Merchant Services & International Ecommerce
It’s only natural that a successful e-commerce business considers international expansion at some point. Local market saturation, a decline in business growth or emerging overseas markets are cited as common motivations for going global.
It’s no real surprise that a considerable number of e-commerce based businesses sell to customers located outside of the country where their business is registered. It’s arguably one of the main advantages of selling online. Quick access to an international customer base and the relative ease with which people can purchase goods using a credit card, makes selling to foreign customers an extremely attractive proposition.
But once you’ve made the decision to trade overseas, you will need to think about the various methods for accepting credit card payments, and it’s an area that can often cause some confusion.
The most common methods for accepting credit card payments are either by using your own merchant account, or using the services of a third party merchant.
A merchant account can be provided to you by a bank, but you will have to go through an application process similar to applying for a loan. The credit card payments are essentially a line of credit that the bank extends to you.
The merchant has full responsibility for the transactions within their account, and each bank has its own terms of service to which account‐holders must adhere.
Getting your merchant account accepted
When completing the application form for a merchant account, you will typically be asked where your business is registered? It’s an important question and the country where your business is registered will determine if your sales are classed as “domestic” or “international”.
If your business is registered in the EU, you will have to work with an EU based merchant provider. The UK and Cyprus are popular options due to the relatively low cost of setting up a business in these counties.
Similarly if a significant proportion of your customers (or expected customers) are located within the US, a potential solution would be to open a business and a bank account in Nevada, Wyoming or Delaware. US based merchant account applications typically have a much higher approval rate if your business is registered in the United States.
Third part merchants
There are a number of merchant service providers and selecting the most suitable option isn’t always an easy decision. Your requirements around mobile processing, online payments, the size of your business, location and the ability to accept credit cards are all important decisions that will need to be assessed.
If you are just starting up and your turnover is still relatively small, PayPal provides a quick and easy solution. However it’s no secret that PayPal have had a number of complaints relating to poor customer service over the years, with alleged issues regarding long waiting times and even instances where business owners have had their PayPal accounts blocked. A significant issue if you essentially “put all your eggs in one basket”. Similarly not all your customers will have a PayPal account and you run the risk of alienating customers with a solitary payment option.
Amazon is another consideration and their online payment service has been around since 2013, providing a number of benefits for both consumers and e-commerce businesses. Merchants benefit from using Amazons’ fraud detection software that provides a tried and tested method for receiving payments, while giving peace of mind and security to the consumer.
The main benefit for the customer however is that anyone who already has an Amazon account, doesn’t need to “re-register” before completing a transaction; they can essentially pay using their existing Amazon details.
In an attempt to increase its global reach and to compete with PayPal, Amazon has recently announced the expansion of this secured online payment system to “The Amazon Payments Partner Program”. It aims to extend the trust and credibility of Amazon Payments to developers and e-commerce merchants.
The new service is expected to directly benefit online merchant platforms (developers who provide e-commerce platforms to their customers), where the new program will allow developers and third parties to incorporate the Amazon Payments service directly into their service offering.
The process for determining the exact cross border fee is often complicated, consisting of a number of variables that will be unique to every business. The ideal scenario would be that a business would have an office in every country, benefiting from the lowest domestic rate, but of course that’s not always possible.
However the general rule of thumb is the smaller you are, the higher your processing fees will be. The more you grow, the easier it gets to find a merchant provider that will give you flexible terms and fees.
Finally if you have your own independent ecommerce platform that’s not supported by one of the major providers, then it’s important to get impartial advice from experts who can help you select the most appropriate merchant service provider.
It has never been easier to sell abroad, and whatever your objectives as a business, it’s highly likely that there’s an affordable and effective solution available to you.