Imagine you work for a grocery store where every 18 out of 100 shoppers must be turned away from the register when they arrive with a loaded grocery cart. This would obviously aggravate a lot of shoppers, which is why its ridiculous that e-commerce companies do this every day usually without realizing it.
Today, foreign e-commerce transactions are declined 18% of the time in the U.S., 11% of transactions will be shot down. Most gateways effectively shoo away customers that are committed to buying your product. Like the scenario in the grocery store, it can amount to forced cart abandonment, especially when the shopper doesnt have a second credit card to try or multiple payment options to choose from.
Particularly when you sell cross-border, conversion problems are disguised, but once you identify them theyre preventable. Two of these issues, payment routing and payment methods, could be stealthily killing your international conversion rates.
In the seconds between clicking "purchase" and reaching a confirmation page, a lot happens in an e-commerce transaction. Most payment gateways (and by extension, most merchants) are connected to one acquiring bank that processes their online payments. Payment card information travels to this acquiring bank, which then pings the bank where the card was issued before deciding to accept or decline. This is where you can lose 18 percent of transactions.
When a U.S. credit card is processed through a U.S. bank, the chance of success is high. The fraud risk appears low to the acquiring and issuing banks. However, when any foreign credit card routes from a U.S. acquiring bank to the foreign issuer, the fraud screening tools that analyze each transaction are more likely to smell fraud and deny the payment. The currency of the transaction, too, can set off the fraud monitors. For instance, when a transaction in Euros is routed to a Canadian bank, it is more likely to trigger a denial.
Therefore, a payment gateways network of acquiring banks has an influence on payment success rates, particularly for cross-border commerce. Sure, the gateway must route transactions to an acquiring bank located in the same region as the merchant. But more importantly the gateway needs to understand the nuances of each banks fraud rules and transaction review processes to intelligently route to the processor that has the best success rates. Visa and MasterCard have six global regions, which means if youre trying to sell globally, you need to check if your gateway has more than one acquiring bank in your region. This also helps you gateway failover to an alternative bank should a transaction fail. This happens in a matter of milliseconds and is seamless to the shopper. You will turn away far fewer shoppers with loaded carts.
"Localizing" payments is another big issue that influences ecommerce conversion rates. In particular, the selection of payment methods can affect how many shoppers complete their purchases.
Not all countries are on the Visa-MasterCard bandwagon like the U.S. For example, just 33% of Germans owned a credit card in 2013, and they accounted for only 18% of payments in the country (compared to 50% in France and 59% in the UK). On the other hand, the percentage of Germans using e-payment options like giropay, PayPal, and ClickandBuy climbed from 26% in 2011 to 40% in 2014.
For Chinese shoppers, too, merchants need a gateway that can cater to local tastes. Most credit cards are issued by China UnionPay, the companys sole domestic bank card association, and the only company allowed to process yuan-denominated transactions inside China. They are the world's largest card brand with more than 3.5 billion, and second only to Visa in total processing volume. To not offer UnionPay is to essentially write off Chinese shoppers.
You have to be able to offer locally preferred payment options anywhere a significant percentage of consumers cant or wont complete a transaction otherwise. To ignore payment culture is to once again turn away shoppers who might have a loaded cart.
Illogical payment routing and a lack of culturally appropriate payment methods are two among dozens of reason consumers will abandon 74% of online carts in 2015 roughly $4 trillion worth of goods. Local checkout experience, shipping costs, ease of the checkout process, mobile optimization and dozens of other factors contribute to this loss. But of all the issues that trip up international sales, payment routing and payments methods tend to fly under the radar.
Look into how your payment processor handles payment routing. Be confident that you can offer local payment methods in the countries that matter to your growth. Stop saying No to people with loaded carts.
Jeff Coppolo is head of global business development at BlueSnap.