Cross-border represents the ultimate promise of e-commerce: that you can sell to anyone, anywhere at any time. But the reality is that many companies—especially mid-market merchants that want to tap the growth opportunities presented by international markets but don’t have internal payment teams that can handle the additional complexity—struggle when they attempt to sell overseas.
Language, currency, culture and regulation vary from country to country and many merchants are not prepared to navigate that complexity.
Ralph Dangelmaier, CEO of global online payment provider BlueSnap, is a cross-border payments veteran who understands the value of localization in cross-border e-commerce success and the difficulty many merchants have in achieving it.
Dangelmaier recently sat down with CNP to talk about localization, “technical debt” and the effect they have on authorization rates—and ultimately revenue—connected with cross-border transactions. He also teamed up with Khushbu Shah from health and wellness retailer Arbonne in a recent CNP webinar to discuss these issues. Click here to access a recording of the webinar.
CNP: The impact of Covid on e-commerce overall has been very well documented. Certain verticals were negatively affected, but many thrived and e-commerce surged. Did cross-border e-commerce see similar gains or did Covid have a different effect?
Ralph Dangelmaier: Cross-border exploded very much like domestic e-commerce for both B2C and B2B merchants. I think there are a couple things that made it different, though. B2B invoicing, for instance, completely switched from wire transfers to card and digital payments during the pandemic and there were challenges. People were buying things but they hadn’t built card fees into their margins, security was completely different, they weren’t ready to accept alternative payment types, FX was suddenly a consideration because before they were paying via wire in their own currency. There were new operations that came into play that businesses really weren’t prepared for.
CNP: Is rising adoption of mobile wallets and alternative payment methods by U.S. consumers making merchants more comfortable with the international payment environment, where accepting local payment methods is more crucial?
Ralph Dangelmaier: Awareness may be rising, but true deployment is not at a high level. They don’t get that, if you’re going to bill someone in, say the Netherlands, you need to be in the Euro currency and probably for a large ticket, use an alternative payment method like iDEAL. People are starting to understand but they’re not quite there yet. Every market is different. I had someone on the phone today who said he was in 26 countries and absolutely needed Alipay. I said, “what are you doing in the other 25?” We haven’t made as much progress as we need to.
CNP: What’s the most common mistake merchants who want to sell cross-border are making?
Ralph Dangelmaier: When you sell into another market you need to be “local, local, local.” By that, I mean local currency, local acquiring, local payment type. Again, most people don’t recognize that. They may say they need Alipay, but they don’t understand things as basic as that they need a local bank account to pay the funds into. So, the failure to go “local, local, local” is the most common mistake. They may be on top of one or two, but few are squared away with all three.
CNP: BlueSnap did some research recently that uncovered some surprising findings about cross-border authorization rates. What struck you most about the intelligence revealed by that survey?
Ralph Dangelmaier: It was really shocking. People were saying good cross-border auth rates were 40 to 70 percent. That’s like buying a beautiful new car that only gets eight miles per gallon. Businesses that were getting auth rates in the 90s at home were accepting 40 percent overseas. Probably the main thing that led to those poor authorization rates was business’ failure to take advantage of local acquiring. Almost 70 percent of the organizations we polled don’t have local acquiring in the international markets they’re selling into.
CNP: Ralph Dangelmaier: As a result, these businesses are getting whacked with high cross-border fees, which significantly affects margins. Half of the people we surveyed estimated that their companies lost up to 10 percent of their revenue by not offering the right mix of payment options. The payment providers they’re working with simply aren’t giving them access to local payment methods and acquiring.
CNP: Another term you’ve used is “technical debt.” What does that mean to you and how have you seen it affecting your clients selling into international markets?
Ralph Dangelmaier: We would see clients with four or five vendor relationships they had to manage. In addition to the payments providers and banks, businesses were juggling other vendors they had to integrate into their e-commerce payments function in a way more complex environment than their domestic operations. We typically see merchants carrying separate technology providers for things like taxes, fraud, alternative payments, etc.
The survey found that 30 percent of businesses selling cross-border are managing four or more payment providers. And many of these are smaller companies that don’t have internal resources to manage those relationships efficiently.
It’s almost impossible for them to keep control of their payment stacks when all this is happening in an unfamiliar cross-border environment. Managing those relationships in that environment results in unnecessary costs. For the middle market, finding a provider that can handle those integrations in a single platform is vital.