A First Data White Paper
Payments:
What to Consider
When Pursuing
Global Markets
Online
By Michael Black
Vice President, International Currency Solutions Group
First Data
© 2011 First Data Corporation. All trademarks, service marks and trade names referenced
in this material are the property of their respective owners.
Payments: What to Consider When Pursuing Global Markets Online
A First Data White Paper
Introduction
Opportunities abound for eCommerce retailers considering expansion into international markets.
In spite of the worldwide economic crisis, eCommerce has continued to grow—and is capturing
an increasing share of total retail sales. Online retail growth has been especially robust overseas,
which is not surprising considering that the eCommerce market is more developed in the United
States than in most other countries. Accordingly, a recent survey by Internet Retailer found that
60 percent of online merchants currently selling only in the U.S. are considering international
expansion in order to take advantage of the global eCommerce potential.1
To date, most online retailers in the U.S. have not yet ventured into international markets beyond Canada, where customers can
be served by simply shipping from U.S.-based fulfillment centers. However, as North American markets become increasingly
competitive and saturated, more and more retailers are seeking revenue growth by expanding into multiple countries.
As an online merchant explores opportunities for global expansion, it soon discovers there are two fundamental challenges it
must address:
1.
Order fulfillment – how it will deliver its products to global customers. This involves deciding whether to be a truly global
retailer with operations around the globe, or to serve the international community from a single country.
2.
Payments – how it will accept payments as either a single-country merchant selling into international markets or as a
multi-national merchant selling locally in multiple countries. In either case, it is important to understand which customer
payment options are essential for each market.
Global payment acceptance can be a potentially complex issue for merchants, but fortunately, there are solutions available that can
simplify the process of accepting payments from customers around the world. This paper discusses the key factors a retailer should
consider in evaluating which type of payment service providers can best meet its global needs.
1
Stambor, Zak. “Searching Abroad.” Internet Retailer. August 1, 2010.
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Payments: What to Consider When Pursuing Global Markets Online
A First Data White Paper
Options for Global Expansion Online
eCommerce merchants planning to target international consumers face a range of operational considerations depending on their
chosen approach; each with important advantages and disadvantages to evaluate. Consider these two scenarios:
JJ The simplest example is a merchant domiciled in only one country, but seeking to sell to customers in international markets
via the Internet. This merchant does not necessarily have to provide payment options or currency support beyond those
already offered in its domestic country. However, it will experience much greater success if its website supports consumers’
local currencies and preferred payment methods; even more so if presented in customers’ native languages. Under this
model, it is important to select a payment provider that can support various options in order to maximize the online sales
potential. Here are two key payment services to be considered:
•
Dynamic Currency Conversion (DCC) — a service that allows merchants
(online or card present) to offer international Visa or MasterCard customers
the option to pay either in their own currency or in the merchant’s currency.
This customer service offering enhances the purchasing experience for
international consumers, provides greater consumer awareness of foreign
exchange rates, offers the merchant protection against exchange rate
risks, and may even be a source of new revenue for the merchant—all while
increasing online sales. Although similar, not all DCC solutions are exactly
the same, so it is a good idea to evaluate them based on your particular
needs and to find out if your current payment provider and online payment
infrastructure can readily support it. (see First Data’s white paper, Increase
Revenue and Improve Customer Satisfaction with Dynamic Currency
Conversion, for more information)
•
Multi-Currency Pricing — allows merchants to price goods and services
in virtually any currency, helping to create the end-to-end feel of being a
multi-national merchant without actually “setting up shop” in the target
market. Unlike DCC, in which the international consumer is offered a
currency choice, multi-currency pricing is designed to allow merchants to
Do you know if you
are already servicing
foreign consumers?
Do you know where
they come from and
how much they spend?
Would this information
help you develop your
global strategy? Ask your current
payment service
provider to tell you.
set foreign pricing and hold that pricing static over time. This is of particular
interest to those merchants who utilize printed marketing collateral in
conjunction with on-line promotions.
For the online merchant experimenting with international sales, these services are important tools in advancing into
specific markets. The online merchant can even utilize these services to “test the waters” before investing heavily in
establishing a true presence in multiple countries ... a virtual “look before you leap” approach.
JJ At the other end of the spectrum is the large online retailer seeking to expand internationally by establishing selling entities
in multiple countries. This means it will need payment providers that can service each country and support the necessary
methods of payment. Being domiciled in a particular country or region requires complying with assorted local laws and
regulations, as well as overcoming other potential barriers to entry—each of which can be daunting to retailers entering a
new market for the first time.
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Payments: What to Consider When Pursuing Global Markets Online
•
A First Data White Paper
Domicile is generally defined as where the selling entity:
1. has a permanent establishment selling the goods/services,
2. holds a valid business license,
3. has a local address for consumer correspondence and judicial process, and
4. pays taxes on the sale of goods and services.
