As Cross-Border E-Commerce Continues To Grow, Expect Payments To March in Step

Enabling cross-border payments for e-commerce transactions will take on greater importance if forecasts hold true.

That means payments companies wanting to serve these merchants will have to adopt services that accommodate international payments.

While U.S. and Canadian consumers will spend an estimated $72.7 billion on cross-border e-commerce in 2017, that figure is projected to increase to $122.6 billion by 2020, says Boston-based Aite Group LLC in its “Digital Commerce in Northern America: Growth and Opportunities” report released in 2016.

One factor behind the projected growth in cross-border e-commerce is the natural inclination of a retail brand to expand. “Companies are always trying to tap into new markets,” says Tony Holbrook, vice president of marketing and commerce at Irvine, Calif.-based Ingram Micro commerce and fulfillment. “It’s largely driven by channels.” Typically, a brand may try to expand by diversifying a channel, like e-commerce, he says. “Many times it’s easier for a brand to expand into an international market when trying to better year-over-year gains,” he adds.

That expansion generates some payments issues, like how to handles duties and taxes for multiple countries. Ingram Micro offers a service that includes an algorithm that calculates in real time applicable duties and taxes, Holbrook says. The merchant can then decide to pass along the cost or absorb it.

The business-to-business aspect of cross-border e-commerce is gaining more importance, too.

In one example Veem, a cross-border payments provider, announced an integration with QuickBooks Online to enable small businesses to more easily pay bills from international vendors.

Veem touts its low-cost cross-border payments ability—thanks in part to blockchain technology—to small business owners who are less likely to pay wire-transfer fees to pay their international vendors, says Marwan Forzley, chief executive and co-founder. Veem makes its money from the foreign-exchange fee, which is paid by the sender or recipient, dependent on the contractual terms between them.

“You have to be able to respond to the increasing needs of globalization,” Forzley tells Digital Transactions News. “Part of that is making sure the infrastructure that services small businesses is there.”

International e-commerce will become an ever-growing segment of revenue for merchants, Forzley says, because many will choose to sell on marketplaces, such as eBay Inc. or Alibaba. “There is a very good chance your first customer may not be a next-door customer,” he says.

International e-commerce is not the only factor in the rush to cross-border payments.

“Technology has made the cross-border payments space much hotter; there are now options besides correspondent banking to move money across borders,” says Talie Baker, an Aite senior analyst who co-authored the report.  “Globalization is also moving many more small businesses and individuals into the need to move payments cross borders,” she says.