The Art and the Science of Building Global Payments Partnerships

Cross-border transactions continue to gain traction around the world, with a staggering $156 trillion expected to cross international borders annually by 2022, according to a PYMNTS report.

In Europe, for example, more than 400 billion consumer transactions are expected to occur in the region each year by 2025, representing a compound annual growth rate (CAGR) of 13%.

This rapidly changing paradigm has forced merchants to quickly adapt to the new landscape, adopting new payment capabilities to meet the differences in consumer preferences worldwide.

For U.S.-based companies wanting to do business across borders, there are several factors to consider, including dealing with cultural and language barriers. Others include interchange fees that can vary depending on the country they’re operating in, differences in local tax reporting and changes in the technology used at the point of sale (POS) to enable merchants to legally process payments in compliance with card brands.

To successfully jump over these hurdles, Joe Natoli, executive vice president of Mergers and Acquisitions at Chicago-based merchant acquirer Payroc, said it is critical for merchants to collaborate with the right partner who is not only bilingual but has the local expertise to help U.S. businesses navigate those complexities.

“When you pick a cross-border partner, you need to pick one that has all of those capabilities, and if you’re lucky, they’ll also have some proprietary [and] unique market advantages that [have helped] them gain market share,” Natoli told PYMNTS in an interview.

He said that over the years, Payroc has worked to grow its cross-border relationships by acquiring several companies that fit that role, especially those who are dominant players in their country or region, know the market well and can help U.S.-based companies get up to speed on what it entails to do business across borders.

See also: Payroc, Dynamic Payments Partner on Merchants Services in Caribbean

Since most U.S. merchants want to do business with a partner from their own country, this has given Payroc a competitive edge in the 60-plus markets in which the company operates.

“It’s not easy, but good companies make tough things look easy, and I’m proud to say that [Payroc’s] partners [working in those areas] are very good at it,” he said.

Surcharging Is Becoming More Acceptable

Apart from partnerships, merchants looking to successfully do business across borders must ensure that the bank in the U.S. that handles the processing has a tolerance for international transactions.

“The majority of the big banks will take a percentage of international transactions, so if you have a merchant that’s doing business in the U.S. that has a card that’s taken overseas, it’s OK as long as it doesn’t exceed their guidelines, as far as 5%, 10%, 15%,” Natoli said.

Payroc’s cross-border initiatives include sponsorship from member banks that operate in those countries, therefore eliminating the concern of being restricted to a certain percentage of foreign transactions.

He added that the percentage involved is a moving target not defined by law or any regulation but rather determined by the tolerance or sensitivity of a U.S. bank to take foreign transactions.

Read more: Surcharging Becoming More Acceptable to Merchants, Cardholders

More and more merchants are also adopting the practice of surcharging, and at Payroc, more than a third of the new merchants the company has onboarded have opted to do so, supported by technology platforms that help businesses comply with local regulations around surcharges.

According to Natoli, the practice is not new, however, and it’s only becoming more and more mainstream and “socially acceptable” now as consumers learn more about the costs of accepting credit cards and accept that form of payment beyond taxes.

But unlike in the U.S., where surcharging is an important initiative, internationally, some countries still don’t allow it.

Nevertheless, more and more countries will ultimately go that route as the U.S. continues to embrace it, given the benefits it gives merchants, particularly those in certain verticals that have been hit hard by the pandemic.

Get Your Message Out

Looking ahead, Natoli said he expects the international payments landscape to continue to grow this year, helped by the new types of businesses, particularly in the health-tech sector, that have been emerging since the onset of the pandemic.

This is an opportunity for U.S.-based merchants to increase their revenue, he said, while embracing technology that supports online and contactless payments and the delivery of goods and services that people now prefer to buy online.

One piece of advice he offered merchants to thrive in this new normal is to prioritize advertising and get their message out in terms of what they are offering and what products they have, making it easier for people to make purchases.

Natoli said Payroc has become that agency for their merchants since the pandemic hit. It has helped merchants redesign their websites, sent terminals to those doing deliveries and enabled them to take various forms of payments online, which many of them have never done before.

According to Natoli, it boils down to giving your customer and your distribution partners the necessary tools they need to win.

“It’s working hand in hand, understanding their market, understanding the needs, [and] even further understanding their clients’ needs and desires and just making it easy for people to do business with them,” he said.