For B2B companies, it's never been easier to reach and connect with customers in other countries and even on other continents. The potential for an expanded customer base is undoubtedly exciting, not to mention the increased revenue that comes with it. But before you embark on cross-border sales, you need to ensure that your business is set up to handle the ins and outs of international payments.
From offering the right types of payment methods to various regulations to potential fees, international transactions are more complicated than purchases made by your customers stateside. That’s why a little research and preparation can go a long way toward a smooth international launch of your products or services—and lead to fewer unexpected hiccups as you begin to accept payments.
Here are four steps for readying your company for global transactions.
1. Investigate Payment Methods
There are multiple ways that you can accept payments from customers in foreign countries. Credit and debit remain relatively popular, as are direct-to-bank transfers. In some countries, e-wallets are becoming more common. And checks are still in play, though that option remains much slower.
The payment methods that work for your company will depend on your customers’ preferences and location. Regardless of how many regions or countries you’re planning to serve, you’ll want to offer a mix of payment methods so that customers can find a way to pay that works for them. That's even more critical than you might think. One recent study shows that 90% of B2B buyers research a company’s payment methods before they make a purchase. And 50% of those buyers prefer a payment method other than a credit card.
Finally, B2B payments—and especially cross-border transactions—have lagged behind B2C commerce in terms of innovation. That’s rapidly changing, as banks and fintech companies begin to develop ways to speed up transactions and eliminate friction. However, be wary of jumping to a brand new technology for your global payment needs right away. You’ll want methods with a proven track record and demand from your customer base.
2. Keep Currency Exchange in Mind
As you enter into new markets in new countries, you’ll be dealing with different currencies. It's key to evaluate not just the pricing of your products or services with exchange rates in mind, but also how your company will handle payments. At the most basic level, you’ll need to select payment providers that work both in your home currency and with the currency of your customers.
Beyond that, you should also consider the number of stops a transaction in a foreign currency makes before landing in your company’s bank account—and how that impacts your timeline for getting paid. Ask your payment providers how often they recalibrate the exchange rates, especially if the currency fluctuates a lot.
3. Understand All the Associated Fees
As your global transactions grow, your payments process will likely include more players. Make sure you understand all of the organizations that come into contact with a payment from your customer to you—and what fees they charge. For instance, an international payment service provider may take a percentage of the transaction in order to move the money.
Visa and Mastercard recently announced that they’ll charge merchants between .6% and 1% of each cross-border transaction, depending on whether the purchase is made in the local currency. And e-wallet providers usually charge a transaction fee for international payments as well. Some fees are to be expected, but review what your company is paying in transaction expenses on a regular basis, compare payment service providers, credit card companies and more to ensure that you’re not losing money on fees.
4. Pay Attention to Local and Regional Regulations
Merchants doing business overseas are subject to various regulations. Being aware of what regulations come into play and how to comply with them is important in order to avoid penalties and fines. For instance, the European Union has a series of regulations—the Strong Customer Authentication (SCA) and Payment Services Directive (PSD)—aimed at reducing incidents of fraud.
In many cases, a payment service provider can handle compliance with regional regulations for your company. But the onus is on you to ask about applicable regulations and understand your company’s role in complying with them.
Taking your business global is an exciting move. Take the time to ready your payments for the transition and you'll reduce any headaches associated with international transactions, and instead be able to focus your attention on cross-border growth.
Is your business looking to go global? Contact your Fifth Third Relationship Manager or Treasury Management Officer today to learn more about how to prepare for international payments.