How Payment Methods Differ Across Countries

by Justin K. on

Man holding credit card

Credit cards may be the most popular form of online payment worldwide, but different countries have different payment method preferences. For example, Argentina's most popular online payment methods generate a voucher that can be paid offline in cash, while shoppers in the Netherlands commonly use direct online transfers from their bank accounts.

Let's take a look at payment processing differences between countries, how to prioritize your audience, and how to test and ensure that everything works.

How Payments Work

There are over 7.5 billion people in the world and just 325 million of them live in the United States. Despite a large global market opportunity, only one percent of the 30 million companies in the U.S. sell across borders. International sales can help increase and diversify revenue — and it's easier than you might think to get started.

Payment processing is one of the most important components of ecommerce. While you're probably familiar with accepting domestic credit cards, many international transactions either involve cross-border fees or use third-party payment processors. The good news is that both options are relatively straightforward to understand and implement.

Cross-Border Fees

Most payment processing fees stem from credit card interchange rates that are set by the major credit card brands. In most cases, an ecommerce shop owner has a merchant account that charges interchange rates plus a margin on each transaction. These rates vary based on a business' location and the currencies that are involved in each transaction.

There are typically two extra fees that are assessed for international transactions:

  • Domestic Cross-Border Fee: The fee incurred when a transaction occurs in the business' registered country, but the issuing bank is located in another country.

  • Foreign Cross-Border Fee: The fee incurred when a transaction is processed in a currency other than U.S. dollars.

These extra fees are added to the interchange rate charged to the merchant account, but they usually flow down to the ecommerce shop owner. It's important to keep these extra fees in mind when setting prices on international goods and services. You may want to adjust non-U.S. dollar prices or foreign shipping addresses to account for these higher fees.

Local Payment Methods

Preferred payment methods differ between countries. When selling across borders, it's important to determine what payment methods to offer in order to maximize conversion rates. Many customers are willing to compromise on a lot — but not payment methods — and you should have as little friction as possible in your checkout process.

Cash Voucher
Example of Cash Voucher Payments - Source: Ebanx

Some examples of unique payment methods include:

  • Canada and Mexico's second most popular payment method is PayPal, which is less common in the United States.

  • Alipay, Tenpay, and UnionPay are three payment methods that are common in China's growing consumer market.

  • German shoppers prefer to pay via invoice or using bank-to-bank platforms, like GiroPay and Sofort.

  • Argentina's most popular online payment methods generate a voucher that can be paid offline in cash.

Credit cards may be the most common global form of payment, but they aren't necessarily the preferred form of payment in many countries. If you want to maximize conversion rates, it's important to ensure you're offering the payment methods that shoppers prefer — else they may look to buy elsewhere.

Supporting Global Payments

Many payment gateways support cross-border payments, including multiple currencies and alternative payment methods. If you're already using one of these gateways, you can usually add support with a simple add-on or by applying for an account in the appropriate country. There may be little or no changes that need to be made on a technical level.

If your payment gateway does not offer options, there are several companies that offer a la carte local payments and do not require you to switch your merchant account. The most popular examples are PayPal and Stripe. The addition of these a la carte payment methods may require some changes to your ecommerce platform to support.

It's equally important to ensure that you're showing the right payment processors to the right audience. For example, you shouldn't offer Alipay to anyone outside of China and you may want to customize the payment dropdown menus to order the payments by popularity within a given country. These small changes can make a big difference in conversions.

Testing That Everything Works

Many ecommerce shops use manual quality assurance testing to ensure that everything works. For example, a QA engineer may simulate making a purchase to ensure that the checkout process works or that tax calculations are correct. Larger ecommerce shops may automate these tests using browser automation tools like Selenium that run through many tests at a time.

The addition of international transactions complicates both of these processes:

  • Manual testers need to find a proxy server that supports the locations that they'd like to test. Many of these servers are unreliable and switching between countries is impractical.

  • Test automation suites must incorporate proxy servers into their scripting, while any availability issues could cause the entire test suite to fail for no good reason.

WonderProxy helps solve both of these problems.

Manual testers can use our Switcher extension to easily switch between countries. In addition to changing the IP address, the extension supports browser-based location testing to ensure that any browser settings are taken into account. It's the most accurate way for manual testers to ensure that everything is working while minimizing their time spent testing.

Test automation engineers can use the same network of about 250 servers across more than 80 countries to add proxy servers to their browser automation scripts. Thanks to built-in integration with SauceLabs, it's easier than ever to build and run location-based test scripts within your continuous integration environment.

Explore WonderProxy's plans today to learn more!

The Bottom Line

Credit cards are the most popular payment method worldwide, but that doesn't mean that they're ideal for every customer. In fact, credit cards aren't even in the top three most popular payment methods in some countries. It's important to understand these dynamics and support alternative payment methods when selling products or services around the world.

The good news is that many gateways support international payment methods out of the box and a la carte payment providers can help fill any voids. When building these payment methods into your website, you should build and test location awareness to offer the most relevant options to your customers and maximize your conversion rates.