Four Elements of Cross-Border Payments Optimization

Cross-border payments have become a critical part of millions of lives as we moved towards a more globalized world and multicultural societies. The segment represents a massive market, great opportunities and very promising players. In fact, PayPal expects that cross-border online shopping in the six key markets for the company will amount to $307 billion with 130 million consumers by 2018.

Cross-border payments are expected to bloom and companies are making predictions for 2016 and beyond on what to expect.

As Mike Massaro, CEO of Flywire (formerly Peer Transfer) shared with the LTP team, Cross-border commerce and money movement is complex but as the world becomes more global, it’s essential that we remove the barriers that exist in traditional channels. As we do, the volume of cross-border money movement will grow and open up tremendous opportunities for businesses, institutions and consumers around the world.

Let’s look at some of the essential parts of cross-border payments optimization offered by various payments providers.

Focus on the local consumer

Whether the world is getting globalized or regionalized, local focus is very important in building loyalty and convenience of use. The term glocalization describes the practice of adjusting universal standards to local tastes. Just like in global chains where the dishes are adjusted, cross-border payments providers need to enable local customers to pay in their preferred ways.

Meeting local customers’ expectations can significantly affect the international sales of e-commerce players and boost the transactional volume for remittance companies. Tailored offering in cross-border payments may also have a positive effect on brand loyalty as customers would see the dedication to cater to a particular need of a particular group.

Successful Dutch payments company Adyen provided an interesting example of Russia, where international cards only represent less than half (42%) of the transactions. In order to benefit from cross-border online purchases made by Russian consumers, merchants should consider accepting local alternatives (like Qiwi or Yandex Money).

Boosting approval rate

When the preferred local payment methods have been embedded, the next important step is to speed up the payment processing by boosting approvals on transactions. Declined transactions for a purchase is a major turn-off for customers in a given country, which is why e-commerce and remittance companies need to make sure of seamless transaction processing with lower decline rates.

In order to reduce the decline rate, it’s important for merchants to understand the reasons of payments denial. Detailed understanding of sets of denial cases can provide insights on the approval rate improvement. The problem may be caused by a certain type of payment, card, company, etc.

After the problem is identified, particular steps can be taken to eliminate it. Either through revising partnerships with some companies, educating a customer, or pivoting the operations within the company, the actions can be taken in response to identified problems.

Appropriate risk management

Security has always been and will be a sensitive topic when it comes to payments. With frequent security issues happening across industries, cybersecurity is expected to become one of the hottest industries by 2020.

The most sensitive and important data users are especially cautious giving away is financial data. Credit/debit card information, alternative payment options—our mobile phones have become payment tokens themselves. With international e-commerce players holding large pools of personal information, they are a target for both local hackers and those looking at global networks.

Just like with payments methods, each additional market requires a safety policy adjustment. Fraud prevention strategies need to take local hallmarks into account to be the most effective. As an option, merchants operating abroad may seek collaboration with existing players to share fraud data and consolidate efforts to protect customers’ data.

A common fraud-monitoring and data-sharing platform may be the reality in the nearest future when it appears to be more cost-effective and safe to consolidate efforts to prevent fraud.

Outsourcing costly and complex operations

Entering a new market is a complex and costly task, which can be partially unloaded from a company’s shoulders through beneficial partnerships.

Instead of spending time and resources to discover locally preferable payment methods, problems with approval rates and hallmarks of local fraudsters, local partnerships can reduce the time and costs as they are already familiar with the market and have all the needed expertise. Local partnerships can help in creating a preferable payment experience, reducing the costs related to fees and taxes as well as reducing the overhead (which is a significant cost itself).