Don’t Shy Away From European E-Commerce Customers, Partner Smartly Instead
In addition, U.S. online retailers are hesitant to accept European online card payments because of the high international exchange fees associated with processing foreign cards.
European vs. Domestic: Acquiring Bank Partnerships is Your Golden Key
Should U.S. retailers stay away from accepting European online payments because of the fear of fraud and high international fees? Absolutely not, as the benefits of this untapped market is priceless. For example, in the U.K. alone, $950 million worth of goods is exported annually from U.S. retailers. However, retailers need to be smart and figure out solutions to overcome this obstacle. One of the most effective solutions is to partner with European vs. American acquiring banks that have both the legal and regulatory rights to process online payments within the EU.
An acquiring bank is a bank or financial institution that has the power to process credit or debit card (e.g., MasterCard or Visa) payments for products and/or services for a merchant.
In the majority of cases, U.S. online merchants’ acquiring banks will typically be one of the many national banks across the country. However, in order to legally conduct e-commerce business within Europe and the U.K., an acquiring bank must have a European license from the Payment Services Directive (PSD) created by the European Commission. Most domestic acquiring banks don't have this license. A recent study shows that over 44 percent of surveyed merchants don't know whether the independent sales organization who handles their payments is affiliated with their acquiring bank in the foreign countries they service. This is especially true for U.S. merchants.
A European bank acquirer that has the jurisdiction to process within the EU will automatically be able to treat that particular transaction as domestic (within a country) or regional (between EU countries) rather than international (between Europe and the U.S.). The benefit for the merchant is that the card processing fees for both domestic and regional are significantly lower than international fees. In addition, with a European bank acquirer, the merchant won't have to pay dynamic currency conversion costs that are required when conducting business within the U.S.
