Global expansion into emerging markets allows U.S. entrepreneurs to bring net new dollars into the United States. With that increasing profitability is where you start to see investment opportunities for growing businesses in the U.S.
This means tremendous opportunity for entrepreneurs to increase the reach of their products and services. By increasing reach, entrepreneurs can expand beyond competition with established domestic brands in a vertical where all are competing for the same demographic.
So, what’s the problem? Unfortunately, but expectedly, there are challenges associated with global e-Commerce. These include increased liability and exposure, other regulated markets, and regional fraud considerations in those markets.
In international markets, as well as in closed economies, there are licensing requirements from both the governments and financial institutions. The difference from one market to the next is how funds move out of that economy (foreign exchange and settlement). The other layer, on top of government and financial institution licensing, is the alternative payment network (APN) in that region. Closed economies often have their own APNs, such as China UnionPay (CUP). For those economies that are using alternative payment networks, a merchant needs a customized solution that aligns with its needs.
In addition to the e-Commerce requirements, there is a high level of fraud in cross-border e-Commerce. The biggest mistake I see merchants making is using domestic fraud solutions globally. Things like address verification services (AVS) and CVV2 are standard here in the U.S., but in cross-border commerce you need added layers of security. Cross-border merchants are more susceptible to “friendly fraud,” which can occur when an international consumer purchases a good, waits for the item to arrive, and then initiates a chargeback in an attempt to defraud the merchant.
The issue is, if you process a cross-border payment and it clears, once you ship those goods they’re gone. There’s no resolution at that point: loss of goods, loss of income, chargeback fees. That can contribute to burnout.
Cross-border merchants should have a fraud solution suite that creates a customized fraud algorithm, based on merchant requirements, that connects to multiple data sources. If a merchant doesn’t have a customized solution it can have a negative impact on its conversions. However, those solutions come at a cost, so it is critical that merchants incorporate the cost of fraud prevention into their product/service pricing when they start conducting cross-border commerce.
Some merchants view fraud protection as a cost area only, but it’s preventative. You don’t want to wait until you need it. These solutions enable you to maintain margin growth and reduces risk and exposure.
When laying the foundation for a global expansion plan, research is key:
Pinpointing your demographic and maintaining cultural empathy is crucial. Ensuring your site is up-to-date with cultural norms and accommodating can go a long way.
Find out what must be customized to the local market. Different cultures can be comfortable with different currencies and payment methods.
Test a new marketplace first. Determine what the level of demand is and scale accordingly.
There is no denying that e-Commerce is the new way of shopping, with the market expected to reach $55 billion by 2021, rising from the current $6-$8 billion1. However, it’s vital that merchants who want to capitalize on as much ROI as possible expand across borders. Cross-border shoppers are predicted to grow by 50% just by 20182. The groundwork is there for merchants. They just need to ensure they are prepared and partnered with a solid team that can enhance their business while staying within the legal framework.
Cleveland Brown is CEO of Payscout, a global payment processing provider covering six continents by connecting merchants and consumers via credit, debit, ATM and alternative payment networks. What differentiates Payscout is its mission “to support the entrepreneurial dream one transaction at a time.”
1“E-commerce Expected to Touch $50-55 Billion by 2021: Study.” Live Mint. N.p., 15 Feb. 2017. Web.
2Labrien, Dianna. “How To Expand Your Ecommerce Venture Internationally.” Tech.co. N.p., 13 Dec. 2016. Web. 10 Jan. 2017.