Regardless of the global eCommerce strategy a merchant decides to pursue, it must have a method of accepting payments that
supports its strategy. Deciding how to accept and process payments is one of the most important decisions a global eCommerce
merchant must make. There are a number of factors merchants need to consider, but first let’s take a look at exactly who is involved
in facilitating an eCommerce payment.
Who Enables Payment?
In many ways, global eCommerce payments work a lot like other kinds of payments. First, the transaction is “acquired” from
the merchant. It is securely sent to the payment processor (either directly or through a third-party gateway provider), which
authenticates the transaction and authorizes transfer of funds between the customer’s bank and the merchant’s bank. The
merchant is notified that it is permissible to complete the transaction.
As online merchants expand from their countries of domicile into foreign markets,
they need support for various currencies and payment types. In addition, merchants
may find that they can be more efficient and obtain better pricing by minimizing the
number of processing relationships where possible.
By relying on one
payment services
provider—a global
acquirer—for all
electronic payments
in all regions, the
merchant can ideally
bypass many of the
costs, risks, and
hassles of managing
service providers in
every country.
In the past, multinational organizations had to use separate (local) service providers
across the world to accept and process card payments. Generally, the acquiring
function was handled by a bank serving its merchant customers in a geographic
market. Account set-up, administration, and reporting functions were limited to the
footprint (license) of the bank. For multi-country merchants, this approach led to
intimidating challenges and overly complex, difficult-to-manage processes.
Although still viable, that business model has been surpassed by today’s high-volume,
global (or multi-national) acquiring solutions. These enable multi-national merchants
to streamline the number of acquiring or service provider relationships required
to serve their global footprint. To manage such a group of disparate acquirers, a
retailer would need to negotiate multiple agreements, deal with multiple technical
connections, multiple relationship managers, understand the regulatory requirements
and fee structures of each market, and be prepared to manage the fraud risks inherent
in fragmented processes for multiple countries.
Global acquirers help merchants simplify the complex system of international eCommerce. By relying on one payment services
provider—a global acquirer—for all electronic payments in all regions, the merchant can ideally bypass many of the costs, risks, and
hassles of managing service providers in every country. However, merchants should still be aware that there is no single firm that can
provide a full array of acquiring services in every single country, worldwide; so you really need to align your business needs with the
potential providers and try to maximize coverage wherever possible.
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Payments: What to Consider When Pursuing Global Markets Online
A First Data White Paper
Categories of Payment Service Providers
As online merchants look more closely into the kinds of services offered by payment service providers, they will also discover there
are several different types of entities in the acquiring sphere. Accordingly, merchants should consider what each of these has to
offer. Here are some key considerations for the most common types of service providers in the global eCommerce space:
JJ Gateways. Gateways are primarily transaction conduits transferring the payment data between a merchant and an acquirer,
usually for a fee. They link transactions from the merchant’s shopping cart with the payment service provider’s processing
networks. In addition to other services frequently offered, like fraud prevention tools and transaction reporting, some
gateways actually provide direct acquiring capabilities when structured as independent sales organizations working in
conjunction with banks and payment processors.
JJ Banks. Aside from a few exceptions, banks, through their acquiring licenses, are almost always involved in the payment
acceptance process. In some cases, it is the direct acquirer and in others it provides its license to others in an Independent
Sales Organization (ISO) or BIN Rental/Sponsorship model. Most banks either partner with a payment processor or have
their own in-house processing platform. Keep in mind, a bank’s retail banking footprint does not mean it has the ability to
support payment acceptance in a particular country, so asking the right questions is critical.
JJ Payment Processors. Most large payment processors have partnered with banks across the globe to establish acquiring
alliances as stand-alone business entities. In other cases, processors may just sit behind the bank as the payment processing
contractor. Similar to gateways, processors can establish direct acquiring ISO relationships with banks and some also offer
gateway, fraud, and other solutions, thus potentially eliminating the need for additional third parties. Many large merchants
decide to connect directly to processors, as well, to avoid the ongoing gateway costs. Again, leveraging a provider who can
offer the most value-added services based on your needs is typically in your best interest, as the more services you acquire
from a single provider, the better your overall costs will be.
Make Your Service Provider(s)
a Key Partner in Global eCommerce
Why is it importance to select the right service provider for global payment acceptance? The
answer is related to an old adage: Part of wisdom is learning to know what you don’t know.
Savvy global merchants know they need a trusted advisor with expertise in the details
and nuances of payment practices in each country where they will have a presence.
The merchant will rely on this partner for advice and action on a host of complex issues,
such as domicile requirements, local payment preferences, interchange, tax provisions,
compliance, and banking relationships.
