Why Global Payments Fail at Checkout

Summary:

Global payments fail more often than domestic payments because of additional perceived risk.
Localizing your payments and using local acquiring reduce checkout abandonment and increase the likelihood of payment success.
Intelligent Payment Routing reduces payment failure by using AI and transaction analytics to evaluate several variables, including card region, to then direct the payment to the acquiring bank with the highest approval probability.

Businesses lose nearly $120 billion to payment failure globally each year, according to Accuity. But this amount compounds in additional lost revenue when customers abandon purchases and find other suppliers for that and future sales.

Payment failure occurs when a transaction is declined or abandoned before completion, costing businesses not just the immediate sale, but future revenue from that customer.

Global payments fail primarily because cross-border transactions are perceived as higher risk by issuing banks, triggering declines and higher fees that domestic transactions don’t face. If you sell globally and want to protect your revenue, you need to:

Understand why cross-border transactions are declined at higher rates than domestic transactions
Localize your checkout currency and payment methods to match each customer’s region
Use Intelligent Payment Routing to direct each transaction to the highest-approval bank

Why Do Cross-Border Payments Fail More Often Than Domestic?

When you sell to customers in another country, the transaction could be processed as cross-border. A cross-border payment occurs when the acquiring bank and the issuing bank are in different regions.

When banks are presented with cross-border payments, they perceive them to be riskier than domestic transactions, leading to greater likelihood of the transactions being declined.

When a cross-border payment isn’t declined, it is subject to higher fees because of the perceived risk. Businesses can expect to pay about 2% more on top of regular payment processing costs. These fees come in the form of “interchange fees,” “assessment fees” or “scheme fees,” and they can take a significant cut from each cross-border transaction your shoppers complete.

How Does Payment Localization Reduce Payment Failure?

Localizing your payments reduces checkout abandonment and the likelihood of payment failure. Localization can play a role both on the front end and back end of payments.

On the Front End: A Localized Checkout for Global Customers

Offering a checkout specific to your customers’ locations builds trust, eliminates confusion and makes it easier for them to pay.

When you sell globally, you should always present in the customers’ local currency and offer local payment methods. Remember: the currency you present in can differ from the settlement currency, or the currency in which you are paid out.

While presenting and settling in different currencies can incur FX fees, presenting in local currencies leads to a 12% increase in sales, according to BlueSnap data. This increase in sales more than makes up for those additional fees.

However, if your business has legal entities in the regions where you sell, you can set up your back end to eliminate unnecessary fees.

On the Back End: Local Acquiring Improves Authorization Rates & Lowers Costs

Local acquiring directly combats one of the most common causes of international payment failure. When you use local acquiring for your payments, it processes cross-border payments as if they were local.

If you have a legal entity where your customers are, you can use a local bank for your acquiring. Then both the customer’s issuing bank and your acquiring bank will be in the same region, and the transaction is no longer seen as cross-border. The transaction is no longer perceived to be risky and is no longer subject to added fees.

When a business processes payments with local acquiring, they improve their authorization rates and eliminate unnecessary costs.

What Is Payment Routing and How Does It Prevent Payment Failure?

With the right global payment methods and local acquiring in place, how are you going to make sure transactions will be sent to the right banks? Payment routing.

Payment routing is the process of directing a payment transaction through a bank or service provider. While many payment service providers can only route transactions through a single, specific acquiring bank, it can cause problems when the route becomes unavailable or there’s an issue with the transaction.

But when payment service providers have access to multiple acquiring banks, they have more options for routing payments. BlueSnap, powered by Payroc, offers Intelligent Payment Routing that uses AI and transaction analytics to evaluate variables like card type, region and issuer history before selecting the acquiring bank with the highest approval probability, eliminating the likelihood of payment failure — all in milliseconds. And when your payments are international, that includes routing the transaction to a local bank whenever possible.

The Benefits of Intelligent Payment Routing

While the specifics of how Intelligent Payment Routing will direct each payment depend on each transaction’s details, here are some of the benefits your business can expect:

Improved authorization rates and increased revenue: Since payments are routed for the highest likelihood of approval, they are less likely to result in payment declines. This means more revenue hitting your business’s bottom line.
A better customer experience: Increasing a payment’s likelihood of success eliminates friction for your customers. This decreases payment failure and encourages return business.
Reduced transaction costs: By routing the payments locally, your business is no longer subject to unnecessary cross-border fees. You will avoid about 2% in additional fees for each transaction processed locally rather than cross-border.
Better insights through data: All the information associated with each transaction will make its way to your payment analytics, allowing you to use the data to fuel better payment and business decisions.

