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As the eCommerce market expands, so does the array of payment gateways available to merchants worldwide. Many are tempted by platforms advertising free or low-cost services, thinking they've secured a great deal. However, the reality of hidden costs of payment gateways often emerges only after transactions begin, potentially eroding profit margins.
Are you grappling with the complexities of global transactions? Consider Tazapay, your global payment gateway partner. With a network extending across 173 countries and a suite of fully digitised solutions for marketplaces and platforms, Tazapay helps you make the world your market.
To better understand this landscape, let’s explore the common costs and fees associated with payment gateways, particularly those involved in cross-border payments.
Platform fees are relatively straightforward—they represent the costs of using a payment platform. Most reputable payment gateways impose some type of fee. These fees can vary, typically appearing as a combination of a flat fee plus a percentage of the transaction, or as a simple percentage-based fee.
For example, some payment gateways may charge fees such as $0.30 plus 2.9% per transaction, or $0.11 plus 3.95%, depending on the payment method. In contrast, Tazapay offers a more streamlined approach, charging either 1.8% or 3% for non-card transactions. To illustrate the differences in cost structures, consider the expense of a $50 transaction versus a $1000 transaction:
Using a $0.30 + 2.9% fee structure, a $50 transaction incurs a cost of $1.75, while a $1000 transaction costs $29.50.
However with Tazapay’s fee, starting from 0.8%, the same transactions would cost just $0.40 and $8, respectively.
Comparing these fee structures highlights significant differences. Opting for a straightforward percentage fee, such as Tazapay’s, can be more cost-effective, particularly for larger transactions where flat fees add up. This comparison underscores the importance of understanding payment gateway fees and how they impact your costs, especially in a cross-border payment gateway context.
Understanding payment gateway costs is essential when considering the financial implications of various payment methods. These platforms may absorb fees, integrating them into overall platform fees, or pass them directly to consumers.
Bank transaction fees play a significant role in the costs associated with direct bank payment methods like local bank transfers and bank redirects. Typically, local bank transfers might incur a surcharge for cross-bank transactions, while in-bank transfers often avoid these fees. Bank redirects, similar in operation to local bank transfers, usually carry minimal processing fees, influenced by national e-commerce policies.
For example, Singapore's PayNow service was free of transaction fees from its launch in July 2017 until January 2021, under a full subsidy. However, a nominal fee of SGD0.22 was introduced in 2022 to cover gateway pricing models adjustments.1
Credit card processing fees are another critical aspect of payment gateway costs. Merchants may apply a surcharge for transactions using card networks like Mastercard or Visa. For instance, as of 2024, credit card processing fees for merchants range from 1.3% to 3.5%, depending on the card and transaction type.2
The cost of wire transfers, particularly for international payments, is a notable part of gateway costs. Domestic wire transfers generally incur lower fees and are processed faster compared to international transfers, highlighting the variability of bank surcharges across different institutions.3
When transactions span multiple geographic regions involving different currencies, international transaction fees and currency exchange costs, or FX costs, are inevitable. Payment gateways often manage these costs by adding a percentage-based fee over the market’s FX rate, or by setting their own buy and sell rates.
This adjustment allows payment gateways to cover the risks and operations involved in currency conversion, forming a significant portion of the payment gateway costs. Understanding these fees is crucial for businesses operating internationally, as they can impact the total cost of transactions significantly.
Setup fees are a common initial cost associated with various online payment methods, including payment links and payment APIs. These fees often reflect the technical expertise required for integration and the complexity of the setup, especially in sophisticated online marketplaces and platforms.
In Malaysia, the variability in gateway setup fees is evident, with the top ten online payment methods charging anywhere from zero to RM300 per year.4 This range illustrates the diverse pricing models that payment gateways employ based on the services and technology they provide.
With a clear understanding of the various payment gateway costs, including transaction fees, setup fees, and FX costs, you are now equipped to make more informed decisions when selecting a payment gateway that offers the best value for your money.
As you consider your options, take a look at Tazapay. Tazapay offers competitive platform fees at just 0.8 - 2.5% for non-card payments and 3.8% + $0.50 for card transactions. Moreover, it provides some of the lowest FX rates in the market and even promises to match any better rates you might find. Making the right choice for your payment gateway could mean the difference in creating significant savings and efficiency for your business operations.
