Going Global? A Crash Course on the Risk of Non-Local eCommerce Merchant Accounts

Operating globally is a challenge.

In this post we’ll explore the implications and challenges of using non-local merchant accounts for ecommerce. By highlighting key issues including lower approval rates for non-local merchant transactions, lower conversion rates for non-localized commerce experiences, and the impact these issues have on revenue, we hope to provide a comprehensive understanding of the roadblocks that businesses will encounter when expanding globally. There’s a lot more to this story, and we’ll briefly discuss other implications and challenges including regulatory compliance, currency conversion complexities and 3PL, but the point here is it’s complicated, there’s a lot to it, so why not get started, now! Let’s go!

Introduction

All business is global. If you’re online in any manner, whether you intended it or not, your business is global. This simple fact has created a new wave of opportunities for businesses to expand their reach into new markets. However, operating in multiple countries often requires the use of non-local merchant accounts, which poses unique challenges - challenges that can significantly impact the success of your business. 

This post examines the implications and challenges of using non-local merchant accounts. In it we’ll focus on three key aspects: 

• Lower approval rates
• Lower conversion rates; and 
• Lower Revenue - the result or impact of the first two.

We also address other essential success factors, such as regulatory compliance, currency conversion complexities, and third-party logistics (3PL), as they, too, significantly impact the overall success of ecommerce efforts.

Improve Approval Rates

Non-local merchant accounts often experience lower approval rates due to a lack of familiarity with the business, its operations, and its target market. Banks and payment processors in foreign jurisdictions may require more stringent documentation and may be hesitant to approve a merchant account for a business they are not familiar with. This may result in delays and potential lost sales as businesses struggle to establish their presence in new markets.

Improve Conversion Rates

Using non-local merchant accounts can lead to lower conversion rates, as customers may be less willing to complete transactions when presented with unfamiliar payment methods or currencies. Additionally, cross-border transactions may result in higher fees, which can deter customers from making purchases. Ensuring that customers are comfortable with the payment process is essential for maintaining conversion rates and maximizing revenue.

Increase Revenue

With lower approval and conversion rates, businesses that rely on non-local merchant accounts may see a decrease in revenue. Delays in account setup and increased transaction fees can further compound this issue. Businesses must carefully consider the potential impact on their bottom line before committing to a non-local merchant account strategy.

Additional Implications and Challenges

Regulatory Compliance: Businesses operating in multiple jurisdictions must be aware of and comply with the regulations and policies in each country. Failure to do so can result in fines, account closures, or other penalties.

Currency Conversion Complexities: Managing transactions in multiple currencies can introduce challenges related to currency conversion rates and fees, which can ultimately affect profitability.

Third-Party Logistics (3PL) Challenges: Businesses expanding into international markets must carefully consider their logistics and fulfillment strategy. Partnering with 3PL providers can be a viable solution for managing the physical and geographical aspects of global ecommerce. However, this approach introduces its own set of challenges:

• Geographic Implications: When partnering with 3PL providers, businesses must take into account the geographic distribution of their customer base and the capabilities of their logistics partners. Choosing the right 3PL partner is crucial for ensuring timely and cost-effective delivery of goods to customers in different countries. Moreover, businesses should consider factors such as warehousing capacity, transportation infrastructure, and the overall reliability of their 3PL partners in different regions.
• Regulatory and Compliance Requirements: Shipping goods and services across borders entails navigating a complex web of customs regulations, import/export restrictions, and tax obligations. Businesses must ensure that their 3PL partners are well-versed in the applicable regulatory requirements for each country they operate in. Failure to comply with these requirements can result in delays, fines, or even seizure of goods by customs authorities. It is essential for businesses to establish clear communication channels and processes with their 3PL partners to minimize the risk of non-compliance.
• Service Quality and Customer Experience: Partnering with a 3PL provider can impact the overall customer experience, as businesses are entrusting their partners with the critical task of delivering goods to customers. It is crucial to select a 3PL partner that maintains a high level of service quality and is committed to meeting customer expectations. Factors such as on-time delivery rates, order accuracy, and responsiveness to customer inquiries should be carefully evaluated when selecting a 3PL partner.

Navigating the complexities of non-local merchant accounts for ecommerce is a challenging task, but it is essential for businesses looking to expand their reach into new markets.

By understanding the key implications and challenges, such as lower approval rates for cross-border transactions, lower conversion rates for non-localized commerce experiences, and the lower revenue these two issues cause, businesses can mitigate risks, enhance customer satisfaction, and ensure a smooth and efficient global ecommerce operation.

To get started with the optimization of your global eCommerce operations, schedule a briefing, and we'll dive in.