BlueSnap, Built to Improve Your International Payments

BlueSnap is a Global Payment Orchestration Platform, designed to take the complexity out of international payments and to reduce payment failure.

BlueSnap offers:

local acquiring in 50 countries, routing transactions through in-region banks to reduce declines and eliminate additional fees
the global currencies and payment methods your customers want so they can easily pay you
Intelligent Payment Routing and payment optimization tools to increase your payment success metrics

With a single connection to BlueSnap, you can sell all over the world. Plus, we support all your payment use cases and integrate with top business software, like Oracle NetSuite, SAP, BigCommerce, Sage Intacct and more, so you can easily use BlueSnap to process your payments.

If payment failure is costing your business, talk to a BlueSnap Payments Expert to see how Intelligent Payment Routing and local acquiring can improve your global sales.

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Frequently Asked Questions

What is the difference between a payment decline and checkout abandonment?

A payment decline happens after payment is submitted and then the card issuer rejects the transaction. A transaction can be rejected due to insufficient funds or because the transaction is perceived to be fraudulent.

Checkout abandonment is when the shopper decides to abandon purchase at the point of checkout. While declines are a subset of checkout abandonment, it can also be due to other points of friction, like high shipping costs or other unexpected fees encountered at checkout.

What causes payment failure in international transactions?

In international transactions, payment failure can occur because of automated fraud filters, mismatched currencies and regulatory and compliance issues:

Fraud & Risk Rules: Issuing banks may decline foreign transactions because they are considered to be higher risk. Many automated systems mistakenly flag such transactions as fraud.
Currency and Payment Method Misalignment: International payments often fail because the business does not offer buyers’ local currencies and preferred payment methods. This leads to friction and higher purchase abandonment.
Regulatory and Compliance Issues: When selling internationally, payment regulations and compliance differ by region. Failing to meet the requirements can result in declines and sometimes penalties.

Businesses can minimize payment failure in international transactions by localizing the payment experiences for their customers and taking advantage of local acquiring whenever possible.

How does Intelligent Payment Routing reduce payment failure?

Intelligent Payment Routing reduces payment failure by routing payments for the highest likelihood of approval and for the lowest cost, reducing the chance of payment failure. When the payments are cross-border, this includes routing the transaction to a local bank, in accordance with Card Brand rules.

Does offering a local currency to shoppers help increase sales?

Yes. Presenting in local currency is when a merchant charges a customer in the currency local to them. Many merchants instead charge in the currency local to their business, which has negative impacts including:

Higher cart abandonment due to the cardholder not knowing the final cost.
Higher rate of declines from the cardholders’ banks due to perceived risk.
Higher billing inquiries from cardholders confused by converted amounts on statements.
Higher chargebacks from cardholders seeing a price they didn’t agree to on their statements.

By offering local currencies to your shoppers, you decrease the likelihood of cart abandonment, declined transactions and chargebacks.

Learn More

What is local acquiring and how does it help authorization rates?

Local acquiring lets a business process cross-border payments as if they were local. That means, whenever possible based on Card Brand rules, the transaction is routed to an acquiring bank that matches the issuing bank’s region. This eliminates the perceived risk and additional fees that accompany transactions processed as cross-border. When more transactions are approved, a business’s authorization rates increase.

What’s the difference between traditional payment routing and Intelligent Payment Routing?

Traditional payment routing is a static process that connects to a single, regional acquiring bank. Even larger businesses that have access to multiple acquiring banks are limited by traditional payment routing as it always follows the same logic for every transaction. This can result in a higher number of declines.

Smart or Intelligent Payment Routing addresses these issues by identifying the most efficient route between available banks. It sends transactions for approval in the most optimal manner based on selected parameters. It is an essential payment processing feature for any business.

What are cross-border payments?

Cross-border payments, or cross-border transactions, occur when the acquiring bank and the issuing bank are in different regions. When banks process cross-border payments, they perceive them to be riskier than domestic transactions, leading to higher fees and a greater likelihood of being declined.

What is failover?

Failover is when a transaction is routed to another bank after it is initially declined. When a payment processor is connected to multiple banks within a region, depending on the decline code, it can immediately send that transaction to another bank in real time for approval.

Can BlueSnap help reduce false declines?

Yes. BlueSnap’s Intelligent Payment Routing and failover capabilities help reduce false declines by ensuring each transaction has multiple opportunities for approval. These systems use machine learning and transaction history to improve approval success.

Does BlueSnap support local acquiring?

BlueSnap offers local acquiring in 50 countries. Local acquiring provides both lower cost and higher authorization rates. To take advantage of local acquiring, merchants may use existing legal entities or choose to open legal entities in regions where BlueSnap offers local acquiring.