5 things to know about international credit card and payment processing
In today’s modern economy, customers are more connected than ever before. That can be a good thing for your business as access to a global marketplace is at the fingertips of consumers worldwide. From as close as Canada or Mexico to Europe and beyond, customers can place orders from anywhere for products and services with just a few clicks.
So if your business is thinking about accepting international credit cards and payments, there are a few things you’ll want to consider. This article looks at 5 things to know about international payment processing, including the payment solutions for your business. To start, let's talk about international merchant accounts.
What’s an international merchant account?
A merchant account allows businesses like yours to accept multiple forms of payment, including debit card or credit card payments, Automated Clearing House (ACH) transactions, mobile payments, and online payments. But when you’re selling abroad, you’ll need a separate merchant account to handle those global payments. That’s where international merchant accounts come into play. Many small businesses choose to work with a third party payment processing services provider who offers international merchant services and helps them with international credit card processing. Next, let’s look at international payment gateways.
What’s an international payment gateway?
However, if you start to sell products overseas, you’ll need an international payment gateway. As the name suggests, an international payment gateway allows your business to accept payments from all over the world. Plus, many payment gateways offer other benefits that we’ll take a look at in the next section.
What should you look for in an international payment gateway?
If you’ll be accepting payments online for international orders, it’s important to have an international payment gateway. Here’s a list of some factors to consider:
- Enhanced security – Because you’ll be doing business in multiple countries, it’s important that your payment gateway provides secure payment options, especially since you’ll be taking payments with multiple currencies.
- Multiple currency support – The ability for your business to accept multiple currencies helps improve the customer experience at your business’s site. This is especially helpful when you can display pricing in your customer’s currency, thereby leading to a more seamless transaction for customers.
- Multiple payment type support – If you’re doing business in foreign markets, it’s important to make sure you accept the popular payment options in those countries. While Visa and Mastercard are staples throughout the world, also look to accept payments like Alipay and have digital wallet support so customers can pay with Apple Pay or Google Pay.
- Foreign tax support – In many countries, there’s what’s known as the Value-Added Tax, or VAT. This tax is collected by the end retailer selling the goods or services. Because they’re different based on the country, it’s helpful for your international payment gateway provider to handle this for you.
- General ecommerce support – Much like your domestic payment gateway, you’ll want to confirm the level of customer support your international payment gateway offers. From integration into your ecommerce site to checkout support, it’s important to consider the level of partnership and support you’ll need when evaluating your provider options.
Understanding international payment methods
When it comes to international payment methods, there are a few different ways to accept transactions. Let’s take a look at each one:
- Multi-currency processing accounts – In this model, a special merchant account is set up on behalf of the merchant. In turn, the merchant accepts payments in different currencies and then gets paid in U.S. dollars. While this is very convenient and allows you to provide a good customer service experience, you might pay cross-border fees, which will be discussed later in this article.
- U.S.-based merchant accounts – In this model, prices are listed in USD, and a U.S. credit card processor processes card transactions. While this process can be quick and simple, it does have a few disadvantages. Customers who are not used to paying in USD may abandon their shopping carts if they’re not able to pay in their familiar currency. Your customers may also be responsible for foreign transaction (FX) fees, which again may discourage them from purchasing your products. Also, declines can be higher with this model as many banks view these types of transactions as high risk.
- Like-for-like processing accounts – In this model, the customer pays and the business receives in their local currency. This model is much more complicated than others because it requires a business to have local entities and bank accounts capable of receiving each of the foreign currencies. That involves working with acquiring banks in multiple countries in order to set up specific merchant accounts. While the business experiences fewer fees and lower decline rates, this processing model is best for a business that has a greater international presence.
As you can see, it’s important to understand the differences between models in order to decide which fits your business’s needs the best. Now, let’s take a closer look at a few challenges that come with accepting international payments.
The challenges of accepting international payments
When it comes to accepting international payments, there are a few challenges that you’ll want to know about as a small business owner. Here are a few of the most common:
- Foreign transaction fees – As discussed earlier, FX fees are fees that your customers pay if buying products in a different country. Therefore, if you’re selling in USD, your customer is liable for these fees, which can discourage purchases.
- Cross-border fees – Charged by the credit card networks, these fees occur when a merchant accepts payment from a customer who uses a credit card with an issuing bank that is not located in the same country as the merchant’s processing account. If you sell internationally and use a U.S.-based payment processor, you’re likely to experience these fees.
- Exchange rates – These are the currency exchange rates, and selling in another currency can expose your business to the fluctuations of currency exchange rates.
- Declined transaction rates – With foreign transactions, it’s likely that you’ll experience some declined transactions. However, this is less likely to happen if you accept the local currency rather than accept card payments in USD from other countries.
- Cart abandonment – Charging USD can lead to more abandoned carts as customers are more likely to complete transactions in their local currencies.
- Increased compliance – When it comes to accepting payments in other countries, you should be aware of the local rules and regulations in those countries when it comes to accepting credit and debit card payments. Work with your payment processing partner in order to make sure you’re following the payment card industry (PCI) compliance guidelines in those countries.
Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind. Learn more at heartland.us.