Cross-border sales can help businesses reach new types of consumers and new levels of profitability. Small online businesses must determine what payment options are available in order to successfully operate across international borders. Once in place, these options can be a powerful tool to fuel business growth.
When they sell globally, most small businesses consider four primary payment options and offer their customers a choice. Each option has advantages and drawbacks.
Credit cards are convenient and generally trusted for payments worldwide. Most credit-card companies automatically adjust consumer purchases to account for differences and fluctuations in currency. To accept credit cards, a business first must open a merchant account with a bank and then determine how it will process the transactions.
Banks may charge relatively high setup and monthly fees for some merchant accounts, and often charge separate fees per transaction. Some financial institutions might hesitate to approve merchant accounts for small businesses, as they often deem such businesses a higher risk. Merchant accounts can take 30 days or more to set up.
International wire transfers
This form of payment is popular between merchants and certain customers with whom they have a previously established relationship. Wire transfers are used frequently to purchase customized items or bulk sales. Transfers provide the advantage of immediacy, often taking just a day or two to clear.
Wire transfers cost between $35 and $60, which may discourage the consumer from using this option. Consumers also tend to be wary of using wire transfers, because they are not easily traceable and often lack an easy means of recourse if something goes wrong.
International money orders
Money orders are widely trusted and utilized by customers and merchants. Orders can be purchased at the consumer’s bank where they are issued in various currencies. Photo ID and signature are required to cash an international money order, so they are viewed as a secure form of payment.
Nominal fees are associated with money orders. Also, money orders must be mailed and then clear the merchant’s bank. Therefore, the payment process can take up to 10 days to complete.
Online payment services
There are several of these services, the most popular of which is PayPal. Online payment services are generally viewed as safe, cost-effective and convenient ways to accept payments across borders. PayPal, for instance, is available in 103 markets and has more than 133 million accounts worldwide. There are often other payment services that operate in countries where PayPal does not.
When using online payment services, the seller pays a per-transaction fee. Generally, this fee is lower than those charged by banks for traditional merchant accounts.
To operate successfully in international markets, small businesses must have secure, easy and cost-effective payment methods. Providing customers with easy-to-use payment options with built-in currency conversion can lead to increased sales and a broader customer base.