Tapping into the Global Cart: Why E-commerce Needs FX Mastery

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By Richard

The global e-commerce boom and the unstoppable rise of cross-border, internet shopping has revolutionised the way that many businesses do business. Online traders now have access to 8 billion potential customers and an uncapped income stream – in fact, global payment flows in 2022 are estimated at US$156t, of which business payments make $150t, a staggering sum indeed.

However, while the potential profits are tantalising, e-commerce presents some very real challenges and there is one essential aspect many e-commerce businesses overlook: optimising FX payments.

In this post we will look closer at fx management and international payments for business.

Hidden Fees: The Silent Cart Abandoner

Did you know that some studies suggest that an estimated 70% of online shoppers abandon their carts?! While there are many reasons for this, one common one is “hidden fees” which only become clear during the checkout stage and perhaps the most odious of these is ecommerce foreign currency exchange fees.

Foreign exchange fees arise when a customer processes a purchase in a currency different from their own. These fees are incurred when a payment gateway converts the customer’s currency into the seller’s currency when processing the payment. These fees are usually made up of 2 different elements – a “markup” (when the payment gateway provider charges an additional amount on top of the exchange rate to keep as a profit) and then a handling/transaction fee.

In e-commerce, especially in cross-border transactions, the differences in currency value and the costs associated with conversion can add extra costs to the final item price and these can be considerable.

We will now illustrate this with a crude example. Let’s imagine that we are a UK customer browsing a US based webstore. We see an item we like that retails for $100 USD which is approximately £78 GBP on the open currency market. However, when we reach the check-out stage, we see that the payment gateway provider wants to charge us £81 for the conversion plus a £3 transaction fee so the item has increased in cost by £6. We may decide to complete the purchase or we may instead join the 70% of shoppers who abandon their carts.

Digital Wallets & FX: The Unexplored Goldmine

In recent years, digital wallets have become a significant part of the global financial landscape and are especially favoured by online traders and remote and freelancers. Let’s look at how they work and how they can assist in e-commerce.

Put simply, a digital wallet is a virtual version of a physical wallet and instead of carrying around cash, credit cards, or debit cards, users can store all these payment methods in a digital form within the wallet. One advantage of using a digital wallet is that they can offer fast, low cost transfers to other digital wallets even across international boundaries.

Some digital wallets also offer other advantages such as allowing users to retain a balance in a number of different currencies. This means that an e-commerce site has the option of allowing customers to pay in their chosen currency reducing FX costs and risk of cart abandonment.

Dodging the FX Fraud Bullet: Protecting Your Profits

The rise of e-commerce platforms has been a boon for international business but has been equally beneficial for the fraudsters of the world. Indeed, some estimates place the cost of ecommerce related fraud at $48 million globally.

There are a number of ways in which fraudsters can target e-commerce to commit FX fraud including the following;

  • Rate Manipulation: Fraudsters may exploit fluctuating currency exchange rates to buy goods cheaply, and then sell them when the rate changes, engaging in what’s known as arbitrage.
  • Phishing Attacks: Sophisticated scammers can create completely fake FX platforms to lure in unsuspecting customers. These platforms might offer enticing exchange rates to collect personal and financial information such as card details.
  • Payment Diversion: In a cross-border transaction, cybercriminals might intercept and divert payments into their own accounts, taking advantage of complex international payment pathways.

Additionally, because cross-currency payments tend to span multiple jurisdictions, fraudulent transactions can be hard to investigate and redress.

All ecommerce platforms are vulnerable but can protect themselves by implementing strong security protocols, monitoring transactions in real time and investing in fraud detection software.

Beyond Transactions: Enhancing Customer Experience with FX

One way to enhance customer experience and drive up completed sales, is to offer fully transparent and optimised FX rates, along with real-time currency conversions.

Firstly, this means that when a customer browses a store, the price they see is the price they will pay. The currency conversion is done on page, in real time, and all prices are quoted in the currency which corresponds with the customer’s actual geo-location. There are many plugins and examples of software that can handle this, and most of them are compatible with all major sales platforms and all major website builders.

As well as offering transparency, it is vital to choose a payment provider who offers optimal FX rates. This means finding a payment provider who applies the lowest possible FX markup and charges the lowest possible transaction fees.

Platform Power: Choosing the Right FX Solution for Your E-commerce

Let’s now recap and break down the features that e-commerce platforms should look for in an FX solution.

Competitive and Transparent Exchange Rates

We previously discussed that customers like to see the price they will be paying and are turned off by both hidden exchange rates, and excessive mark up fees. The right e-commerce platform should therefore offer;

  • Competitive Rates: Use a payment provider that offers competitive exchange rates ensuring that customers receive the best possible pricing.
  • Transparent Pricing: Payments providers should clearly outline any additional fees or charges so that there are no hidden surprises.

Real-Time Currency Conversion

Foreign Exchange rates fluctuate throughout the day. As such, real time currency conversion software that tracks these movements ensures that prices quoted in store stay accurate. Therefore a good e-commerce platform should;

  • Allow customers to see up-to-date prices in their local currency.
  • Enhance the user experience by providing instant clarity on costs.

Security and Fraud Prevention

Online fraud is serious business and ecommerce providers need to be take steps to protect themselves and their customers.The right e-commerce platform should always offer;

  • Robust Security Protocols: End-to-end encryption, multi-factor authentication, and other security measures all help to protect data.
  • Fraud Detection: Real-time monitoring and alerts for suspicious activities.

Integration and Compatibility

Finally, payment gateways used on a e-commerce platform should;

  • Easily integrate with existing e-commerce platforms and payment gateways.
  • Support various devices and browsers to deliver a seamless user experience.

Other considerations include compliance with applicable financial regulations and flexible payment options. This page from Money Transfer Comparison is a top resource for comparing FX solutions tailored for e-commerce.

Final Thoughts on FX Payments For Online Sellers

As you can see, to succeed in e-commerce, traders need to take foreign exchange very seriously and take steps to find the best business fx solution.

Hidden fees and unexpected mark ups on ecommerce international payments can deter customers from completing a purchase and steps need to be taken to ensure transparency and reduce FX fees. Another major (and growing) problem is fraud and e-commerce transfers need to take steps to protect both themselves and their customers against this.

Therefore e-commerce traders need to find platforms and payment providers who offer transparency and low cost FX exchange, maximum platform integration as well as robust fraud mitigation.

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