Thanks to the wonders of the internet, it’s never been easier to sell your products or services to people across the globe. As nice as this opportunity is, however, it comes with some drawbacks. One of them is the cross-border fee, which is a fee you pay every time your business sells something to a customer who is using a credit card issued in another country.
If you want to sell internationally, there’s no way to avoid cross-border fees. Similarly, credit card companies will refuse to negotiate on the fee amounts. However, you can manage and reduce these fees via other methods. Here are four common examples you need to know about.
1. Negotiate With Your Processor
The first thing you should try is negotiating with your payment processor. If your business volume has grown significantly in recent years, they may be willing to offer more competitive rates or slash your fees. If your payment processor isn’t open to this idea, it’s worth considering a switch to one of their more cost-effective competitors.
In addition to substantial savings, choosing the right payment processor can enhance your international payment processing efficiency. As such, it’s always worth doing your research into budget-friendly payment processing solutions.
2. Register a Local Business Branch
If the international market accounts for most of your sales, it may be time to think about opening a local business branch in a different location. This will allow you to partner up with an acquiring bank that’s based in the same country as most of your customers’ card issuers.
Of course, registering a business branch in another country comes with another set of challenges. These include governing laws, administrative overheads, and tax considerations. Before opting to go down this route, do your research to ensure it’s worth it.
3. Set Minimum Transaction Amounts
Setting minimum purchase requirements can be a good way to reduce cross-border fees, but this approach requires a thorough understanding of local laws and card network regulations. Card networks like Visa and Mastercard tend to discourage minimum transaction amounts but often permit surcharges that are within specified limits.
The key to minimum transaction amounts is being transparent and consistent. You must clearly communicate to customers what the purchase threshold is, both through online channels (such as your business website) and at the point of sale.
4. Partner With Distributors
Partnering with local distributors is a slightly less risky version of registering a business branch in another country. You would still have many factors to consider, such as compatibility with your partner. However, they would have a local acquiring bank and thus avoid cross-border fees.
Keep in mind that using local distributors to sell your products or services means they’d be handling the transactions and fulfilling the orders as well. If your business is handling a lot of credit card transactions daily, this can be a welcome relief.