This article provides considerations and materials for better understanding cross-border ecommerce payment methods and the issue of transactional fraud.
Last Published: 11/1/2017

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Credit cards are still the preferred method of payment online - both domestically and internationally.  But with the use of credit cards also comes the inherent risks of client drawbacks and fraud.  Mobile money wallets are becoming increasingly popular in countries like India, where there are more people with mobile phones than active bank accounts.  A payment gateway is a software application set up as a part of your website ecommerce platform to enable customers and other businesses to complete transactions from your website, which is responsible for taking the forms of payment you determine will be accepted (ewallet or credit card compared to cash on delivery).
 

What about online international payment fraud-prevention?

Selling through cross-border ecommerce inherently raises your risk for fraud.  This fraud risk however, can be mitigated by researching customer behavior and fraud trends in each target market.  All payment gateways have data encryption, however some countries like Singapore require a second layer of data encryption software (ie: CVV2, 3D Secure) for all online transitions in order to prevent fraud.  It is important to go with a well-known payment gateway with a strong reputation for security, as overseas consumers need to feel their payments and transactions are secure.  

What e-payment types are there commonly acceptable in your target market?

While credit cards remain the preferred method of payment by overseas consumers, that preference doesn’t eliminate the risks associated with payments done by credit cards.  Do your research and ask local partners or in-country consultants what payment methods are preferred so you can make sure your payment processing software accommodates your target market.  Before you enter into an agreement with any payment processor, it is important to understand how they handle payment disputes and fraudulent transactions in the target market.  

Are you ready to receive payment in the currency of the foreign buyer?

If you do decide to take payment in the local currency, keep in mind the potential for wild fluctuations in exchange rates, depending upon the market.  Also, some markets (eg: Asia Pacific) have high cross-border ecommerce transaction fee rates, so you need to make sure that your payment gateway is able to process these sort of transactions as well.  

Is a local legal entity required in your target market region for payment processing?

Some overseas markets have established that in order to complete financial transactions, or conduct business altogether, there must be a local legal entity of the company in-market.  This can be for multiple jurisdictional reasons, such as local tax revenue generation for example.  Avoid a rigid one-size-fits-all approach towards entering overseas markets, and be adaptable to rule changes in the future, as with local legal entities.  

If using an online marketplace, where do their responsibilities begin and end with regards to tax payments on revenue generated in the overseas market?

An online marketplace is an attractive market-entry option, especially if you want to get visibility in a country without investing much time or money.  If using an online marketplace, make sure you either figure in the individual product VAT into the product sales price featured on the marketplace, or find out if the marketplace will take on the responsibility of collecting and remitting VAT.  Paying attention to details such as duties and taxes can and will have a serious effect on your brand if the consumer is inconvenienced while attempting to purchase from you.  

Which costs more for your business - the service fee percentage of an online marketplace, or that of a third party payment gateway?

Just as with any business service you are faced with potentially using, you need to do a cost-benefit analysis of whether or not using the payment services of your chosen online marketplace or those services of a third-party payment gateway are more beneficial to your bottom line.  As always, be prepared to be flexible on your choice of service provider should you find out that you need to make a change of provider or services to suit your business needs.  

USG provided resources:

We always recommend contacting a local International Trade Specialist or Global eCommerce Specialist within the U.S. Commercial Service’s worldwide network to receive free counseling.  Through our International Expansion Blueprint service, our trade professionals can help map out a global ecommerce strategy and to determine which markets might be best for your product or service.  Also, you can do some preliminary homework by taking advantage of the Country Commercial Guides (CCGs).  Produced by U.S. embassies and consulates abroad, the CCGs provide the latest “boots-on-the-ground” market intelligence on more than 140 countries.



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For Further Consideration:

•    Protect Your Online Brand
•    Choosing an eCommerce Channel Mix
•    Identify eCommerce Market Opportunities
•    Optimize Your User Experience (UX)
•    Build Your Digital Brand
•    Ship Your eCommerce Products
•    Manage After-Sales Service
•    Price Your eCommerce Products
 

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