One of the continuing trends in the global payments ecosystem is the growth of merchants who sell across the border from the country in which they started, and then get paid as easily as they do in the home market. In this article, we’ll look at why North American merchants want to sell internationally, and how they are increasingly enabled to do so by processors and other fintech companies.
Why sell globally?
A company that does business only within its own country, even in a country as large as the US, will find itself at a long-term competitive disadvantage if it does not have a global strategy. Companies will need to eventually find new customers – and to be successful, global expansion is the only path to continued growth. It is no longer optional for an enterprise to look only at local markets, as their business matures.
The easiest way to extend a global footprint is to sell on the web. It’s especially easy for sellers of subscription-based services and other digital goods (gaming, for example). Indeed, TSG noted in a recent study that the growth of the ‘Subscription Economy’ is a noteworthy, permanent trend. Even internet-based marketplace sellers of physical goods are finding it easier to set up warehouses and shipping solutions in other countries. Thus, as we see web and mobile commerce increase, we will see consumers shopping, buying, and paying across their borders.
The continued growth of internet and web commerce and the willingness of consumers to buy over the web or use their mobile devices to shop and pay are leading indicators of cross-border commerce. It has become easier to reach a consumer population for which buying digitally is becoming part of everyday life – and the smartphone is part of it too.
In addition to digital sellers, fintechs and SaaS companies, who themselves have often monetised the transactions that they enable, are extending into new countries. Since their value proposition is tied to making things simpler for their customers, they can make things simpler for themselves by finding cross-border payment processors. The ISV (integrated software vendor)/ SaaS company drives cross-border commerce for itself and its customers. Thus, TSG is seeing all types of businesses that are increasingly digital selling globally or enabling others to go global. As a result, Visa has reported that for the 12-month period ending September 2021 cross-border volume grew by 14%, even with the COVID-19 impact.
Cross-border commerce is becoming more lucrative as transaction costs and revenue improve. Enablers of cross-border solutions are becoming more commonplace, meaning competition is driving down the cost of processing transactions. In addition, cross-border merchants can often get a piece of the FX markup, something which previously was exclusive to banks and major card networks. FX revenue is an attractive business line by itself.
A seller of goods and services has every reason to go global, and they are finding partners who will enable their international aspirations.
How is cross-border enabled?
Most of the trends in payments – and in commerce generally – have enabled companies to go global. All major processors have platforms that accommodate global merchants and global solutions. The ability to process transactions in most countries is becoming easier, and it is especially easy for North American processors. US processors, for example, only have to extend into two countries, Mexico and Canada, to reach large populations of increasingly digital consumers.
For the merchants and marketplaces who are extending their footprints, cloud deployment of business solutions is a major technology trend that is making it easier than ever to go global. Reliable access to the internet provided by services from AWS, Microsoft Azure, and Google means that companies can extend their customer care, sales, and service operations globally without having to recreate technical infrastructure wherever they go. A business can establish a customised language webpage in a new country, or they can offer a mobile app on Apple Store or Google Play Store, and they are up and running.
Companies can find fulfillment, shipping, and delivery route optimisation partners for the physical goods they may sell across the border. Amazon perfected this model, but it is easily copied. Companies going across borders are finding that the business automation services they enjoy from ISV partners in their home country are also available to them in their target markets.
Commerce and the resultant payments are increasingly becoming both more global and more local at the same time. Customer experiences are more easily localised into language and business practices by web and mobile services, and processors are connecting to local payment types. Using social media tools like Facebook and Instagram for promotional campaigns can be done across borders. The data collected from sales and social media usage can be used to tailor marketing campaigns and increase sales by country. Consumer and buyer experiences have never been better for cross-border commerce, and merchants and their partners are meeting that demand.
The trends in the global payments ecosystem all mean that we should expect an increase in cross-border commerce. In turn, businesses will have a willingness and ability to extend their reach into other countries. They will expect more options from processors and SaaS providers for enabling their global aspirations, and they will see better pricing and FX revenue share. Consumers will be rewarded with additional choices for buying goods and services, and they will demand better overall shopping experiences. Regulators will be expected to support these trends for additional choices, and support for protectionist behaviour will decline.
This article was first published in our Cross-Border Payments and Ecommerce Report 2021–2022, which taps into the fast-growing cross-border market and provides a comprehensive overview of trends and developments that are pivotal in this space, being the ultimate source of information for ecommerce businesses interested in expanding globally.
About Mark Waring
Mark Waring has over 30 years of experience working in the payments industry, and he is a recognised leader for initiatives that improve customer profitability, develop innovative products, and support launches in new markets. At TSG, Waring will be involved in many areas, including product design and go-to-market plans, project management, international markets, global emerging markets, mobile network wallets, cross-border, and foreign exchange, as well as processor and payment facilitation expertise. Prior to joining TSG, Waring held executive positions at First Data and PayPal.
About The Strawhecker Group (TSG)
The Strawhecker Group (TSG) is the largest analytics and consulting firm focused on the payments acceptance industry. TSG serves the entire payments ecosystem and has experience in working on large-scale projects for the world’s biggest payment players. The firm has worked with all card networks, nine of the top ten merchant acquirers in the US, as well as leading private equity firms and investment banks. The firm’s 50-person workforce is primarily in Omaha, with satellite offices in Sacramento, Denver, and London.
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