Sources
1 2020 E-commerce Payments Trends Report: Singapore Country Insights (jpmorgan.com)
2 Average Credit Card Processing Fees (fool.com)
3 Wire Transfer Definition (investopedia.com)
4 Top 10 Online Payment Methods in Malaysia for Ecommerce - ZCOM MY Blog
Online cross-border transactions happen on the daily through a whole slew of digital payment gateways. They happen so frequently and so seamlessly that the cross-border payments industry is expected to reach $156 trillion USD in 2022¹.
Digital payments work so frequently and seamlessly such that it may only look like a few clicks between payment providers to an average Joe. But what belies these clicks are infrastructures held in place via API calls, always-on servers, and other functions that serve both B2B and B2C markets globally.
With this in mind, the discerning merchant based in India may be curious to know how their payments work when they export their products or services on the international market. After all, India’s export market is sized at USD 284 billion for goods and USD 205 billion for services in the year of 2020².
A market of interest to these Indian exporters would be the United States of America, who is India’s largest destination country valued at USD 64.2 billion in 2020². Exporters in India would stand to gain from targeting this country’s consumers by not only offering the product or service American buyers would need, but to also ensure that the checkout process is localised to their sticky buying habits.
For platforms that would like to optimise their checkout to the US market, it should ideally have multiple payment methods such as card payments, digital wallets, local bank transfers, etc.
In the USA, cards have a very strong presence both online and offline, where credit cards are the most common payment method in the US consisting of 58% of the 2020 eCommerce payments market according to JPMorgan’s study3.
Some of the most used card networks are Visa, Mastercard, American Express and Discover. The ubiquity of credit cards and debit cards has made them an enabler of digital wallets in the US where consumers can link their payments and top up their digital wallets using card networks. Thus, making it the second most popular payment method there.
In addition, other payment methods include bank redirect apps and local bank transfers using banks such as:
Once the payment is made by the buyer, the payment gateway starts processing the payment. The process differs for different payment methods used to pay. If the buyer has chosen to pay by card or wire transfer, the funds would not be held at the local bank account but sent directly using the payment method’s payment rails.
On the other hand, if the buyer pays by local bank transfer, it will first be held by the payment provider’s local bank account before transferring the funds to the seller’s bank account in India.
Sending payments cross-border can be simply boiled down to sending money from an origin country’s account to a destination country’s account. In this instance, the origin country would be the United States and the destination country is India.
For bank transfers, cross-border payments are sent via SWIFT wire transfers. Outside of the bank transfer payment method however, card networks would have their own payment rails to send funds into. But platform fees may still vary from one payment method to another.
Generally speaking:
While it would be beneficial to keep these factors in mind, some payment providers like Tazapay may have cheaper platform fees due to partnering with local payment providers to keep these costs low.
For merchants that deal with suppliers internationally, it may make sense to opt to receive payments in USD in order to hedge against fluctuations in their local currency.
This can be achieved by opening a multicurrency account in the merchant’s own country so that they can both hold USD, their local currency, and any other currencies that they may need when dealing with other businesses.
The last step in international payments happens when the merchant based in India would receive their payment from the payment provider.
Merchants who built their own brand.com with integrations to the payment platform, have built their storefronts with tools like Shopify or WooCommerce, or use the payment platform directly can expect to receive their payouts by the next business day or a week depending on the buyer’s chosen payment method and whenever they request for the payout.
On the flipside, merchants who sell via an online marketplace may have a fixed time period to receive their payout as it is more economical for the online platform to club their payouts to a single day of the month. When this happens would be mentioned on the eCommerce marketplace’s Terms & Conditions page when the merchant first signs up with the platform to sell. These funds then get compiled and sent to the Indian merchant’s local bank account.
Some major Indian banks to look out for include:
After receiving any form of international payments, the Indian merchant needs to obtain an FIRC or FIRA to prove that there was foreign inward remittance into an Indian bank account. Obtaining an FIRC/FIRA is part of the legislative requirements set in place by the RBI in order to prevent money laundering or fraud from taking place within the country.
Obtaining an FIRC or FIRA would require the Indian exporter to request for the document from an AD1 (Authorised Dealer Category 1) bank that has processed their cross-border payment. RBI has provided a list of such banks on their website⁴.
With this knowledge on how cross-border payments work from the United States to India, you now know the importance of having an online checkout that not only caters to the American consumer in terms of ease of use, but also allows for a seamless transfer of money from one country to another.
