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Organizations face inherent risks and challenges on the path to globalization, due in part to each country’s regulations, inflation rates, currency and currency exchange rates, language and cultural barriers, foreign politics and policies, and consumer behaviors and preferences.

With almost 200 countries participating in international business, worldwide commerce presents an opportunity for enormous organizational growth if these hurdles can be cleared. Several large enterprises have expanded well internationally (Apple, McDonalds, etc.) by following some key touchpoints.

Surprises at checkout can lead to high cart abandonment.

The last thing an online merchant wants is to have a successful purchase in progress, only for additional fees, unaccepted payment methods, or extra taxes to tempt the consumer to abandon the cart. With online shopping cart abandonment estimated to be around 69.8%, it is the responsibility of the merchants to be aware of foreign regulations and payment challenges that could potentially add costs and corrupt the customer experience.

Equally as important is to be forthcoming about this information. All taxes and fees which may be associated with purchasing internationally should be upfront, and merchants must consistently highlight what the entire cost of the product is going to be, even if this includes additional wording in the checkout. Furthermore, e-commerce merchants need to be clear about the payment methods they accept, as this can vary significantly from country to county.

Merchants need to start paying attention to what consumers want to pay with.

When it comes to localization in e-commerce, customizing payment options is essential. Established enterprises and e-commerce merchants alike should not approach payments with a one-size-fits-all mindset. For example, while Americans prefer to pay with credit and debit cards, Europeans favor bank transfers and digital wallets (such as PayPal), and Asian consumers gravitate to QR codes. Narrowing down the scope even further, demographics within those counties play a role.

Therefore, e-commerce merchants need to tailor their payment methods to what will work for their target consumers.

Data breaches are far too common and are only on the rise.

Recently, international enterprise giants such as Microsoft, Estee Lauder, and MGM Resorts suffered security issues. From accidentally exposing confidential customer data online (such as credit or debit card information, home or office addresses, birth dates, buying history, and more) to malware and hacking incidents, these events significantly harmed consumer trust and brand reputation for these businesses. Even more, cybercrime is a substantial financial liability as the cost of patching, compensating victims, and possible litigation leaves many companies unable to recover fully.

The good news is that there has been much investment from established enterprises to create solutions that cross-border e-commerce merchants entering the market can utilize. For example, innovative technology is allowing faster responses to suspicious activity to ensure that transactions remain secure. As e-commerce merchants now realize that they are at risk if they decide to hold sensitive data in-house, they are discovering new ways to safely store information that is susceptible to threats.

Global merchants must take a lot of things into consideration. 

The established enterprises that have thrived worldwide do so because they understand their target audiences. They know that the key to success overseas is localization starting from a very high level, such as transparency and communication. It then goes down to payment preferences and choices, followed by assuring security and local compliance.

For global e-commerce merchants, this is a roadmap they can follow. For an e-commerce merchant to grow internationally, they need to identify what they want to accomplish, how local they want to be, what resources they have in-house, how to create the best experience and their KPIs.

This is where the right payments infrastructure partner can be of great value. By helping global merchants discover optimal ways of implementing payment methods, defining the best digital experiences based on preferences by the local consumers, and determining conversion metrics, they help merchants connect with more consumers, whether they’re 10 or 10,000 miles away.

Therese Hudak is the Head of Enterprise Account Management at PPRO

intermediary banks laundering

Connecting the World: The Importance of Intermediary Banks

Whether you are initiating electronic international payments through a fintech solution or buying physical currency, the chances are high that a bank will be involved. The relationship between banks, as well as the role of intermediary banks, often eludes the general public, who are content with the process as long as it works.

However, understanding how the sausage is made can provide valuable insight into the way you conduct your business. Let’s take a closer look at intermediary banks and their subsequent relationship with currency exchange.

What is an Intermediary Bank?

In layman’s terms, an intermediary bank is where funds are transferred prior to reaching their destination, the payment bank. 

To transfer money, banks must hold accounts with each other in the same way that a typical client would. However, there are too many banks for one to hold accounts with all the others, so instead, they strategically choose where to open accounts. The result is a fragmented network of financial institutions. 

When a bank needs to send money to a location where their bank does not hold an account, the bank instructs an intermediary bank to act as a “middle man” to pass on the funds on their behalf. Funds can transfer between multiple intermediaries, especially if one of the banks is not networked with many larger banks. If the payment bank is across an international border, the intermediary bank may also act as the currency exchange provider.

The Role of Currency Exchange

Currency exchange refers to the use of one currency to purchase the same value in another currency. It’s required any time one entity wishes to pay another in a currency different from their default option.

Each country has either a “fixed” or “floating” exchange rate. A “fixed” exchange rate—also known as the “gold standard”—means that all the country’s money has a physical equivalent in gold or another precious material. “Floating” exchange rates may not have a physical worth, but are influenced by the market and politics, as is currently the case with the Great British pound’s relationship with Brexit.

Breaking Down the Cost

For businesses, currency exchange is vital to a true international payment process. Some vendors may wish to be paid in their customer’s default currency, which would not warrant an exchange. U.S. businesses may experience this when working with vendors in countries like China or Japan, who often prefer payments in USD. This happens when a vendor finds it cheaper to open accounts specific to currencies other than their own in order to avoid exchange fees.

Some vendors have opened multi-currency accounts, which enable vendors to accept and store more than one currency in a single account. Because this method is still gaining traction, it’s good practice to ask if vendors have multi-currency accounts before sending them money. If they don’t, and their account cannot support your currency, the payment bank will likely reject the funds.

Other hidden costs to consider when working with international payments are:

The exchange. If your origin currency is weaker than the payment currency, your money may lose some value in the trade. However, the market is continuously shifting, so the exchange will also gain value at times. The more international payments you make, the likelier that this cost will even out over time.

Intermediary bank fees. Some intermediary banks shave off a fee for their services, which is usually taken from the sum – the net amount is deposited into the vendor’s account. Not all intermediary banks will charge this fee, and it’s not immediately obvious which banks will do so.

Payment bank fees. Similar to the intermediary banks, certain payment banks also charge a fee for processing international payments. Again, not every bank charges this fee, but those that do will deduct it from the payment sum before depositing the net amount into the vendor’s account. Vendors can discuss this charge with their bank if it occurs.

Disrupting the Status Quo

With all these nuances to keep in mind, it can feel like involving a fintech will only add another cog to an already-overwhelming process. However, a fintech can determine the most efficient route through an intermediary bank, and assist in locating missing payments. If funds are returned for any reason, fintechs also act as a holding account while you decide if you want to exchange the funds back or resend them. Following a process like this ultimately saves time, money, and hassle.

If you’re on the fence about using a fintech for international payments, keep in mind that you aren’t losing out by mitigating an overly complicated bank processes. You’re merely side-stepping the complications in favor of usability.


Alyssa Callahan is a Technical Marketing Writer at Nvoicepay. She has four years of experience in the B2B payment industry, specializing in cross-border B2B payment processes.