News, Education and Events Decoding Digital Payments & Fraud

News, Education and Events Decoding Digital Payments & Fraud

Q&A with Carl Miller, Founder of The Global Retail Insights Network

Q&A with Carl Miller, Founder of The Global Retail Insights Network

Many CNP companies consider global expansion to be an optimal growth strategy. While new markets mean new customers and profits, they also can represent an uncharted road with potholes in the form of new payment methods, processing partners, currency exchange rates, foreign fees, regulations and taxes as well as repatriation strategies. The Global Retail Insights Network (GRIN) was established as a community focused on education, benchmark data and collaboration for global retailers. The GRIN now includes more than 1,200 merchants in 53 countries who can share information so those just starting a cross-border e-commerce program will not make the same costly mistakes others have made.

Carl Miller, founder and manager director of the GRIN, recently sat down with to share his members’ answers to the most frequent questions they receive from companies considering accepting payments from outside their domestic boundaries. When it comes to global payments, what are the key topics that retailers are asking about?

Carl Miller: Most retailers start with questions around alternative payments. They ask which alternative payments are the most important and whether or not they should work directly with the alternative payment provider or through a global PSP. Not bad questions, but usually a bit off the mark.

I usually take a step way back from that conversation and try to get a better understanding of their goals, their current setup and their resources. In a recent survey of our members, we found that middle market retailers have a 23-percent higher credit card decline rate than the leaders in the space and, on average, pay 60 percent more for processing costs. This is due in part to their lack of resources and experience. So, I would suggest all middle market retailers doing less than $50 million in global business focus on optimizing their credit card contracts and the process flow and, depending on the countries they are in, settle on a few mandatory alternative payments. Are there any issues or areas you feel retailers need to work on and what are some major blind spots that keep coming up again and again?

CM: Yes. There is a lack of attention and expertise when it comes to money management. To me, this includes understanding how currency fluctuation can affect pricing and marketing strategies, currency management and reporting.  In our survey we found that 53 percent of smaller companies have no visibility as to what their payment providers are charging them for FX or how the rate is determined, whereas 41 percent of larger companies have no idea. This is a big deal. Similarly, about a third did not take into account currency fluctuation when evaluating marketing spend. When it comes to global processing, money management is the biggest missed opportunity to have an impact on a retailer’s business. They need to have expert clarity around currency movements and controls to realize optimal profit (like the big players do). Are there any misconceptions when it comes to global payments?

CM: A common misconception is that global payments are static. Much of the data out there is either years old or isn’t relevant to retailers. I recently read an article in the Wall Street Journal about the battle between Alipay and WeChat (owned by Tencent). In it, they shared a graph from 2015 in which WeChat had 15 percent of the wallet share in China. I was in Shanghai a few months ago and everyone I asked was using WeChat Pay for 60-to-85 percent of their payments. That is major disruption in one of the largest consumer markets in the world that I believe is being completely under-reported. There are, of course, much more subtle examples, but I would go back to my comments about money management. Currencies move a lot and global payments is ultimately about money management. Cards and alternative payments are merely the simple rails. The expert players know how to pack and unpack what is going on over the rails to maximize efficiency. Where is the most opportunity for cost savings or growth?

CM: For most retailers, it is to (1) realize the benefits of in-country credit card processing where they will have much higher approval rates and massive savings on processing fees and (2) invest in people to provide expert money management. Are there are any countries that are more challenging than others?

CM: I always start with a few simple questions for retailers. How easy is it to get your product in and your money out? We need to look outside the payments silo to address this question. If payments are straightforward but you can’t get your product in the country or it is extremely challenging to acquire customers, then you are in a losing state. Taking all things into consideration, the most challenging countries include Argentina, India, Russia and Indonesia. What are the top alternative payments that retailers should look at? Any that they shouldn’t?

CM: The most common alternative payment methods I see merchants using are Paypal, iDeal in the Netherlands, Sofort in Germany, Boleto in Brazil, Alipay and WeChat in China. Almost everything else is a phase-2 conversation for most companies. Before implementing an alternative payment, it is very important to know whether or not they are optimized and relative to retailers. What are the leaders in the space doing that others may not have the resources to do? 

CM: The leaders, like Amazon and others, already have entities in many of the countries they conduct business in, so they have the advantages already laid out in regards to in-country processing. They also have treasury and reporting experts that have advanced knowledge around global money management. The good news is that there are service providers that can help expedite in-country processing and money management for middle market retailers.

Overall, it is key that your global team has a good understanding of how global payments work and what steps can be taken to optimize the consumer experience and the merchant’s profitability. The GRIN specializes in working with retailers on their global journey by tapping into our community of experts and retailers that have already taken the journey and made the mistakes that others are about to.

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