Keeping these steps and features in mind will ensure that you are able to select a payment provider that helps you to decrease cart abandonment and passes time and cost savings to you. If you are looking for a payment provider, why not give Tazapay a try? With coverage of over 173+ countries and local payment options in over 70 major markets, satisfy your customers anywhere in the world by providing them a seamless checkout experience.
In recent years, Singapore has rapidly evolved into a digital-first economy, with the island nation at the forefront of adopting innovative financial technologies. The emergence of digital wallets has signaled a shift in consumer preferences, with predictions suggesting they might soon eclipse traditional card payments. Central to this digital revolution is PayNow, a system that has transformed the way transactions are conducted in Singapore, promising a seamless, efficient, and secure method of payment.
Developed under the auspices of the Association of Banks in Singapore (ABS), PayNow is more than just a payment method; it's a cornerstone of Singapore's ambition to become a fully cashless society. This real-time payment platform enables users to send and receive money instantly using just a mobile number, NRIC/FIN, or UEN number, integrating seamlessly with the Singapore Quick Response Code (SGQR) for QR code payments. Supported by a consortium of major banks and financial institutions under the regulation of the Monetary Authority of Singapore (MAS), PayNow is a testament to Singapore's cohesive approach to financial innovation.
Updating the statistics with the latest information, PayNow's trajectory in Singapore showcases the nation's accelerated embrace of digital payments. In 2020, Singapore witnessed a dramatic surge in real-time transaction volumes, reaching 138.38 million, a 48% increase from 2019. The value of these transactions also saw a significant jump of 40%, escalating from US$110 billion in 2019 to US$154 billion. The growth trend is projected to continue, with real-time transactions expected to climb at a compound annual growth rate (CAGR) of 23.2% to hit 392.94 million by 2025. This would elevate the total transaction value at a CAGR of 17.74%, underlining the increasing significance of digital payments in Singapore's financial landscape (Fintech Singapore).
The recent expansions into real-time cross-border payments further underline PayNow's evolving role in the financial ecosystem. 2023 marked a pivotal year as Singapore initiated real-time cross-border payment connections with neighboring countries. These developments, facilitated by the Monetary Authority of Singapore (MAS), aim to enhance convenience for cross-border fund transfers and small-value payments. The introduction of cross-border QR code payment linkages with Malaysia and Singapore, along with the establishment of a cross-border linkage between Singapore’s PayNow and India’s UPI, highlights the city-state's commitment to fostering financial inclusion and bolstering the ASEAN economy through improved payment connectivity (Fintech Singapore).
While PayNow excels in facilitating local transactions, its integration with international payment systems like Tazapay represents a significant leap forward. This synergy allows Singaporean businesses and consumers to participate in the global marketplace more effectively, providing a streamlined process for cross-border transactions. Through platforms like Tazapay, users can easily transfer funds internationally, opening up new avenues for commerce and personal transactions alike.
Tazapay stands out by offering a simplified and secure method for leveraging PayNow in international transactions. By facilitating the transfer of funds to Tazapay's Singapore account via PayNow, and then on to the recipient's foreign account, it bridges the gap between local and global payment ecosystems. This process not only enhances the utility of PayNow but also offers businesses a competitive edge in the international market.
The cost-effectiveness of PayNow for local transactions is clear, with nominal fees and a structure that promotes accessibility. However, the dynamics shift when considering international transactions. The use of third-party platforms like Tazapay introduces additional costs, albeit often lower than traditional banking fees. For businesses looking to expand globally, understanding these financial nuances is crucial in selecting the most efficient payment methods.
As PayNow continues to evolve, its potential to shape Singapore's digital economy grows ever more significant. Its integration with international payment gateways heralds a new era of financial connectivity, enabling Singapore to further solidify its position as a global financial hub. The ongoing developments in digital payment technologies promise to enhance PayNow's offerings, ensuring that Singapore remains at the forefront of the digital payment revolution.
For businesses and individuals alike, the journey towards a cashless society is filled with opportunities. Embracing platforms like PayNow and Tazapay not only facilitates easier transactions but also opens up new horizons for global engagement. As we look to the future, the role of digital payment systems in driving economic growth and fostering global connections cannot be underestimated.
