How do payments work in Cross-Border E-commerce Trade?

how do payments in cross border
3 MINs

For ecommerce businesses all over the world, the sky is the limit. Cross-border businesses have become quite popular today, thanks to the growing number of online customers. In 2017 alone, an estimated 1.66 Bn people worldwide have purchased goods online. However, for ecommerce businesses venturing worldwide, the payment processes continue to be a matter of concern. Whether the payment provider will be capable of initiating cross-border ecommerce payments efficiently is questionable too. With all that in consideration, it is essential to understand and examine the way payments work in cross-border ecommerce trade. This enables entrepreneurs to evaluate a potential payment provider.

Cross-border ecommerce payments work in a somewhat similar way as the domestic businesses. However, when it comes to international payments, there are some extra complications that need to be handled well to have a smooth global business. So, here is a step-by-step description of how payments work in cross-border ecommerce trade.

How payments work in Ecommerce
  • The Purchase: Purchase is the foremost step in cross-border ecommerce payments. Once the customer arrives at the checkout page, he chooses a payment method after supplying the required information. For cross-border payments, the customers need a localized checkout experience. As such, the checkout page should be presented in the language of the shopper, which ensures their comfort. The payment gateway must also detect the shopper’s URL to eventually serve up the appropriate screen. Quite similarly, in cross-border ecommerce transaction, the price should appear in the local currency and the shoppers are provided with local payment methods too. These are quintessential for promising much-needed customer satisfaction.
  • Routing & Processing: Following the purchase, the process of capturing the shopper’s credit card information and encryption by the payment gateway comes to play. With cross-border ecommerce payments, it is necessary for the payment solution provider to have a partnership with multiple banks around the world. Payment solution providers that have one bank partnership should be avoided in cross-border ecommerce. This is because if the acquiring bank and the shopper’s bank are located in different countries, the transaction is considered fraud.
  • Approval: For smooth and hassle-free cross-border ecommerce payments to take place, the approval stage is very important. The issuing bank accepts or denies the payment request based on certain factors. These are the availability of funds, transaction value and matching of the currencies. In cross-border ecommerce, the process is smoother when transactions are routed to banks that match geographically, fit the card type of the transaction as well as the currency. With intelligent routing, approval rates increase by at least 17%.
  • Settlement and Payout: After the payment is made and the order is fulfilled, this happened to be the next most important stage in international payments. When it comes to cross-border ecommerce payments, the conversion fees are applied for the merchants who go for payouts in their local currency. On the other hand, there are providers who opt for like-for-like payout options. By this, they are able to pay into the merchant account in the same currency as that of the original transaction. The conversion or FX fees are saved in this mode.
  • Reconciliation: For merchants who receive funds in multiple currencies, this stage can be quite complicated. However, the payment solution providers often send easy-to-read processing statements that clearly delineate the transaction activity linked to each type of disbursement. This not only saves considerable time but also ensures enhanced accuracy in cross-border ecommerce payments.

Thus, it is necessary for ecommerce businesses to analyze each step in the process of payment, a very important aspect of online global transactions. With the professional guidance of reliable payment solution providers, the cross-border ecommerce payment challenges can be overcome to a great extent.

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