Present-day globalization tendencies push more and more businesses to process payments in multiple geographical zones.
Particularly, such companies include businesses, which start offering their products online internationally, and franchises, which enter international markets.
The purpose of this article is to outline the problems faced by these companies and try to provide structured step-by-step strategy that they could follow.
Let us say, there is a company, which wants to solve the problem of multi-currency and international transaction processing for itself or for its clients.
The task of entering an international market can be addressed at one of the three “complexity levels”.
- Level 1: A company wants to process its own transactions (product sales) in different countries.
- Level 2: A franchisor wants to operate in different countries, but in each country at most one processing partner is sufficient (a franchisor can impose all franchisees to use a single processor).
- Level 3: A software vendor company wants to service many clients in different geographic zones using several processing options (support more than one platform or acquiring bank in each country).
Strategy in brief
The crucial issues you will definitely have to deal with (if you want to expand your operations to multiple geographical locations) include:
- Finding a solution for operations with several currencies
- Prioritization of regions
- Prioritization of typical transaction types handled by your payment ecosystem
- Organization of underwriting and on-boarding processes in new geographies
- Is it going to be possible to settle transactions in one single currency, or settlement currency must always be the same as authorization currency? If a company wants to charge its customers in a local currency and settle the funds from international sales in a single bank account, it can partner with a single acquirer, that supports dynamic currency conversion. If it plans to settle transactions in the local currency, then a local relationship with a specific bank will be required. In the second case a more complicated payment ecosystem will have to be built.
- What are the high-priority and low-priority regions? What the actual transaction volume is going to be? Evaluation of transaction volumes is necessary for pricing negotiations and related issues. Establishment of the relationship with a payment processor and implementation of the required technical integration is never a simple process. It takes plenty of time, and it becomes even more difficult at the international scale, especially when several projects are under way. Most likely, you will have to proceed in the sequential manner, which is why it is important to prioritize.
- What are the transaction types you need to process? Are you going to deal only with online card-not-present transactions? Is card-present transaction support required? Will you need EMV support and respective payment terminals? Usually, it is much easier to find a card-not-present solution, because various local regulations exist for use of the chip cards in a particular region. In some cases region-specific specifications are necessary for you to be able to accept cards in the retail environment. The additional challenge is that in some countries it is not possible to certify your existing EMV solution, and you may be required to use whatever is available on the local market. Some of these available solutions might not fit into your existing payment ecosystem.
- Which banks will handle the underwriting process, and how merchant accounts are going to be issued? How are you going to integrate with these banks? What is the specific connection mechanism? These questions are extremely relevant for many countries. However, in some countries (say, in North America) there are payment gateways, which work with several processors or acquiring banks, and are able to facilitate your relationship with any one of them. On the international arena, the options might be more limited, because some regions have only few acquiring banks, and some gateways might be limited to work with only specific acquiring partners.
Strategy in detail
In order to organize the process properly, first of all, you have to study the overall situation and then – answer some fundamental questions.
As we can see, all business details (including corruption as well as local regulations and legislative barriers, which might result in cost increases) must be discussed and considered in advance.
You must find the gateway, providing the best solution in each specific country in view of the listed questions.
Finally, you will get a list of countries, banks and payment platforms you will have to partner with. After that you will have to analyze the available gateways and check, which of them have either all or most of the necessary bank connections.
Next you have to define, in which countries you will have to start from scratch, and in which countries you have some clients (merchants) already using the system. Keep in mind, that in any case if you are going to expand your operations, a strategy will be needed for on-boarding of new merchants.
In such a situation, you have to analyze, how to migrate these clients from their existing solutions to the company’s main product. Beside that, you need a strategy for the new underwriting process (get new merchant accounts for the already existing merchants and check if processing costs are going to increase). Finally, you have to define, which technical solutions are needed (in terms of additional integrations) in order to allow merchants to be able to send transactions for processing.
If you have no clients (yet) in some region, you have to work out operations for on-boarding process in each particular country.
If you are planning to enter foreign markets, handle new currencies, and process transactions internationally, you need to set up priorities and develop a step-by-step expansion strategy.