Accepting International Payments in 2020: An Overview of Acquiring Aggregators
Accepting payments in foreign currency from a credit card for an online business is a cross-border operation, which leads to a sharp increase in the cost of accepting payments for businesses or leads to a decrease in the conversion of payments by customers. I will examine internally the options for connecting acquiring for international online business and touch on the topic of “High Risk”.
The classic card acquiring scheme:
Client — pay the merchant (seller)
Merchant — pay the commission at the rate of the Acquirer.
Acquirer — pay for interchaining ~0.7%–2.5 % to the Card Issuer.
Acquire and Card Issuer pay for card processing fees ~ 0.1%–0.2%(Visa / Mastercard, etc.)
Wholesale Transaction Cost from Processing
Banks mainly practice multi-level and fixed acquiring rates. Consider a wholesale example of the Visa ISA (Visa International Service Assessment) and IAF (Visa International Acquirer Fee) foreign card processing fees are charged whenever a payment is made in foreign currency.
Thus, if you have a foreign transaction, you can expect both fees to be added to your processing costs.
Since Visa always charges a standard commission of 0.13%, you can count on an additional interchange commission of 1.38% (0.13% + 0.45% + 0.80%) without currency conversion. With conversions you will pay more than 1.78%. The acquirer sets an additional 0.20% to 4% depending on the type of business.
With the Interchange-Plus tariff plan, you will pay ISA and IAF fees in addition to the standard exchange rate and any mark-up that your merchant account provider charges you for each transaction.
Since Interchange-Plus rates are generally low, these fees can more than double the cost of processing a transaction. This method is most transparent in connecting acquiring, but in few places it is practiced.
The customer buy the product for $ 100 (including tax). He pay with a Visa credit card in EUR. The cost of Interchange is 1.78% + $ 0.10 or $ 1.88. The provider transfers this cost to you, plus they charge a margin of for example, 0.20% + $ 0.10 per transaction. The total cost of receiving a credit card will be $ 2.18, or 2.18%.
Multilevel tariff plans
Your provider can change the transaction fee and type of your business. In addition, you must select the garbage collection when choosing a provider. Accordingly, the calculation example here is strictly individual for your type.
You have the opportunity to receive a separate commission for international transactions. The best way to find out how your provider processes these types of payments is to familiarize yourself with your contract documents. Visa ISA should be set out in terms of the terms of your contract. Visa and Mastercard.
Subscription / Membership
This is a newer pricing system, but it is gaining popularity. This is similar to interchange-plus in that the wholesale cost of each transaction is charged separately from the mark-up.
The difference is that you do not pay a percentage premium on transactions, but simply pay a small transaction fee. Then an extra margin will be charged as a fixed monthly fee.
Especially for merchants with large transactions, this type of pricing can save a lot of money without reducing transparency.
Banks act as an intermediary between the Bank Card Issuer and payment processing, for example, Visa/Mastercard, and this does not differ much from Acquire payment aggregators in pricing policies, but at the same time they have very limited opportunities to serve the needs of online businesses.
Banks practice international transactions Dynamic Currency Conversion for acquiring Visa/Mastercard, thanks to which you do not need to conduct currency control, open foreign currency accounts and be present in foreign jurisdictions.
But this scheme has a number of significant drawbacks, which nevertheless will inevitably return the Business to a presence in foreign jurisdictions.
Restrictions on foreign operations or fear of foreign currency
The Bank asked to justify the need for cross-border payments and give an honest forecast on their volume. The bank may limit the number of payments in foreign currency, for example, to no more than 10%. Bank of fear from incorrect forecasts on their volume.
If the share of payment from abroad is higher than planned, the Bank raises the rate. This is due to the high cost of such payments and the actions of fraudsters who often use stolen data from foreign cardboards.
Currency Risks and Restrictions on Currency Conversion
Only local currency can be credited to the current account, therefore, the bank will convert the received money at the exchange rate. Foreign exchange risks are transferred to business — this option, as a rule, is not suitable. If the bank is not ready to write off money in other currencies, then the Business will have to set prices in local currency.
Conversion will happen anyway, but buyers will pay for it, which will negatively affect the expected cost of debiting. This negatively affects the conversion of orders. Loss due to rate fluctuations can be 3–10% in both cases.
Sophisticated regulatory integration
Banks are not eager to work with startups and small businesses with low margins. Integration implies compliance with all regulatory requirements and classifications by type of business, if you received the High Risk classification, then your chances of connecting to trusted banks are limited.
