Selling products across borders requires an understanding of the preferred payment methods of international consumers, many of whom do not use credit cards. Payment gateways can assist merchants in offering alternative, multi-currency payment options, as can specialized vendors, such as AlternativePayments.com
Many ecommerce retailers desire to expand internationally. Understanding the preferred payment methods in other countries is a key component.
In this post, I’ll explore some of the issues involved with accepting credit card and digital payments from international consumers.
The major card brands — Visa, MasterCard, Discover, American Express — charge cross-border fees that trickle down to merchants. Those fees are determined by two criteria.
- Location of merchant. This is the location reported to the payment processor during merchant’s on-boarding process. This serves as the merchant’s “domestic” location; any sales originating outside of the domestic country will be subject to cross-border fees.
- Location of card-issuing institution. Card brands also look at where the cardholder’s issuing bank is located. If the bank is located outside of the merchant’s country, the issuing bank may also be subject to cross-border fees, which the merchant will ultimately pay.
Most online payment processing fees are governed by the credit card interchange, which are rates set by the major card brands. A merchant’s account provider pays the interchange rates and then assesses fees to the merchant to cover those rates, plus profit. Interchange rates vary by region and geographic location. The U.S. has two cross-border fees.
- Domestic cross border fee. This fee is incurred when a transaction occurs in the business’s registered country but the issuing bank is located in another country. These are sometimes referred to as International Service Assessment Fees (ISA). As of April 2017, this fee ranges from .60 percent for MasterCard to .80…