Cross-border payments: The key to global business success

Svetlio Todorov, Managing Director, emerchantpay

In an international market, smooth cross-border payments processes are critical for businesses wanting to sell to consumers abroad, but expansion also comes with challenges that must be overcome to safeguard success.

The value of cross-border payments is estimated to increase from almost $150 trillion in 2017 to over $250 trillion by 2027 equating to a rise of over $100 trillion in just 10 years. With the growth of cross-border payments, businesses are looking for fast and efficient methods for accepting payments across different regions.

In this article, we explore the challenges businesses face when it comes to cross-border payments, and what they can do to mitigate them.

The challenges presented by borders

Expanding into new markets presents unique challenges stemming from diverse local legislation and standards. Disparities often act as points of friction for business operations and strategic decision-making. Staying on top of the changing regulatory landscape within a single market is already demanding, and this complexity increases when entering multiple markets, with non-compliance often resulting in fines and penalties.

What’s more, outdated payment platforms may contribute to, and exacerbate inefficiencies. Some regions still rely on payments infrastructure that was designed during the early days of electronic banking, resulting in slow processes. When multiple legacy systems interact in cross-border transactions the challenges are then amplified.

The diverse payment preferences observed across different markets are accompanied by their own fee structures and setup requirements. For example, while one market may favour credit card payments, another might lean towards e-wallets, mobile payment platforms or cash-based methods, each with different fee structures and settlement terms. Understanding the different payment preferences across regions and integrating multiple payment methods can be complex and resource-intensive for merchants, requiring customised solutions for each market and method. Ensuring compatibility and seamless functionality across various payment systems is vital.

Each market presents unique risk profiles largely influenced by inadequate AML regulations and enforcement, political instability and corruption, limited international cooperation, economic vulnerabilities and geopolitical considerations. These factors also impact cross-border payments in these markets.

Moreover, linguistic and cultural disparities can impede the payment process. Merchants must localise their checkout experiences to deliver seamless transactions for customers across different regions. Ensuring the payment page has customisation features to accommodate this is extremely important.

Fraud and security can’t be overlooked as cross-border transactions attract the attention of opportunistic fraudsters. In response, merchants must prioritise the implementation of rigorous fraud detection and prevention measures. By strengthening their anti-fraud mechanisms, merchants can protect not only their own interests but also uphold the security and trust of their customers.

The importance of using the right payments partner

Commerce is no longer restricted by geographic borders, opening opportunities for retailers to tap into the cross-border market. This unlocks potential new customers but success hinges on the creation of a seamless payment experience.

Merchants therefore need to ensure that they use the right payment partner who has the right local market knowledge and expertise to penetrate their desired region successfully. By doing so, they will ensure they are not only optimised for the market into which they are expanding but also that the payment strategy for that market integrates with their global systems and processes.

PSPs can be invaluable to merchants looking to expand oversees, but there are particular features that merchants should look for to select the right partner:

• Global reach: global coverage indicates a payments provider is equipped to handle multiple currencies and payment methods, catering to a diverse customer base spanning across countries.
• Expertise in compliance: a payment provider known for its proficiency in navigating intricate international regulations and compliance standards, will help mitigate legal risks related to payments and ensure seamless operations across borders.
• Robust fraud prevention: robust fraud detection and prevention tools is essential for safeguarding against fraudulent activities that often proliferate in cross-border transactions; this enables merchants to safeguard their revenue.
• Responsive customer support: responsiveness and effectiveness of the payment provider’s customer support services must be assessed, particularly concerning issues related to cross-border transactions. Swift reaction to issues ensures uninterrupted business operations and can enhance customer satisfaction.
• Scalability and growth support: a chosen provider should have the capacity to accommodate escalating transaction volumes and facilitate expansion into new markets.
• Seamless integration: a seamless integration process will minimise disruption to business operations and will enable the payment solution to be used in-market in a timely manner. This ensures a smooth transition, comprehensive analytics, detailed reporting and uninterrupted operations.

Cross-border payments are evolving, with the projected increase in value indicating an expansion in global commerce. The potential for growth is high, especially for retailers willing to tap into new markets.

Selecting the right payment partner equipped with local market knowledge, global reach capabilities, compliance expertise, robust fraud prevention solutions, customer support, potential for scalability and seamless integration processes is crucial for success in entering new regions. By adapting to local preferences, merchants can optimise conversion rates and capitalise on the opportunities presented by cross-border commerce.