Market Forces Driving Down Fees as eCommerce Becomes Increasingly International

As PYMNTS discusses in the Cross-border Retail Payments Tracker, eCommerce merchants increasingly recognize the importance of catering to international customers.

Read the report: The Cross-border Retail Payments Tracker

For example, a 2021 study of the top 50 eCommerce websites found that 46% of them offered four or more languages, while 16 of these sites attracted more than 20% of their total traffic from other countries, with AliExpress, Steam, Booking.com, Samsung and Ikea being the eCommerce sites with the most international visitor base.

But catering to international customers is about more than just making a website available in multiple languages. Having the best cross-border payments strategy in place is also key to success.

A perpetual headache from cross-border commerce is the high cost of processing international transactions.

It’s exactly this frustration that drove eCommerce giant Amazon to threaten to suspend Visa payments in the U.K. last year after the card processor upped its cross-border transaction fees in the country following the lifting of a fee cap when the U.K. left the European Union.

In the end, Amazon used the threat to renegotiate its agreement with Visa at the global level and U.K. consumers were never cut off from using their Visa cards on the Amazon marketplace. The new deal also worked in favor of Amazon’s customers in Australia and Singapore, who previously had to pay a surcharge when making payments with their Visa card.

More recently, in June, the U.K.’s Payment Systems Regulator (PSR) launched its own inquiry into Visa and Mastercard’s post-Brexit fee hike. And just this month, the Treasury Committee of the U.K.’s parliament has put significant political weight behind the PSR investigation by sending letters to Visa and Mastercard asking them to explain their increased fees.

See also: UK Regulator to Review Visa, Mastercard’s Processing and Swipe Fees

In the end, what forces international payment networks to lower their cross-border fees may not be regulatory pressure but rather market forces.

In recent years, FinTechs that propose innovative solutions to the cross-border problem have been one of the industry’s greatest success stories. And while many of these initially focused on peer-to-peer payments, the focus has increasingly shifted to retail payments.

For example, international money transfer app Wise started out as a multicurrency account for individuals but the company now has a dedicated eCommerce account designed to help international retailers reduce the cost of processing incoming payments.

Leveling the Playing Field

Compared to the rapid growth in innovative payment and remittance solutions for consumers in other parts of the world, businesses across the Middle East and North Africa (MENA) region still lack access to affordable payment and money transfer opportunities.

In a region where the eCommerce sector is still relatively young compared to more mature markets in Europe, America, and China, expensive cross-border fees can hurt merchants’ growth prospects.

“We’ve seen consumers and businesses becoming really tired of paying expensive payment charges to transfer money globally, often taking one to five business days to complete,” Kaushik Sthankiya, chief commercial officer at global payments provider Sokin, told PYMNTS in a recent interview.

Read more: Startups Opt for Fixed-Price Payments to Bank MENA’s Unbanked

In the end, FinTechs like Sokin are stepping up to meet the demands of businesses for cheaper cross-border fees and access to more international markets. These days, wherever an eCommerce business wants to sell, there’s likely a payment solution that will help them connect with their customers in that place.

Not all online retailers have the same bargaining chips as a giant like Amazon would, but what they do have is the ability to choose the solution that works best for them.

So, as the payment gateway and processing options available to eCommerce businesses in the MENA region grow, it seems likely that prices will come down too.

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