Payment Pitfalls In the Cross-Border Cart

It goes without saying that the cross-border ability to reach billions of consumers around the world presents a tremendous opportunity for businesses. However, the reality is that this opportunity can be marred by pitfalls in the consumer payment process, resulting in more abandoned carts than successful transactions.

Why care about payments?

Twenty-five percent of consumers identify payment options as a deterrent to making online cross-border purchases. If you are not offering a choice amongst payment options, then consumers can and will take their business elsewhere.

When making a purchase outside of their country, consumers are most likely to use either a credit card (45%), e-wallet (34%) or debit card/bank transfer (17%). While survey results varied by country, no one payment option was chosen by a majority of cross-border shoppers.

While consumers want choice, merchants are striving to limit cost and complexity for every transaction with fees charged and connection methods required. Merchants make decisions driven by the ability to generate margin and a choice of payment options makes a big difference. For example, if you live in a world of 3-5% margin and the cost to process transactions are 2-3% (and even higher for cross-border), a merchant’s ability to meet consumer preference and earn the coveted increases in checkout conversion is constrained.

Growth in payments technology (e.g. e-wallets, digital currency and tokenization, etc.) is also giving rise to a plethora of payment options for consumers, particularly in our increasingly mobile, easy-click world. These, however, have not proven to streamline payments for both the consumers and merchants. Consumers find that it’s not as easy to buy products on a mobile device, delaying the shopping experience. Similarly, for the merchant, mobile can be a clumsy method of payment and hard to get right for your ecommerce engine. Considering new security protocols, issues concerning fraud and compliance, easy click is anything but easy for retailers.

Not only does payment optionality drive retail costs, but it also has a big impact on the bottom line in how merchants process payments. The largest retailers with broad international footprints can leverage domestic processing capabilities to lower costs and increase customer acceptance rates. But small- to mid-sized retailers looking to gain access to high growth markets overseas are unfortunately limited in their access to payments markets and are left to navigate higher costs with less effective results.

Another challenge is the disparity across regions and understanding how these variances can directly impact retailer cash flow. For example, in most of Asia there isn’t really a concept of delayed capture like there is in the U.S. However, in places like Japan, Korea and Hong Kong, it is typical for retailers to see a 30-day payment processing settlement period. Moreover, in markets where credit enablement is becoming increasingly relevant, settlement periods can span up to several months.

For example, PayPal and Amazon are issuing credit to customers and, in Brazil, they each offer an installment loan that lasts 60 days. And in China, the world’s largest ecommerce market, AliPay and Tencent Pay have their own networks in which they process transactions. The point is that, as a U.S. retailer who wants to reach these growing regions, what you expect and provide for U.S. consumers will not work and cannot be ignored from the perspective of consumer acceptance, cost of operations and impact on cash flow.

While no one can argue the world is getting smaller and more interconnected, it surely is getting much more complex in the payments sector. What we do at Pitney Bowes is focus every day on how we can make navigating the waters more feasible for retailers looking to sell beyond borders. We simplify the complexities and work to optimize consumer conversion all while reducing costs for each of our partners.

Here is some of the advice we recommend:

Look at your payment options.

Choice matters for the global consumer but it can inflate your costs. Know how to optimize your payment process so you can offer choice without sacrificing margin, security or compliance.

Build a bridge with your current systems.

The payment market is expanding rapidly. Look for ways that you can embrace new offerings and technology to make cross-border profitable.

Find the experts.

You don’t need to do it alone. Ask the questions about payments with your cross-border providers. Can they help you negotiate the obstacle course of payments? Do they have the technology that supports the best consumer experience?

 Chris Johnson, Vice President, Global Financial Services at Pitney Bowes

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