The High Risk classification is variable, and this or that line of Business can be either included or excluded by the Bank, in which case you will be blocked or switched to higher rates of alternative and possibly offshore Banks.
Aggregators and online payment gateway are widely used as part of intermediation between banks, providing all kinds of services for receiving payments — the classic PSP.
The trend is the spread of electronic currencies and payment methods, the transformation of payment systems into aggregators, so we will talk about PayPal, Stripe, Square, etc.
Blocking and holding accounts
Payment gateway that consolidate accounts rather than opening separate trading accounts are intermediaries and their clients face problems such as frequent holding and / or closing of accounts.
Look at reviews on popular payment systems on almost any website on the Internet, and you will see unhappy sellers with closed accounts. Since the payment aggregator does not guarantee this for you.
On the dark side of Banks
The payment gateway does not eliminate the registration of foreign companies and representative offices for withdrawing electronic currency to bank accounts, and here we also encounter regulatory requirements, currency risks and increased rates for foreign currency.
Most trusted payment aggregators serve different classifications of Business and in the direction of “High Risk” — the status is applicable both to the country and to the type of activity, but trusted payment methods exclude such opportunities and you will be offered an alternative at a higher transaction rate with significant restrictions.
Card fraud can empty you Business
The total loss due to fraud can far exceed the cost of the fraudulent transaction itself. Since if we summarize Chargeback fees, expenses incurred in investigating and combating chargebacks, lost shipping costs, as well as other expenses, then in general you can get much greater losses than just the amount of a fraudulent order.
The consequences of fraud can also lead to the loss of your trading account and the ability to accept credit and debit cards.Fraudulent transactions will inevitably lead to chargebacks, and too many chargebacks over time can cause your provider to close your trading account and most likely to do so without warning or transfer you to the “High Risk” category and You will pay high rates.
Using a reliable service provider will not save you from fraudulent card transactions, so you should initially think about additional methods of anti-fraud protection.
Mediation for convenience
Acquiring suppliers provide payment method gateway services in the most popular areas:
Bank cards — Visa, Mastercard, Discover, Amex, Mir, Union Pay etc.
Internet banking — Acquiring a Bank depending on your regulatory area.
Mobile commerce — Masterpass, Apple pay, Samsung Pay, Google Pay, etc.
Terminal Networks — Replenishment and payment through offline points, shops, mobile communications, etc.
E-Wallets — Paypal, Masterpass, Alipay, Wechat. Webmoney. Skrill, Neteller. Advcash, Payeer, Yandex money, Webmoney, Qiwi, Perfect money, Kviku, etc.
Unfortunately, customer convenience in a variety of payment methods implies opening separate Business accounts for the merchant and passing regulatory requirements in each individual payment method.
The advantage of a payment aggregator is the ability to manage all payment methods at one entry point, fulfilling the role of financial CRM, as well as relatively easy integration and turnkey solutions for CMS modules and PCI DSS compliance standards, antifraud, etc.
Diversity provides convenience for the client, but brings problems at the final cost of the product / service, depending on the particular payment method, includes commissions of the mediator mediator, Payment Gateway, Acquirer Bank, Issuer card Bank, interchange, payment processing.
Accepting payments using a digital cash, for example, such as Bitcoin, has become widespread online, but if you process payments in cryptocurrency without the appropriate knowledge, big losses are possible due to the high volatility of the exchange rate.
You should think in advance how to fix profits when the rate drops. Bitcoin uses a fixed fee for any transaction volume. The merchant receives payments directly to his Bitcoin wallet without any obstacles, he does not need to verify the business, since cryptocurrency acceptance is considered as a P2P payment, and account creation in two clicks.
This method is High Risk in terms of high exchange rate volatility and regulatory status of this type of payment for individual regions.
Client send from his wallet in bitcoins to Merchant and pay the commission of the Bitcoin blockchain fee~ $ 5 for any transaction volume
Merchant receives bitcoins on wallet and may lose on the difference in the exchange rates of his exchange and on the depreciation of the Bitcoin (Exchange wallet like Binance)
Merchant can sell his Bitcoins on USD through intermediary services. Example of a commission of 1% ~ $ 20 for withdrawal from wallet and Exchange to the Bank Transfer
Benefits of using Digital Cash:
Cross-Border. You can send and receive Bitcoin anywhere in the world where there is access to the Internet Network.
Low fees. The average transaction fee of any volume ranges from $ 1–3 and in some currencies almost free.
