How to Optimize Cross-border Payments for Your eCommerce Brand
It’s now easier than ever before to sell products worldwide. Thanks to the rise of online shopping and the cross-border payments tech that supports it, the global eCommerce industry is worth a massive thirty-five trillion dollars with no signs of slowing.
As the eCommerce industry continues to grow unabated, businesses and consumers are demanding bigger and better eCommerce cross-border payment solutions. Offering multiple payment options and airtight security are all critical for obtaining higher conversion rates through cross-border payment solutions.
Here’s what you need to know about cross-border payments for eCommerce brands and how to optimize them for greater revenue and profitability.
What are cross-border payments for eCommerce?
Cross-border payments are payments that take place between a buyer and seller located in different countries. A cross-border payment doesn’t always refer to the eCommerce realm, however. These types of transactions can be bank transfers, credit card payments, mobile payments, or digital wallet transactions.
Here are the two main types of cross-border payment methods:
- Wholesale cross-border payments — Financial institutions mainly use these types of cross-border payment solutions to support their customers. Government entities also use wholesale methods to enable large transactions and trade in various financial markets.
- Retail cross-border payments — This method occurs during customer-to-customer, peer-to-peer, B2B, and D2C financial transactions across different countries.
Let’s get into how cross-border payments work next.
How do cross-border payment methods work?
With cross-border payments, the currency isn’t physically transferred to another country, and domestic payment solutions aren’t usually connected to the financial systems of foreign countries. So with cross-border payments, international banks create separate accounts with their foreign equivalents.
Credit cards, digital wallets, and bank transfers are the most common methods for facilitating cross-border payments. Cross-border payment providers that support credit card transactions are the easiest way for consumers to purchase eCommerce goods.
What are the benefits of cross-border payments?
Enabling cross-border payments for your eCommerce business has several key benefits.
First, discovering and purchasing new, innovative products from abroad is a significant draw for consumers, which increases conversions and brand awareness. Let’s get into the other obvious and not-so-obvious benefits next.
Build a global brand
With eCommerce, you’re not just limited to a small geographical area within driving distance of your core demographic. Instead, you can sell to people all across your country. But with cross-border payments, you can sell to anyone in the world. As a result, cross-border payments for eCommerce allow you to build a global brand and generate much higher profits than you could otherwise.
In addition, certain cross-border payment methods are more popular with consumers in specific regions. With a little bit of research, you can add these particular transaction types to your repertoire, building brand awareness and a robust customer base in targeted locations.
A better customer experience
Offering a top-notch customer experience is critical for conversion rates. In fact, 73 percent of consumers say that the customer experience is a major deciding factor in purchasing. So, if you want to generate more revenue and build a loyal customer base, offering an excellent customer experience is a must.
Convenient and varied payment methods are one way to do that. The more payment options customers have, the more likely they will make a purchase. Another significant edge that cross-border payments give your business is eliminating the burden and expense of foreign exchange fees.
Done right, cross-border eCommerce payments save you and your customer time and money. It's a win-win for everyone.
Increased payment security
Secure payments are crucial for consumer and business safety and brand reputation. Certain cross-border payment solutions are more secure compared to more traditional eCommerce payment options.
Payment service providers with PCI DSS Level 1 Security and payments compliance ensure cross-border payment security for both the business and its customers.
Another benefit of enabling cross-border payment methods for brands that doesn’t get much airtime is the convenience it offers workers. Integrating cross-border payment services makes paying foreign employees and freelancers much easier and faster.
Unfortunately, nothing is perfect — even cross-border payment methods. So before going all in on a cross-border payment solution, it's a good idea to understand the drawbacks so you can mitigate them before you work on optimization.
Understanding the negatives can help you optimize your eCommerce brand for easier transactions with international customers. Here are the top things to consider:
- Regional preferences — Customer preferences for payments and purchasing habits vary significantly from country to country. When targeting customers in different countries, research what types of payments they tend to prefer.
- Financial regulations — Cross-border payment processes are under much stricter, more complex rules than domestic payments. Additionally, longer settlement times can introduce friction into the sales process and hurt the customer experience. Also, consider if the foreign exchange fees will kill your margins before implementing a new payment method to your eCommerce menu.
- Front and back-end issues — Keep in mind that you’ll likely come across fragmentation and a certain level of interoperability between front-end and back-end solutions when enabling foreign transactions.
The good news for eCommerce merchants is that these main issues with cross-border payments aren’t going unnoticed.
In 2020, the G20 summit made improving cross-border transactions a priority. The summit approved a three-stage process for improving the costs, speed, transparency, and access to cross-border payment solutions.
Optimizing for cross-border payments: Top Tips
Despite the drawbacks, cross-border transaction capabilities offer an excellent opportunity for your eCommerce brand to attract more business and sales. Here are our top tips for optimizing them for greater profits and customer satisfaction.
#1. Consider local payment methods and preferences
Before investing in a new payment method, you want to ensure that it’s in demand with your target demographic.
For example, most consumers in the Netherlands prefer the online banking solution iDEAL. Chinese consumers like eWallets WeChat, and AliPay. In Canada and the US, credit cards are the preferred payment method.
#2. Offer personalized and localized shopping experiences
Giving your customers a localized shopping experience is critical to building brand loyalty and generating recurring revenue. In addition, paying with familiar methods makes it easier for customers to trust your brand.
Plus, customers prefer eCommerce brands that speak their native language. Personalized, localized shopping gives you the needed edge to push conversion rates along. In fact, 92 percent of surveyed consumers prefer to buy from eCommerce sites priced in their local currency.
Calculating prices in the customer’s local currency saves them time and makes it easier for them to decide to buy. The good news for eCommerce merchants is that you don’t have to calculate this yourself. Instead, there are many different website plugins that you can put on your website that will automatically convert the prices to the currency of your choice.
Additionally, these plugins also translate the website into multiple languages. You can also download plugins that allow you to set different promotions and prices for regional holidays and offer tailored distribution and shipping options.
These plugins offer a cheap, fast way to test different local markets before investing in a more robust cross-border payment strategy.
#3. Invest in multi-currency solutions
You’ve probably heard the phrase, cash is king. But when it comes to cross-border payments, the currency is king and rules over the conversion rate court.
When partnering with a cross-border payment service provider, you'll want to invest in one that offers multiple currency options. This enhances the customer experience and will increase our conversion rates.
In addition, multiple currency support reduces the risk of false declines. No matter what, if you’re going to go the cross-border payment route, go all in.
#4. Easy API integration
Plug-and-play payment service providers that offer easy API integration are a must for scaling your website to support your international expansion. When shopping for a cross-border payment provider, look for one that allows you to quickly add and activate new cross-border payment solutions as needed to support your marketing efforts.
Cross-border payments: Key takeaways
Cross-border payments enable you to reach far more customers in highly targeted markets anywhere in the world. In today’s competitive eCommerce landscape, you must offer multiple payment methods to keep your customers happy and your business growing.
Consider your target audience's payment method preferences and the possibilities a give cross-border payment provider offers your business’s future. Be sure to choose a payment provider that can provide multiple currency options and payment methods. Providing convenient payment options will delight your customers and build trust and loyalty.
It’s time to establish the right payment system for your eCommerce brand. At Lingble, our marketing professionals are experts in growing eCommerce businesses into global, successful brands with cross-border reach.
Get in touch with our team today for your free consultation.