Today's New Normal: Mastering Multi-Currency *and* Local Processing

Education
Written by Sascha Vrolijk

Whether serving the global marketplace is just a dream or it’s your company’s current reality, having a solid grasp of both multi-currency and local processing capabilities is a must for merchants. Yet many merchants charge forward only slightly aware of these options even being a pain point, as they’ve left these ‘small details’ up to credit card processors. This is a very costly mistake.

Here’s what you need to know, and why processing payments in today’s ‘new normal’ demands that you must! 

The local processing/multi-currency combo that most merchants miss

There are significant international transaction fees (that we’ll detail in a moment) that are par for the course when offering multi-currency processing to consumers – and this offering is essential to compete globally. That is hurdle #1, and it is one that many merchants clear. But foreign transaction fees still hit both the consumer and the merchant. Avoiding these fees is the critical next step - the second hurdle. And it requires local processing.

Processing transactions locally is the only way to avoid international fees levied toward merchants and their consumers. And most merchants not only stumble when they reach this hurdle - they fall flat. Local processing is also the only way to get the best transaction authorization rates available. Banks are the ultimate decision-makers when it comes to risk, and processing locally means less risk for banks (and by extension, more approvals). 

So, what is a merchant to do?

The optimal setup that has merchants presenting shoppers with payment options in the currency they’re familiar with (and also does not overdo it with endless options they are not familiar with!) and it does so without extra, and usually shocking, fees. But that isn’t possible without setting up shop (read: entities!) in each locale and at an expense that far outweighs the benefit. 

Or is it possible to accomplish this another way?

Let’s explore the importance of both multi-currency and local processing separately to better appreciate the combined power of the two, and the significantly cost-saving solution Reach has created for you . . . 

Why multi-currency processing is a game changer

It’s one thing to understand the importance of multi-currency processing and another entirely to implement it. Most businesses have a sense of the former, but have never considered the latter. We’ll start at the beginning.

Customers want to pay in currency they’re used to using. For example, would you ever ask your U.S.-based customers to pay in GBP and then process their credit cards through an Australian bank? No, because it would be both confusing and expensive. Yet, that’s precisely what many merchants do when they aren’t set up to process multi-currency transactions.

So, you sort out simple ways to handle multi-currency processing.

There are any number of services available to manage this for you. And the benefits are amazing – initially. Customers are happy, you’re happy. And then the bill comes in and no one is smiling, as there are hidden, unexpected fees.

Breaking down multi-currency processing fees

When you offer multi-currency processing, there are cross-border and other processing fees that apply. This leaves consumers with an unpleasant surprise when their credit card statement comes in, as the fees are added at the end by their bank. And it results in many fewer repeat sales, you can count on that. It’s a matter of trust.

Consumers expect a consistent, seamless experience and trust that you’ve done your homework to obtain the best rates for them – or at least, that you’ve communicated any potential upcharge very specifically. This does not happen though, and consumers are left holding the bill.

But that’s not all – merchants pay as well, of course. There are fees all over the transaction, sticking to it like little very expensive burrs as it progresses through the various channels it must travel to move from the consumer’s point of sale to the merchant’s physical location. 

Local acquiring is where things get complicated

As cross-border and other processing fees typically come in a thousand tiny cuts spread out over time, merchants miss the slow bleed. And once they identify the source of lost revenue, they make moves toward processing locally, which is a must for any merchant planning to live a long global life.

Processing locally is more than just offering currency choices that resonate with your local market. It’s also processing payments via local entities and using local banks to avoid the extra cross-border fees. And there is another benefit beyond avoiding fees - it also comes complete with higher approval rates for transactions. Banks identify local transactions as less risky and therefore more transactions will be approved when these are processed locally than when these are processed cross border. Less risk for banks means more approvals for you. 

If only processing locally was a simple solution! Unfortunately, it’s not. Setting up an international entity for local processing is a fairly complicated and extremely expensive undertaking for any merchant to consider.  

But then - how can a merchant offer savings to consumers and experience these savings themselves if there are fees every which way, including up? 

There’s a Merchant of Record option that’s not very well known, but is super exciting. And it’s one that savvy merchants are starting to take advantage of.

Economically viable local processing and acquiring? Enter Reach.

In our unique-to-the-market and revolutionary approach, Reach handles both multi-currency and local processing for merchants. We do this by acting as the Merchant of Record for the merchant, so they do not have to have a local entity to be able to process locally.

This scalable, real-time capability allows merchants to process locally, without the high cross-border fees. This is a critical capability to have as we enter the environment facing the international ecommerce community today!

Connect with us when you have a moment to learn more about multi-currency processing, local acquiring and how Reach helps you optimize both to obtain lower fees and better authorization rates than you’re facing right now.

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