Anonymity. When anonymity is important for services and for users, Bitcoin is the best solution for receiving and sending payments.
Lack of chargebacks. A transaction in the Bitcoin blockchain network cannot be stopped or returned.
Lack of limits. On the Bitcoin network, thousands of transactions occur daily from a few dollars to a billion.
Liquidity of the exchange. Due to the developed infrastructure of exchange points (online / offline) and market regulation in some countries, you can easily exchange and withdraw Bitcoin into cash or to a Card / Bank account anywhere in the world.
Protect Volatility Acquiring of Digital Cash
Client send from his wallet in Bitcoins to Merchant and pay the commission of the Bitcoin blockchain fee~ $ 5 for any transaction volume
Acquiring automatically converts Bitcoin/USD at its own rate with a difference of ~ 1%- 2% to dollars, while protecting you from losses on exchange rate volatility
Merchant can withdraw his USD through intermediary services. Example of a commission of 1% ~ $ 20 for withdrawal from wallet and Exchange to the Bank Transfer
Accept payments in the Digital Cash without taking risks due to high volatility. Acquirers are available on the market who offer a fixed-rate protection service at the time of payment.
Bitcoin transaction goes to the acquirer. The acquirer exchanges cryptocurrencies for fiat, the business gets the opportunity to withdraw fiat to affordable methods. Current offers on the market will also oblige you to pass regulatory requirements like a traditional acquirer when verifying a Business.
The big difference is the transparency of transaction processing without junk account maintenance fees. When choosing an acquirer, you need to consider at what cryptocurrency exchange rate you will be offered the average exchange rate at the time of payment. You can find providers of these services on the Web.
I recommend Coingate, Bitpay and Plasmapay.
Client send from his wallet in Stablecoins to Merchant and pay the commission of the blockchain fee~ $ 5 for any transaction volume
Merchant receives Stablecoin 1:1 USD on his wallet (Exchange wallet like Binance)
Merchant can sell his Stablecoin on USD through intermediary services. Example of a commission of 1% ~ $ 20 for withdrawal to the Bank Transfer
Stablecoins — a subspecies of the Digital Cash, which has a 1: 1 collateral for a fiat pair, for example, “Tether” (USDT) — is traded for a Bitcoin pair, which allows traders to take profits in fiat currency, and at the same time remain within the Digital Cash format.
Stable currencies are the prototype of Bitcoin and retain its technological advantages and disadvantages. A business can accept and exchange payments to Bank accounts and payment systems on the same principle as accepting payments in Bitcoin.
This payment format can hardly be called massive, since it has a number of difficulties due to the lack of traditional tools for maintaining an account like in a traditional payment system.
Hybrid Acquiring of Card Processing X Stablecoins
Client pay by Visa / Mastercard to Merchant
Merchant pay commission to acquirer ~ 3.5% — **%
Acquirer automatically converts 1: 1 to Stablecoins.
Merchant can withdraw currency by exchanging Stablecoins to Bank Transfer on average 1% ~ 20USD
This is a new type of payment acceptance. The acquirer allows you to use the functionality of the Digital Cash and can provide you with a traditional model of receiving funds through card processing and automatic conversion to a Stablecoins.
Benefits Convert to Stablecoins
Stablecoins — fully owned and controlled by you as much as you own and control private keys and passwords from accounts. Neither the payment system nor government systems can technically block your account or seize your digital assets.
Your account and funds can be exported (transferred) to another payment system or electronic / cold wallet. Stablecoins integration allows you to embed an account in third-party systems, games and services, exchangers, exchanges, create accounts and process payments using stable currencies. Low commissions on wallet to wallet transfers using the example of PlasmaPay
This service defaults to 42 fiat currencies and automatically converts them into a Stablecoins when a Visa / Mastercard checkout is connected, with the function of further withdrawal to Swift / Sepa, Visa / Mastercard and through the p2p exchange system.
Integration of wallet — to wallet checkout will not require regulatory compliance, company and account requirements. The integration of card acquiring will require you to have a registered company and the classification of your business, but it does not require you to have a Bank account.
This type of payment is also convenient for the “High Risk” business. At the moment, the interest rate for processing is individual and is calculated according to a multi-level tariff plan without garbage charges of 3.5% and higher, depending on the volume and type of business.
The project provides an open API and CMS modules for integration.
Perhaps this solution is ideal for starting an international business in accessible service regions, but it may not be suitable for you.
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