In conclusion, PayNow's journey from a local payment solution to a key player in international transactions encapsulates the essence of Singapore's digital transformation. Its continued adoption and integration with global payment systems underscore the importance of digital innovation in today's interconnected world. As we embrace these technologies, the prospects for seamless, secure, and efficient transactions are boundless, heralding a new chapter in the story of digital payments.
The eCommerce scene in Indonesia is a lucrative and burgeoning market, evident with its current placement as the 10th largest eCommerce market in the world with a revenue of USD 52.9301 B this year, putting Italy in 9th place¹. The market is certainly a healthy one with a CAGR of 10.4% and has contributed 17% to the global eCommerce market growth rate¹.
This makes Indonesia a prime choice market for any prospecting eCommerce business looking to venture into the international marketspace, especially with the highly competitive market they currently have². Therefore, what better way to localise in such an environment than with one of the most popular local payment methods they have today? Let’s take a look at Dana, and how it functions in an international payment gateway.
Dana is a digital wallet, or e-wallet, service that is popular in Indonesia and has been working together with Bank Indonesia to help advance the country’s aims of both integrating technology into their financial services, and building up the country’s digital economy³.
As a digital wallet, it allows users to make payments with either their saved cards, e-wallet funds, or dynamic QR codes.³
Indonesia’s digitalisation efforts have been successful thus far, based on the drastic increase in the country’s internet penetration rate from 69.8% in 2020 to 75.47% in 2022². This is evidently reflected in both the aforementioned high competitiveness in Indonesia’s eCommerce market, but also in Dana’s own rapid climb in popularity, reporting a jump from 93 million users in 2021 to over 135 million users in 2022–a 145% increase⁴.
However, due to the country’s vast landmass and numerous scattered islands, low banking and internet penetration remains an issue in those remote regions as difficulty in building the infrastructure to support digital payments is still high².
No payment gateway is perfect, and each has their own sets of benefits and drawbacks. Here are Dana’s pros and cons:
At the time of writing, Dana has yet to expand beyond Indonesia so any cross-border transactions involving it must use a third-party payment provider to act as the international payment provider. To do this, a user would need to use one such payment provider that offers Dana as a payment option upon checkout. From there, proceed to conduct the transaction as one normally would in a local transaction with Dana. Once the payment is made, the funds will be transferred from the third-party payment provider’s ID account to one of its international accounts before being disbursed to the foreign seller.
Presently, Dana provides each user with an allowance of 10 free withdrawals, charging an administration fee of IDR 4,500 per withdrawal after that³. Dana also charges administration fees of IDR 1,500 per top up, IDR 7,500 per train ticket purchased via the Dana app, and IDR 2,500 per bill payment³.
However, since Dana has yet to expand beyond local borders, any fees charged for cross-border transactions will be the usual costs that come with using third-party payment providers, such as setup fees, and FX costs.
Now that you know more about Dana, you can now think about localising into Indonesia with more confidence. However, it wouldn’t hurt for you to consider taking a look into robust payment gateways that offer a slew of localisation options like Tazapay to help increase your odds of success.
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Sources
The savvy e-Commerce merchant knows that when it comes to payment methods, they are spoiled for choice. Knowing how many to take on, and the suitability of each in any given market, is a crucial matter entirely that could spell the difference between success and mediocrity in the sphere of e-Commerce. Generally speaking, it is good business sense to have multiple localised payment methods on hand to both increase your odds of successfully integrating into the local market ecosystem and reducing the risk of chargeback fraud.
The overall B2B e-Commerce market is also projected to be continuing its healthy upward trend of growth where it has a reported global market value of 17.9 trillion USD in 2021– a roughly 120% increase from its previous 14.9 trillion USD in 2020, thus making at least 5 times larger than the global market size of the B2C e-Commerce market¹. This tremendous market size and growth is further compounded by the overall increase in digital shoppers worldwide, sitting at nearly four billion consumers in 2021².
This goes to show that the e-Commerce market sphere is not only thriving, but also intensely competitive as well as it is evident that the number of digital businesses and digital consumers will only keep increasing. Therefore, knowing which payment methods to choose from and how they function is key, and this includes knowing how to distinguish between synchronous and asynchronous payment methods.
Synchronous payments refer to payments that are processed in real-time or near-instantaneously. This usually means that payments made using synchronous payment methods are fast and convenient at the cost of high transaction fees and/or greater dispute resolution difficulty. Examples of synchronous payment methods include card payments, internet banking, real-time payments, and bank redirects.
