Global Processing By the Numbers
At Reach, our goal is to help retailers understand the entirely confusing and complex world of global payment processing. One thing we see time and time again is that retailers are getting ripped off by processing fees, but because these fees are tucked into gigantic and unreadable reporting, nobody knows exactly how much they’re paying for international credit card processing.
Just how expensive are these global processing fees? International fees on ecommerce sales are monstrous. Overstating things, you say? Not when it comes to long-term ROI in increasingly competitive, global markets.
Credit card companies offer “Interchange Plus” pricing. This leaves retailers with a fixed markup for international charges, but what often gets forgotten is that there are additional, variable fees bundled in as well.
The interchange and assessments charged by Visa & Mastercard are highly complex and can differ drastically from one transaction to the next. There can be hundreds of variables that go into what interchange and assessment fees apply for a particular transaction. For example - is the card a rewards card? What’s the issuing bank? Where was it issued? Interchange pass-through fees vary widely based on card type, how the credit card is processed, what information is included in the transaction, and where the credit card was issued. There are so many variables, and specifics are buried in a long, 20+ page monthly report along with a list of domestic fees.
Bundling all this information together makes it nearly impossible for a retailer to distinguish what they are paying on international sales and what they are paying on domestic sales.
In addition to all this, international transaction fees can be exorbitant.
Here’s an example of fees on a credit card issued outside of the USA and processed through a US acquiring bank:
- Assessment fee: 0.13%
- Qualification rate: 1.60%
- International assessment fee: 0.80%
- International acquire fee: 0.40%
- Total: 2.93%
- Assessment fee: 0.12%
- Digital enabling fee: 0.01%
- Qualification rate: 60%
- Cross-border assessment fee: 0.60%
- Acquire program support fees: 0.85%
- Total: 3.18%
In real terms, this means that any retailer is going to be paying at least 2.93% on cross-border sales, with fees that can go up as high as 4.73%! It’s important to note that these are just the pass-through fees, and don’t even include the markup charged by the processor.
But there’s a way around it.
The Ecommerce FX Solution
Leading retailers alert to these fees are decidedly unimpressed – and concerned - and have found ways around them. To avoid this steady erosion of profits from international sales, retailers are turning to local processing solutions to get around cross-border fees.
That’s the trick though – how does a business route transactions through local banks without setting up shop in that locale? Doing so would be cost prohibitive even for the largest retailers, never mind small- to mid-level retailers who are just finding their footing in the global market.
This is where our Merchant of Record model comes in to play. We handle the entire transaction, from start to finish, offering local payment options, and even guaranteeing conversion rates for 90 days after a sale for headache-free returns.
The consumer is happy, as they see payment options and terms that make sense for them, creating a frictionless purchase experience. And they aren’t hit with unexpected charges that will ruin all of your hard work, helping you retain their business and drive growth. They’ll sing your praises online, as your service will be held in stark contrast to those other, oddly expensive international transactions they’ve encountered.
From the retailer’s standpoint, the process is a dream. One very clear fee per transaction and zero worry over losing market share to that new, local competitor who is bound to pop up. You’ll appear local, because you’ll be local, via your local Merchant of Record - Reach! It’s a seamless process all around that will give you a definite edge, as well as enhanced ROI.
Fees come with the territory, of course. There’s a cost to doing business, but don’t throw money away. Redirect what you’re spending needlessly on FX to CX and amplify your company’s growth with Reach.