The digital economy enables companies to reach customers across national borders more easily than ever before. A study found that two-thirds of e-commerce companies sell outside their home markets and 31% of their sales come from cross-border sales; Other data showed that more than half of online shoppers made at least one purchase from a foreign retailer in 2020.
Global cross-border business-to-consumer (B2C) e-commerce had already hit $ 440 billion before the pandemic, according to UNCTAD’s latest comprehensive estimate, and industry studies show that figure rose 24% in 2020.
However, the payment side of international business is more problematic. Merchants, marketplaces and platforms face numerous challenges when dealing with cross-border payments and, unlike many other aspects of digital business, this area is becoming increasingly complex. In the busy payments market landscape, new payment and risk services are constantly being offered, and governments are often changing regulations to keep up with the digitalization and influx of online transactions.
Payment reliability and cost are also central parts of the equation, and this complexity makes efficient payment orchestration particularly critical in a cross-border context. For large corporations, often serving customers in dozens of markets, the most at stake is, each with its own regulatory, banking, and payment gateway dynamics.
Total cross-border e-commerce will reach $ 2.8 trillion in 2022, according to industry research, with the lion’s share coming from large corporations. The following deep dive examines how Payment Orchestration Platforms (POPs) can help large companies to manage cross-border payments more efficiently and how this can save time and money compared to attempts by international merchants to develop their own solutions.
The efficiency challenges for cross-border payments
Recent PYMNTS data identified several key problems for US and UK companies doing business across borders, averaging 26% of their sales. Sixty percent of businesses feared payment fraud on outbound payments and 56 percent were concerned about payment fraud in general. Other top concerns they had were payment data theft (52%), long processing times (45%) – companies waited 55% longer on average for cross-border payments than domestic ones – and foreign exchange costs (42%). 
67 percent of the largest companies surveyed – with annual sales in excess of $ 500 million – said they need third-party help to manage cross-border payment innovations. Payment orchestration solutions can solve all of the above issues.
A high quality POP connects to multiple payment providers, routes transactions, increases payment acceptance rates, and provides fraud detection and security, all done on a single, easy-to-manage layer. A survey found that cross-border shoppers are far more likely to buy from merchants who offer the payment methods they want, a problem that POPs can solve on a system-wide basis.
Two other problems large businesses face in cross-border e-commerce are transaction errors and shopping cart abandonment, both of which can be mitigated by POPs. A recent survey found that transaction errors cost businesses nearly $ 120 billion annually around the world, and these are more likely to occur with cross-border transfers than with domestic ones. Large companies feel the pain the most: 80% of companies with 20,000+ daily defaults said it caused them to lose customers. Another study found that in 2020 consumers gave up 81% of their online shopping carts and that additional costs were the main reason.
POPs versus DIY approaches
Clearly, payment orchestration can help large companies that deal with customers in markets around the world manage payments more conveniently and efficiently. The question then is: build or buy? The complexities and challenges of managing a complex payment system suggest that a do-it-yourself approach can prove time consuming and expensive. Companies that go this route could also forego efficient transaction routing, matching and payment data analysis – advantages that POPs offer that even a well-designed DIY system cannot offer.
The first key area where POPs improve the efficiency of cross-border payments is by eliminating the need to implement a new application programming interface (API) every time a merchant wants to connect to a local payment provider or gateway for a target market. Even very large companies with sophisticated IT teams have to spend a lot of time and energy establishing the connections themselves, and they have to continue to monitor and update their DIY systems constantly as Payment Service Providers (PSPs) and local gateways change their protocols.
The more payment connections an international merchant has, the more difficult it becomes to efficiently manage incoming cross-border transactions. Payment routing, one of the core functions of POP, routes transactions via the cheapest payment provider in the respective region. This leads to significantly lower payment costs and higher acceptance rates.
Another way that POPs can increase payment acceptance rates is by repeating transactions. This function was specially developed for declined transactions that occur either for technical reasons such as downtime of the payment provider or due to insufficient funds on a customer account. The declined transaction is repeated within a set time frame until it is finally carried out, resulting in both higher conversion rates and higher customer satisfaction.
POPs add value for large companies doing cross-border business beyond streamlining payments and minimizing the associated costs and hassle. They provide data analytics capabilities that large organizations can use to identify growth opportunities and areas where they can increase efficiency or reduce costs. In addition, the matching helps merchants to summarize their payment reports from different providers in different formats in one concise document, thus increasing operational efficiency.
POPs also give their customers access to a wealth of knowledge from payment experts. Businesses dealing with the increasingly complex world of cross-border payments should carefully consider how third-party solutions can facilitate the payment orchestration process, both immediately and over the long term.
