Part 2: Comprehensive Analysis of Cost Drivers
Cost optimisation starts with understanding what drives fees. Merchant profile, customer behaviour, and transaction region interact to affect total expense. Antom provides actionable insights for merchants to anticipate and manage these variables.
FAQs
Cross-border payment cost is not just a “fee” charged to merchants. It is shaped by the interaction of three dimensions: merchant attributes, consumer behavior, and transaction geography. Understanding how these factors interact is essential for building an effective cost-optimisation strategy.
- Merchant factors
Different industries carry different levels of risk and compliance requirements.
High-risk sectors, such as travel, digital content, and gaming, often face higher fees and stricter reviews, while physical retail and B2B trade typically enjoy lower cost levels.
Merchants with better KYC quality, strong compliance records, and healthy chargeback ratios often receive lower pricing and faster settlement cycles.
Transaction scale and frequency also matter.
High-volume merchants usually benefit from pricing discounts, while small but frequent transactions increase operational and clearing costs.
- Consumer behaviour factors
Payment method choice strongly affects cost.
Credit cards, local wallets, and emerging options (BNPL, crypto) each carry different fee levels, FX costs, and risk models.
Virtual goods, subscription services, and high-refund categories tend to generate higher risk premiums and dispute-handling expenses.
Payment experience impacts overall cost structure.
Complex checkout flows increase abandonment and reduce conversion, while higher chargeback rates raise risk-related fees.
- Transaction geography factors
Local payments and domestic clearing systems generally offer shorter chains and lower costs.
Cross-border payments involve international networks, multiple intermediaries, FX conversion, and stricter compliance checks, resulting in higher total expenses.
Regulatory differences, FX controls, and financial-infrastructure maturity vary widely by region and directly influence settlement speed and fee structure.
- Examples of how these dimensions interact
- High-risk merchant + credit card payments + emerging markets
Typically produces the highest cost due to risk premiums, card-scheme fees, and expensive cross-border clearing.
- Compliant B2B merchant + local payment method + mature market
Usually results in lowest cost because of low-risk classification, cheap domestic rails, and stable regulatory frameworks.
- Large-scale merchant + e-wallet payments + multi-currency settlement
Scale brings fee discounts, e-wallets lower channel costs, and multi-currency accounts reduce FX loss.
- Virtual goods + high refund rates + strict regulatory region
Refund pressure and compliance overhead significantly drive costs upward.
Yes. Every merchant receives an MCC (Merchant Category Code) that signals its industry type and typical risk level. Payment providers use risk-based pricing, so industries with higher fraud or chargeback rates naturally pay higher fees. This is driven by industry-wide behavior, not by the performance of a single merchant.
High-risk categories such as gaming or digital tipping often face higher interchange and scheme fees. Low-risk sectors like restaurants or supermarkets usually enjoy lower costs due to fewer disputes and smaller transactions. For example, a US$10 restaurant payment may cost 2-3%, while the same amount in gaming can reach 5-6%.
In short, MCC is the system’s core tool for standardising and pricing industry risk.
The payment method affects cross-border costs because different tools carry different risk levels for payment providers.
Credit cards involve bank funding, so merchants face higher chargeback and fraud risks, resulting in higher fees. Premium cards like Gold or Platinum add benefits that increase service costs, though their holders usually have stronger credit and spending power. Transaction context matters too: in-person payments are lower risk and cheaper, while online cross-border “card-not-present” transactions are high-risk and costlier.
In short, a customer’s choice signals risk to banks, directly shaping the merchant’s cost structure.
Yes. The transaction scenario often reveals risk more clearly than the product category, which directly affects the merchant’s payment costs. Even the same customer buying the same type of product can incur very different fees depending on how the transaction occurs.
For example, buying an airline ticket on the airline’s official website is considered lower risk than purchasing through a third-party platform. The latter adds intermediaries, increasing the chance of refunds or disputes, so fees are typically higher.
Similarly, digital goods like in-game items carry higher risk than physical cross-border products because they lack delivery proof and are delivered instantly. Transaction characteristics such as instant payments, cross-timezone purchases, or frequent low-value payments also raise anti-fraud challenges and costs.
In short, payment systems focus not only on what is being sold but also on how it is sold.
Yes. Local acquiring means the card issuer, acquiring bank, and customer are all in the same country, so transactions avoid cross-border clearing and typically incur significantly lower fees.
The real value of local acquiring goes beyond lower fees. It reduces overall operating costs, increases success rates by adapting to local payment habits, and minimises chargebacks, delayed settlements, and currency fluctuations.
Strategically, local acquiring helps merchants establish compliant local entities, gain regulatory and tax advantages, and improve competitiveness. For example, a cross-border e-commerce platform relying solely on international acquiring may pay 3-4% per transaction, while local acquiring can reduce fees to 1-2% and improve conversion rates, often generating more profit than the fee savings alone.
In short, local acquiring is not just a cost-saving tool but a key strategy for long-term market growth.
