Cross-border payments: Go global with local acquiring

By Myles Dawson, Managing Director, Adyen UK

How to optimise your cross-border transactions while keeping things simple with the right acquirer

The coronavirus pandemic has led to a surge in online shopping, as the closure of bricks and mortar stores forced people to shop online. In particular, online marketplaces such as Farfetch, eBay and Etsy saw a large growth in customer base as they helped people sell their goods across the globe. For example, June saw the biggest year-on-year spike in new UK businesses signing up to sell their products on eBay, up 335%, as the trend of setting up a lockdown start-up became more mainstream. In fact, cross-border online sales worldwide increased by 21% from 1^st January to 14^th June, compared with the same period a year ago, according to Global-e.

But popularity in cross-border shopping wasn’t just triggered by the pandemic. In fact, a recent study reveals that in 2019, cross-border ecommerce represented 24 per cent of total online sales in Europe, as well as a turnover of €108.75 billion. This growth trajectory in cross-border payments highlights that shoppers are no longer put off by the prospect of ordering a product from another country.

This breaking down of traditional shopping borders has created a big opportunity for businesses, making it easier for them to expand to new markets and attract a broader range of customers. And, thanks to technology partners, small and large companies alike can now accept and reconcile payments across borders with ease. Traditionally this had been pretty complicated as cross-border payments typically require a myriad of third-parties, including different acquirers in each market. In this article, we’ll explore how acquiring can be optimised to improve your conversions without adding more complexity to your business.

What is an acquirer?

An acquirer is a bank that processes credit and debit card payments on behalf of a business. It sends purchase authorisation requests via card networks (like Visa and Mastercard) to the customer’s bank. It then either brings you the money or tells you why the request has been declined. Whilst this may seem straight forward enough, when it comes to processing cross-border payments it becomes a little more complicated.

When accepting payments across borders, you have some choices. You can choose a cross-border approach where a central entity in one country accepts payments from cards in multiple countries using a single acquirer. Or you can take a local acquiring approach where your entities in individual countries have a card acceptance contract with a local acquirer, or an international acquirer with the relevant domestic licenses. To help inform that decision, here are some key elements that must be considered.

Cross-border vs local acquiring

Locally processed transactions tend to generate higher authorisation rates compared with cross-border transactions. However, as it requires a separate acquirer in each market, you’ll need separate contracts, service level agreements, functionalities, reporting formats, and data elements. Suddenly reconciliation becomes complicated, and siloed systems begin to emerge. On top of this you need to consider local payment methods and payment channels. You could attempt to tackle this alone, but it can be time-consuming and expensive, with the added risk of something being missed. Thankfully, there’s a better way.

The best solution is to have a single partner with local acquiring licenses in all the markets in which you operate. That way, you can benefit from higher authorisation rates, lower transaction fees, and faster settlement in each market. This also eliminates the need for different partners and paperwork. Not only does this make reconciliation easy, but you’ll be able to view all transactions from across all regions, channels, and payment methods in the same place. So, you can track performance, spot trends, and get to know your loyal customers with the help of a single provider.

Boosting your settlement performance

Another important consideration when you’re processing cross-border payments is how money is settled into your company’s account. Ideally, you want to get paid as quickly and as efficiently as possible in your preferred currency.

Partnering with the right third-party acquirer can mean that your transactions are handled in the preferred currency of all parties involved without the stress of individually managing each step of a transaction. For example, Adyen’s platform offers a Sales Day Payout method to make sure merchants are paid-out quickly. With this solution, businesses are paid a full sales day all in one go, regardless of whether Adyen received the funds from the card or payment providers. This simplifies the reconciliation process as it allows for predictable cash flows.

Final thought

Global commerce is no longer reserved for large businesses. Today, pretty much any business can accept and reconcile payments across borders with minimum fuss. Carrying out cross-border payments efficiently means that you can offer your goods and services to a global community of buyers, exposing businesses to a potentially vast customer base, and ensuring you stay ahead of the competition. What’s more, expanding brand visibility globally played a vital role for some businesses during lockdown, helping them stay afloat during economic turmoil.

However, understanding the various approaches and considerations to acquiring is essential if you want to optimise the performance of your cross-border sales and ensure the best customer experience. Whether you tackle this internally or partner with a payments solutions provider, knowing the steps and processes will help you make a decision that best suits your business.