Trying to manage different acquirer relationships for each country in which you are
operating, or selecting a provider that simply doesn’t have the reach to service your
market areas, creates a lot of problems down the road. However, selecting the right
service provider(s) enables a merchant to:
JJ Offer the essential payment options in each region—those with enough
Trying to manage
different acquirer
relationships for each
country in which you are
operating, or selecting
a provider that simply
doesn’t have the reach
to service your market
areas, creates a lot of
problems down the
road.
shopper appeal to maximize sales and reduce cart abandonment rates
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Payments: What to Consider When Pursuing Global Markets Online
A First Data White Paper
JJ Leverage the efficiencies of one or a few providers across a large geographic footprint
JJ Obtain more favorable pricing through the volume achieved in global coverage
JJ Minimize the IT development and support resources needed to support each new country
JJ Avoid fragmentation of fraud management efforts
JJ Gain transparency with unified reporting and analytics
For merchants, evaluation of a payment services partner needs to involve two essential steps:
Step 1: Determine how well the service provider’s geographic coverage aligns with the countries in which you are selling or will
be selling.
Step 2: Evaluate the service provider’s level of support for local and alternative payment types and other key products and
services important to you.
How do you evaluate a service provider’s capabilities? The next section provides a checklist of capabilities a merchant should
expect from a global payment services provider.
Key Attributes to Consider
Each of the following factors contributes to the total value proposition of a global acquiring partner. Ideally, you will want a service
provider that is able to deliver on as many of these attributes as possible.
3 Single contract for your global needs
Without a multinational payment services solution, merchants typically rely on local banks or acquirers in each of the regions
where they do business. This means negotiating terms and executing contracts with each one of those entities.
The global acquiring model, on the other hand, ideally can cover many countries with one provider. The merchant negotiates
contract terms once and it’s done. This reduces the need to individually evaluate prospective providers and subsequently
negotiate contract terms with them.
3 Pricing based on global volumes
The broader a payment processor’s scope of international operations, the greater the potential for the merchant to receive
volume-based pricing. A provider with a global footprint can capture economies of scale for the merchant’s current and
prospective volumes in the areas where it operates. This is particularly beneficial in new markets where initial transaction volume
may be quite small.
For example, a local Hong Kong payment service provider would price its services based only on the volume of transactions
generated by the Hong Kong locations of the multinational merchant. A global acquirer, however, would take into account
volumes from all areas of the merchant’s operations.
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Payments: What to Consider When Pursuing Global Markets Online
A First Data White Paper
3 Unified reporting on global transactions
When it comes to reporting payment information, multinational merchants have more complex needs than other merchants.
The global merchant may face two issues:
•
How to gain easy, online access to its transactions from all locations with as few interfaces and sign-ons as possible,
without the inconvenience of using different reporting tools from multiple providers.
•
How to import and combine raw data files from all countries into one in-house database, from which custom, selfgenerated global reports can be created as needed. (Although this may not be an important consideration for all
merchants.)
Both are difficult to accomplish when data is coming from many different sources in multiple formats. With a single provider, the
merchant can receive a data file consistent across all countries the provider supports.
3 Single point-of-contact for all global relationships
What happens when there’s a question, a problem, or a request? If the merchant must deal with multiple service providers,
finding a solution can be a laborious activity. If the merchant has one provider for all multinational services, the merchant can
potentially work with just a single relationship manager. Whether the issue involves settlements in Japan or authorizations in the
United Kingdom, there’s just one call to make.
3 Simplified technical solution
The service provider’s interface methods should simplify and minimize the merchant’s integration effort and maximize global
support. The back office operations of the payments process should be practically transparent to the merchant across all
different countries and methods of payments.
In addition, the service provider’s network should virtually eliminate the risk of downtime through built-in redundancy and
worldwide, 24/7 support to assure reliability for all service areas.
3 Broad global reach
Merchants should assess the different payment providers to see which countries the provider can serve as well as how the
transactions in those countries will qualify with Visa and MasterCard (e.g. locally, intra-regionally, internationally). The goal
is minimize the number of payment providers required to support your current and future geographical footprint, while
maximizing cost efficiencies.
3 Support for a wide range of payment types
The payment service provider should serve as a merchant’s trusted advisor, ready to assist in opening new markets. The
provider should be familiar with and able to support the key payment types by region/country. This would include local
payment products like country-specific direct debit or bank transfers, as well as relevant alternative payment types like
PayPal or Google Checkout, etc. By knowing which payment types are essential to a given market, eCommerce merchants can
maximize their sales results.
3 Ability to optimize interchange costs
Merchants offering multiple methods of payment may be able to minimize interchange costs. The greater the provider’s global
reach, and the more payment types it supports, the better the provider is positioned to help merchants minimize their cost
of payment acceptance. Consider an “interchange plus” or similar pricing model, in which all fee components are transparent
(versus a “bundled rate” offering).
