To generate income from overseas, a high-risk merchant has to engage in a process called cross-border acquiring. This process is necessary for any merchant who wants to sell their products outside the country they registered their store in. This article answers essential questions on 1) what acquiring is, 2) what its regulations are, 3) how these rules and regulations relate to Visa, and 4) what strategies a high-risk merchant can employ to maximize income.
Because of the growing success of domestic high-risk merchant companies, many merchants are looking to expand their business globally to attract new customers. Enabling cross-border payment acceptance allows merchants to expand their customer base and generate additional income from emerging markets. The advantage is that customers from across the globe can purchase goods and services from these merchants—no matter what country they are in—and often in their local currency or payment method.
Experts project cross-border shopping will make up 20% of all ecommerce in 2022, leading to sales of $630 billion. Although China spearheads this type of shopping, there is plenty of good news for US- and Canada-based merchants looking to generate higher revenue.
An increasing number of merchants are selling products and services to customers from outside the international borders of their company’s location. Therefore, an expanding number of international cardholders are subscribing and purchasing services and products from high-risk merchants, meaning an optimized cross-border transaction experience is fundamental to success.
In this article, we will discuss what an acquirer is, what cross-border acquiring is, its various rules and regulations, how it relates to VISA, how these rules affect high-risk merchants, and the best strategies high-risk merchants can utilize to maximize their sales revenue from selling cross-border.
So, let's start with the basics.
What is an acquirer?
In short, an acquirer is a bank that works with a business and accepts debit and credit transactions on their behalf. The acquirer will then take the transaction authorization requests through various card networks (e.g., Visa) and send them directly to the customer’s bank. Then, one of two things will happen. Either the money will go directly into the merchant’s account, or the merchant will receive a message as to why the payment was declined.
Simple enough. But let’s explore a more complicated question.
What is cross-border acquiring?
Cross-border acquiring allows merchants to operate their businesses in countries other than their own by using an acquirer’s card acceptance methods. It enables merchants to operate across multiple countries to centralize transactions and card processing, allowing for a more efficient payment process.
This type of acquiring leads to cross-border payments—payments that occur across international lines where the payee and the transaction recipient are in different countries. These transactions can go through banks, companies, or individuals who want to transfer funds from different countries.
As cross-border acquiring opens merchants to new, international markets, it can provide a host of benefits. For starters, it increases competition by allowing merchants (including high-risk merchants) to go abroad to find better rates and services than what domestic acquirers offer. But the benefit extends beyond merchants because, as they experience lower costs, customers will get better prices—leading to higher customer satisfaction. And happier customers are more likely to be repeat customers.
Therefore, it is essential that international merchants can accept payments from all the countries they sell their products or services in. Ensuring that you can receive international payments in a timely and efficient manner is vital.
What are the rules?
There are various rules merchants must stick to when it comes to cross-border acquiring. Let’s explore some basics of Visa and other rules more generally.
Visa
If you are using Visa, there are specific cross-border ecommerce disclosures a merchant needs to stick to. They must:
- Disclose payment location.
- Disclose address of merchant or sponsored merchant’s payment establishment (including merchant’s outlet country).
- A merchant must show this either on the checkout screen where the transaction amount appears, or in the web pages the cardholder sees as they go through the checkout process.
For more information on Visa’s rules, click here.
Generally, a cross-border ecommerce merchant must make it clear to customers that they are purchasing from an international merchant. As the location of an ecommerce store is not apparent in the same way a brick-and-mortar store is, transparency and clarity are crucial.
Also, it is not always apparent what country an ecommerce store is based in. Sometimes, these stores are translated automatically into the customer’s domestic language, giving off the impression of a domestic website. Understanding what stores are domestic can be even more difficult for customers who have never encountered the store before, or for those who are less savvy with ecommerce in general.
Now we know some of the rules. Let’s explore the risks.
What are the risks of cross-border payments to high-risk merchants?
Cross-border payments come with a variety of risks to merchants, but many of these can be offset. Some of these include:
- Merchants’ businesses open up to potential fraud and additional risks, especially because fragmentary processes hinder cross-border payments.
- Cross-border payments are complicated. They involve multiple payers, two or more currencies, governmental and international regulations, additional markets, systems, and risks.
- Transactions can take longer to complete, and take as much as several days, because transactions must pass through intermediary banks—an inconvenience to customers.
- Additional fees may incur to the merchant and the customer due to various international taxes and fees.
What are the strategies and services for cross-border acquiring?
There are many strategies a merchant can carry out to ensure best practices to improve their international shopper’s experience.
Firstly, a merchant should disclose which currency they use. This reduces the potential of a customer misunderstanding what they’re paying for, which in turn will mitigate the risk for disputes.
To be a transparent merchant, you should:
- Disclose the country or region you operate in on your payments page.
- Let the customer know the transaction currency they are using to purchase goods or services. (This is especially important if the term is generic. For example, “dollar” isn’t clear as Australia, New Zealand, and other countries use the term for their currency. Be specific, like stating “US Dollar”).
- Price goods in the country’s currency your store is located in, and give customers an option to see prices in their local currency.
- Remind customers on the checkout page that they may have to pay additional fees and/or taxes if they use a foreign card.
- If you do offer multiple currency pricing (MCP), allow the cardholder a simple way to move between currencies they may want to purchase your products or services with.
- Ensure to display all Dynamic Currency Conversion (DCC) services on your website clearly (if you use it). Be sure to make it mandatory for cardholders to say whether they accept or decline the use of the DCC service. Also, make sure the currency of the customer is used when they select DCC.
- Only offer DCC if the cardholder’s currency differs from your business's home currency.
- Make sure to let the cardholder choose what currency they want to pay with. Do not estimate it based on their location.
- Make sure all the transaction receipt statements have all the essential information on them.
One option you have as a merchant is to utilize local acquiring by going through a single global partner. This way, you can get licenses to all international markets where you operate your business. There are many advantages to this strategy. You can get higher authorization rates, reduced transaction fees, and quicker settlement in all the different markets. You will also see all of your transaction details and understand your customers better and in what regions to increase sales.
If you want more information about going through a global partner, feel free to contact an L3 representative at 800-277-7785 or sales@l3payments.com.
Conclusion
You now understand how you are affected by cross-border acquiring and some of the methods you can undertake to offset some of the potential issues. You must consider cross-border acquiring if you want to increase your revenue and lower your costs as a merchant.
If you would like any additional assistance or have any questions about what cross-border acquiring can do for your high-risk business, an L3 representative is here to help. Reach out to a professional at 800-277-7785 or sales@l3payments.com.
