How domestic acquiring helps overcome your cross-border payment challenges

As multinational businesses seek to expand into emerging markets, cross-border e-commerce is expected to reach a value of $2.25 trillion by 2026, up from $579 billion in 2019.

What’s driving this growth? Increasing globalisation of our economy makes it simple for customers to buy what they want, domestically or internationally. At the same time, more and more businesses accept a wide variety of local payment methods, making it easier than ever to pay cross-border.

The ease of cross-border shopping means there is a significant growth opportunity for multinationals to enter new markets, attract new customers and increase revenue. However, selling internationally means you need to rethink how you accept payments. If you’re not careful, higher fees and lower authorisation rates can impact your ability to profitably compete in new markets, leaving your business on the sidelines instead of across the border.

If you have a presence in countries outside your home market, you should take advantage of domestic acquiring to reduce cross-border payment complexity and increase your revenue.

The challenges of cross-border payments

Local payments and cross-border payments are treated differently. Here’s the difference.

There are two banks for every credit card transaction: your acquiring bank, which requests permission for a card payment, and the customer’s card issuing bank, which authorises the payment. When selling locally, these two banks often have pre-established relationships, generating the level of trust required to keep authorisation rates high and costs low.

However, with a cross-border transaction there’s a good chance the two banks might not know each other. This means greater scrutiny and higher risk, increasing costs for the merchant. These increased costs come in the form of interchange fees. Different countries, merchant types and payment methods all impact the risk of the transaction and, therefore, the interchange fee. In general, cross-border interchange fees are higher than fees for domestic transactions. Interchange fees account for the bulk of the total transaction costs, making them critical in controlling your payment processing costs.

But higher costs are just the beginning. Cross-border transactions are also likely to have lower authorisation rates if the issuing bank determines that the risk is too high. If the bank doesn’t authorise the payment, the transaction is cancelled, leaving you with a lost revenue opportunity and an unhappy customer.

How domestic acquiring helps

With domestic acquiring, also known as local acquiring, you can complete a transaction using an acquiring bank in the same country as your customer. This is now considered a domestic transaction, and it creates the local relationship you need to control costs and improve authorisation rates.

While you can set up domestic acquiring banking relationships for each country where you operate and sell, this can leave you with dozens of partners and relationships to manage. It also puts you on the hook for staying current with changing payment rules and regulations in each country, which can be challenging to understand if you don’t have local market knowledge.

The easiest way to manage payments in multiple markets is to work with a single payment provider who can provide domestic acquiring for you. That’s why we deliver a domestic acquiring solution in almost 60 countries globally and local expertise with offices in nearly 40. This gives you a single relationship to manage payment acceptance in your key markets while reducing your interchange fees and improving your authorisation rates.

Businesses that sell globally shouldn’t overlook the opportunity to maximise authorisation rates, reduce costs and improve the customer experience through a domestic acquiring solution.

Ready to sell smarter around the globe? Learn more about our domestic acquiring solution.

For a multinational business it can be hard to stay on top of the latest payment trends. Visit our Multinational Insights Hub to access the latest payments industry insights and trends, tailored to multinational businesses. From thought leadership videos to informative whitepapers and region-specific market guides, discover the resources you need.

Find out how our insights hub can support you here.