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Payments: What to Consider When Pursuing Global Markets Online
A First Data White Paper
3 Advanced fraud management solutions
Look for payment service providers offering a robust fraud detection and rules management solution. The fraud rate for
international orders is nearly triple the fraud rate for domestic online orders. To combat fraud, global eCommerce merchants
need a set of consistent, integrated fraud prevention tools for all countries, rather than fragmented approaches from various
third-party providers.
Powerful tools and technologies for fraud management include automated transaction risk scoring, device fingerprinting,
automated challenge/response questions for identity authentication, and geo-location tracking. An ideal solution enables
merchants to adjust transaction risk assessment by region and local payment methods. (see First Data’s white paper,
Strategies for Reducing the Risk of eCommerce Fraud, for more information).
3 Broad suite of ancillary products and services
Providers can be more than just payment processors. The better service providers offer a number of tools and services that help
merchants drive incremental revenue and/or lower costs.
•
Prepaid access cards – popular with Internet shoppers in many countries. Non-bank-based payment methods, such as
general purpose reloadable cards, can be invaluable for teens or people of any age who are budget-conscious, have
security concerns, or do not have conventional bank relationships.
•
Dynamic Currency Conversion or other multi-currency solutions – maximizes the merchants ability to cater to foreign
consumers, enhancing the purchase experience, and driving incremental sales and revenue.
•
Transaction encryption services and other PCI compliance services – shifting the burden and liability of holding
cardholder data.
•
Opportunities for private label or co-branded credit cards – creating custom payment vehicles which drive increase
sales, lower cost of acceptance, and/or create new revenue streams.
•
Recurring payment and account updater services – maximizing approved sales transactions.
3 Global support for card-present processing
Some eCommerce merchants enter a market by first accepting transactions online, and later opening stores in the country.
Certain providers can handle both card-present and card-not-present transactions for merchants with physical stores in
various countries. Therefore, the merchant doesn’t have to seek out a new payment processing relationship for in-store, cardpresent transactions. If that flexibility is important to you, look for payment service providers who can handle both eCommerce
payments and in-store payments in the regions you intend to operate.
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Payments: What to Consider When Pursuing Global Markets Online
A First Data White Paper
Conclusion
As merchants expand their eCommerce business internationally and seek capable providers of global payment acceptance
services, they have a wide range options. With so many choices, merchants need to focus on the factors that lead to success.
One key is to list the top attributes of your ideal provider of global payment services; then match the capabilities of the
prospective provider(s) to the list. Also, determine which prospective providers have geographic coverage footprints that match
your planned target markets.
The idea is to gain efficiencies by establishing relationships with as few payment
service providers as possible in all of your relevant markets. The selected service
providers should have the expertise to advise you on all facets of payments in as many
regions of the world as possible.
Advantages of the integrated, single vendor approach:
JJ Saves the merchant considerable time and effort in setting up processes for a
non-core area where they lack expertise
JJ Creates cost-saving efficiencies through consolidated reporting and fewer
technical integrations
Gain efficiencies
by establishing
relationships with as
few payment service
providers as possible
in all of your relevant
markets
JJ Enables consolidated, single-source reporting with integrated tools for
analytics, reconciliation, and transaction research
JJ Creates opportunities for better pricing through global volumes and optimum payment methods for specific regions
JJ Create efficiencies through fewer contractual agreements and dealing with fewer relationship managers
JJ Enables unified fraud management to minimize charge-backs and fraud losses
JJ Helps improve the checkout experience with ancillary products and services that drive sales and incremental revenue.
Merchants have exciting opportunities to leverage their payment capabilities as a growth engine for global eCommerce.
For additional information and strategies for growing your global eCommerce business, see First Data’s white paper,
Payment Strategies for eCommerce Growth.
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Payments: What to Consider When Pursuing Global Markets Online
A First Data White Paper
The Global Leader in
Electronic Commerce
Around the world every day, First Data makes payment transactions secure, fast and easy for merchants, financial
institutions and their customers. We leverage our unparalleled product portfolio and expertise to deliver processing
solutions that drive customer revenue and profitability. Whether the payment is by debit or credit, gift card, check
or mobile phone, online or at the point of sale, First Data helps you maximize value for your business.
About the Author
Michael Black has been with the merchant acquiring division of First Data for over six years and is responsible for First Data’s
international currency solutions suite of products, which includes Global Acquiring, Multi-Currency Processing, and Dynamic
Currency Conversion. Prior to joining First Data, Michael spent 11 years at JPMorgan Chase in the card issuing business where
he ran strategic new cardmember acquisition channels and also served as senior product executive for two of JPMorgan
Chase’s co-branded portfolios. Michael is based in New York.
For more information, contact your sales representative or visit firstdata.com
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