on all cross-border payments.

PSD2 and cross-border payments

Laws and regulations detailed under PSD2 concerns cross-border payments within the EU. If only one leg of the payment journey is outside of the EU, the cardholder has to complete the two-factor authentication process. However, for those placing payments from one EU Member State to another, the rules do not apply. This is an attempt to streamline payments processing and move towards the goal of a single digital market.

Implementing 3DS2 is the best way to ensure that merchants are complying with the Strong Customer Authentication requirements introduced by the PSD2. The two-factor authentication process applies to a large number of online transactions and requires payers to prove their identity with a password, code or secret question answer. There are exemptions to SCA, including recurring transactions or single online payments under €30.