Asynchronous payments refer to payments that are processed with some length of time between the moment of transaction and the resolution of the transaction. The time it can take for an asynchronous payment to process a transaction can take anywhere from a few minutes to a few days, depending on the payment rail used. That said, asynchronous payment methods also have strong brand trust behind them and are typically more secure and readily available than most synchronous alternatives. These asynchronous payment methods include local bank transfers, mobile money, voucher payments, and wire transfers.
Most synchronous payments are powered by a robust digital payments infrastructure to help facilitate the protocols and uniformity needed across banks to make synchronous payments possible, such as Singapore’s inter-bank payment system with PayNow, or Sofort’s utilisation of Klarna Kosma’s PISP-based infrastructure in Europe.
Generally speaking, a synchronous payment in a payment gateway would go as follows:
Asynchronous payments are usually synonymous with more conventional payment methods and/or hybrid payment methods that intend to reach out to the unbanked population of a given market, such as voucher-based payments in Latin America. While they may take more time to process, their security cannot be understated.
This is how asynchronous payments are processed in a payment gateway:
Now that you know more about the difference between synchronous and asynchronous payment methods, you can make smarter decisions the next time you opt for a payment method to adopt into your e-Commerce business. Though, with Tazapay, you can skip the ruminating phase altogether and enjoy access into more than 80 localised markets at your fingertips with just a single click. Don’t delay, try Tazapay today!
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Sources
In the dynamic realm of cross-border eCommerce, seamless payment experiences are the cornerstone of successful international sales. Despite the growing diversity of global payment preferences, credit cards remain a universal staple.
Yet, international retailers face a unique challenge: optimizing card authorization rates to minimize checkout abandonment and maximize global customer satisfaction. This article delves into strategies for boosting card authorization rates, a crucial element for thriving in the competitive landscape of cross-border eCommerce.
Card authorization rates play a pivotal role in ensuring the smooth completion of cross-border transactions. Defined as the percentage of transactions approved during the authorization phase, these rates are critical for maintaining a frictionless payment experience for customers worldwide.
High authorization rates signify a seamless checkout process, essential for building trust and loyalty among international shoppers.
Low authorization rates can significantly impede cross-border sales, leading to lost revenue and customer dissatisfaction on a global scale. The impact of failed payments is magnified in international eCommerce, where trust and reliability are paramount.
Understanding the hidden costs of these failed transactions, particularly in the context of selling high-value goods across borders, is crucial for any eCommerce platform aiming for international success.
The complexity of cross-border payments introduces unique challenges affecting authorization rates:
Improving card authorization rates for cross-border eCommerce requires understanding and addressing the specific needs of an international clientele:
In the intricate dance of cross-border eCommerce, where each step from browsing to payment transcends borders, the choice of a payment provider becomes pivotal. The right partner, like Tazapay, doesn't just facilitate transactions; it elevates them, ensuring high authorization rates that are crucial for international success. Here's how:
Strategic Global Partnerships: Tazapay's vast network of issuer and network partnerships shines brightest in the realm of cross-border transactions. These strategic alliances ensure that payments are not only secure but also highly likely to be authorized, regardless of geographical and financial boundaries.
Localised Payment Solutions: Understanding and navigating the payment preferences of different regions can be daunting. Tazapay simplifies this, offering localized payment solutions that resonate with customers worldwide, significantly boosting authorization rates for international sales.
Advanced Fraud Detection Tailored for Global Commerce: The balance between preventing fraud and approving legitimate transactions is particularly challenging in cross-border eCommerce. Tazapay employs sophisticated fraud detection mechanisms that are fine-tuned for the global stage, minimizing unnecessary declines while protecting your revenues.
Compliance and Adaptability Across Borders: As global data laws and payment regulations evolve, staying compliant is key to maintaining high authorization rates. Tazapay's proactive approach ensures your payment processes remain on the right side of regulations, adapting swiftly to changes that could impact international transaction success.
By partnering with Tazapay for your cross-border eCommerce needs, you tap into a world where payment processes are not just transactions but strategic tools for global market expansion. Tazapay's emphasis on high authorization rates through strategic issuer and network partnerships offers businesses a clear path to international growth and customer satisfaction.
Optimizing card authorization rates is a vital strategy for enhancing the cross-border eCommerce experience. By addressing the unique challenges of international payments and partnering with a provider like Tazapay, businesses can unlock new levels of success in the global market.
