Comment: Embracing international e-commerce
Friday March 8 2013
Back in the 1960s, singer Bob Dylan produced a seminal album called The Times Are a-Changin. By Shane FitzpatrickIt’s a fitting title to what’s happening now with Europe surpassing the U.S. as the world’s largest online shopping region and e-commerce sales are predicted to keep on growing in Europe by 16 per cent throughout 2012, according to the Centre for Retail Research.
In this “e-commerce Olympics,” most of the e-commerce growth in Europe is driven by the markets in the UK, Germany and France, which account for approximately 70 per cent of all European online sales (Source: Eurostat July 2012). Research also revealed that last year, more than €200 billion was spent by Europe’s estimated 240 million online consumers. (Source: Centre for Retail Research 2012)
Online sales in the UK are expected to grow by 14 per cent while other markets are starting to show even higher growth this year. Growth in Poland is predicted to be 24 per cent followed by France (22 per cent), Sweden (18 per cent), Italy (18 per cent) and Norway (17 per cent). These trends present new international opportunities for CNP (customer-not-present) e-commerce merchants. Early estimates indicate that cross-border trade could account for as much as 20 per cent of e-commerce sales by 2017 (source: Channel Monitor).
Research conducted on behalf of Chase Paymentech called “the Changing CNP landscape 2012” suggests that CNP retailers already recognise the potential for overseas expansion; 40 per cent already trade internationally and are looking to expand into more countries. The survey also reports that international retailers also have higher expectations for growth than their domestic competitors, with at least one in ten expecting to grow their CNP sales by more than 50 per cent. However, attitudes towards cross-border e-commerce vary widely across Europe and consumers can be cautious about shopping from e-commerce stores in other countries. (Source: Dynamic Markets: The Changing CNP Payment Landscape – March 2012)
Merchants therefore need to adapt to the local shopping habits in each market and build consumer trust, for example, by translating websites into local languages, offering additional payment methods and meeting customer expectations for deliveries, returns and refunds. At the same time, retailers should not underestimate the increased complexity and operational demands of handling international sales. Adopting a standardised approach to managing international payments, multiple currencies and online fraud, can help minimise the costs and risks associated with cross-border selling and are important for international e-commerce success.
Top 5 international e-commerce payment tips
Understanding the international e-commerce payments landscape will go a long way in helping e-commerce merchants succeed internationally. A recent report by Accenture found that 68 per cent of retailers consider increasing European cross-border e-commerce to be a priority for growth, and one in four believe they can increase revenue by 25 per cent if they can sell more effectively online and cross-border in Europe (source: European Cross-Border E-Commerce: Accenture/ERRT 2012).
However, international expansion also increases complexity of back-office costs for retailers. In the survey conducted by Chase Paymentech, 60 per cent of international CNP merchants faced two or more challenges related to CNP sales including:
• Handling foreign cards (40 per cent)
• Dealing with exchange rates (35 per cent)
• Handling multiple currencies (34 per cent)
• Handling cultural issues (28 per cent)
• International fraud (27 per cent)
• International expansion (23 per cent)
• National fraud (21 per cent).
Retailers need to consider how to manage their e-commerce technology, payments and fraud across a
growing number of markets. Adopting a standardised approach is the most effective way to address the added complexity of accepting multiple methods of payment and currencies, while at the same time minimising overheads and the cost of reconciliation. Here are five tips to help address challenges in international e-commerce:
1. Accept multiple currencies
Make sure a payment system offers a wide choice of currencies that enable customers the ability to pay in their preferred local currency. This helps consumers to understand the price. From a settlement perspective, consider receiving funds in the local presentment currency or receiving funds in their home currency. Such flexibility may be of benefit in treasury management and financial planning.
2. Get an overview of company-wide performance
Use centralised reports to help manage fraud, review chargebacks and monitor returns on a country-by-country basis. Setting up reports to show transactions by currency pair, exchange rate or fees can help identify business issues, trends and costs as well as enable benchmarks to be set for monitoring international performance.
3. Automate reconciliation
The Chase Paymentech survey revealed that CNP merchants spend an average of nine days every month on the manual reconciliation of CNP payments. These costs increase for companies with larger sales volumes or rapid growth plans. Streamlining international payment reconciliation through a single payment system can help mitigate overhead and improve efficiency.
4. Rationalise payment processing
Complexities and inefficiencies can be the result of mergers and acquisitions and the corresponding use
of multiple systems. Taking a strategic view of payment processing and acquiring needs can help streamline payments, reduce costs, simplify processes and increase business intelligence. When entering a new market, it might be necessary to use a local partner or set up a local bank account. However, a growing number of local acquirers or partners also increase complexity. Adopting a single integrated system early can help with fewer relationships to manage and improved efficiency.
5. Tackle international fraud
The Chase Paymentech survey found that nearly a third of international merchants have seen levels of fraud increase in the past 12 months and that average losses were three times greater for these retailers compared with those trading nationally. Ensuring that the latest geolocation tools are being implemented to detect fraud more accurately can help minimise the cost of manual reviews and identify emerging fraud patterns and threat levels on an individual country basis.
Shane Fitzpatrick is President and European MD of Chase Paymentech