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What is global payment processing?
Global payment processing is the way businesses handle transactions when customers from different parts of the world buy their products or services. It's the behind-the-scenes action that ensures money moves safely and quickly across borders, currencies and payment methods, from the customer to the business.
In the context of global commerce, global payment processing allows businesses to sell to customers anywhere in the world.
Key players
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Customers
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Merchants
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Payment gateways
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Payment processors
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Banks
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Key steps in global payment processing
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Step |
Description |
Time |
Possible delays |
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1. Customer initiates payment |
The customer selects a payment method and provides their payment details. |
Instant |
No significant delays typically occur at this stage. |
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2. Data encryption |
The payment gateway encrypts and securely sends the payment information to the processor. |
Seconds to 1 minute |
Depends on the speed of the payment gateway and internet connection. |
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3. Validation and processing |
The payment processor checks the data, confirms the transaction and communicates with the customer's bank. |
Seconds to 1 minute |
Possible delays if there are network issues or high transaction volumes. |
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4. Bank authorisation |
The customer's bank verifies the account, checks funds and either approves or declines the payment. |
Seconds to 1 minute |
Delays can occur due to fraud checks, insufficient funds or banking system issues. |
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5. Response sent |
The bank's decision (approve or decline) is sent back through the payment network to the merchant. |
Instant |
No significant delays; however, network issues could cause a slight lag. |
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6. Transaction settlement |
Approved transactions are grouped and sent for settlement, where funds are transferred from the customer's bank to the merchant's account. |
1 to 3 business days |
Delays due to banking hours, bank holidays, cross-border transactions, or currency conversion. |
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7. Reconciliation |
The business reconciles the transactions and fees, finalizing the process with transaction records. |
Same day to 2 days |
Delays can occur due to high transaction volume or manual reconciliation processes. |
Payment processing is similar for credit card, digital wallets or mobile apps, but with a few differences. For example, there's no need to swipe a card or enter credit card details with a digital wallet or mobile app, which some customers prefer. Others include:
Verifying CVV code vs biometric authentication
When making internet purchases, the payment processor verifies the CVV code and other details to prevent fraud, while digital wallets and apps leverage extra layers of security such as biometric authentication.
Currency conversions
Currency conversions are handled by the payment processor or the issuing bank with credit card payments, while the digital wallet provider handles the currency conversion. Some mobile apps handle the conversion directly. This might not seem important until you realize one might offer better rates or lower fees than the other.
Payment processing fees
Understanding fees is essential in maintaining profitability in international markets. These fees can vary widely, depending on the payment method, currency and countries involved in the transaction.
Here's a breakdown of the most common fees you might encounter:
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Transaction fees A standard charge applied to each payment. They can be a flat rate, a percentage of the transaction value, or both.
Example: 2.5% + $0.30 fee per credit card transaction |
Currency conversion fees When payments from customers are in a different currency, these fees cover the cost of converting one currency into another. They can impact the amount you receive.
Example: A 1% fee for converting USD to EUR |
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Cross-border fees For cross-border transactions, additional fees may be charged where the customer's bank is in a different country to the merchant's bank.
Example: A 1.5% fee for cross-border transactions |
Authorisation fees Every time a payment is authorised, a small fee is charged by the payment processor. This fee is sometimes passed onto the customer.
Example: $0.10 per authorisation request |
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Chargeback fee If a transaction is disputed and reversed by a customer's bank, this fee is paid by the merchant and can be quite costly.
Example: A $20 fee per chargeback |
Settlement fees Settlement fees are charged for transferring funds into the merchant's bank account.
Example: A $0.25 fee per settlement |
How to minimise payment processing fees
When it comes to keeping your payment processing fees in check, there are a few tips. First off, understanding the fees and process and help improve customer satisfaction.
- Using multiple-currency accounts
Avoid high currency conversion fees by using multi-currency accounts can make your prices more appealing to international customers. - Optimise your payment methods
If you know which methods come with lower fees, you can promote those to your customers, which helps cut down overall costs. - Better rate with high transaction volume
Be sure to negotiate with your payment provider if you have a high transaction volume, or are comparing your options. - Implement security measures
Secure transactions aren't just about keeping fraud at bay, they help to increase customer satisfaction and minimise chargebacks.
Security for global payment processing
22.5% of internet users won't buy online due to payment security concerns. Digital fraud became more prevalent during the pandemic as sales shifted online and is still a problem, according to 58% of surveyed merchants. Meanwhile, around a fifth of internet users don't want to make an online purchase due to security concerns.
Security standards in global payment processing have come a long way, with the rise in online shopping and international transactions, but remains an area of focus for most businesses.
Encryption and tokenisation are standard, ensuring that customer data is scrambled and protected. But there's more – AI is now playing a big role in detecting and preventing fraud before it happens.
Biometric authentication, like fingerprint and facial recognition technologies, are also becoming the norm, as is multi-factor authentication, lifting the level of security in global payments.
Optimising payment processing for international sales
Expanding your business internationally opens new opportunities, but it also comes with the challenge of managing payments across borders. Here are some strategies to help optimise payment processing.
Offer multiple payment options
Different regions prefer different payment methods. For example:
Europe: Credit cards, SEPA direct debit, PayPal
Asia: Alipay, GrabPay, local credit/debit card payments
Latin America: Mercado Pago, Pix, Pegaleve, credit cards
Show multi-currency pricing
Allowing customers to see prices and pay in their local currency can reduce cart abandonment rates and improve the overall shopping experience. Multi-currency pricing can be implemented through payment processors or multi-currency accounts.
Strengthen security measures
Protect your business and customers by using extra layers of security with multi-factor authentication or fraud detection tools.
Optimise the checkout experience
A user-friendly checkout process to improve the customer experience includes localised checkout pages, simplified forms and mobile optimisation.
3 takeaways for businesses wanting to improve their global payment processing
- Understand and optimise fees in global transactions to maintain profitability
- Enhance security measures to protect against fraud and build customer trust
- Offer multiple payment options and multi-currency pricing to boost conversion rates in international markets.
Global payment processing with Antom
Global payment processing is complex, involving managing different currencies, adhering to various financial regulations and integrating multiple payment methods. There's also the complexity of waiting times for fund settlement, handling chargebacks and declined payments. And, the industry is also evolving constantly, making it hard for merchants to keep up.
Antom can simplify this process for you. With our established global network, we can help you improve payment success rates by offering a wide range of payment methods, ensuring secure transactions and optimising fees. This allows you to provide local payment options, reducing cart abandonment and boosting revenue.
Interested in expanding globally without the market complexities? Contact us today.
