Ecommerce payments for Cross-border ecommerce.
Expanding into international markets requires a robust payment infrastructure. Cardflo provides the tools necessary to navigate the complexities of cross-border transactions, ensuring seamless and secure payment processing for your global customers.
Optimise your international sales with our platform.
- Industry
- Cross-border ecommerce
- Category
- Ecommerce
- Cardflo support
- Yes
The overview
Cross-border ecommerce involves the sale of goods or services to customers located in a different jurisdiction from the merchant. In the payments stack, this process requires coordination between the merchant, an international gateway, and an acquirer with the capacity to process foreign transactions.
Navigating this environment involves managing foreign exchange risk, complying with regional regulations such as PSD2 in Europe, and addressing the technical requirements of various card schemes.
To maintain conversion rates, merchants often rely on local acquiring, where the transaction is processed by a bank in the customer's home region to avoid the high decline rates and fees associated with inter-regional processing.
Effective cross-border strategies also necessitate the integration of alternative payment methods that reflect local consumer behaviour, as well as robust fraud prevention tools to manage the increased risks inherent in international card-not-present transactions.
Proper implementation of these mechanics can minimise the impact of interchange differentials and scheme fee markups across diverse geographical markets.
How it works
Currency selection and presentation
The customer selects their preferred currency at checkout. The system identifies the customer's location via IP address or BIN and presents prices in a local format.
This reduces friction by ensuring the final cost is transparent before the authorisation request is sent to the issuer via the gateway.
Dynamic routing to acquirers
The payment orchestration layer identifies the optimal acquirer for the transaction based on the merchant category code, the card's country of origin, and current scheme rules.
Routing the transaction to a local acquirer within the same region as the issuer typically results in higher authorisation approval rates.
SCA and 3DS compliance
Transactions are analysed to determine if Strong Customer Authentication is required by regional laws.
If the transaction falls under PSD2 mandates, 3DS challenges are triggered to verify identity, reducing the risk of a soft decline by the issuer while managing the liability shift for the merchant.
Authorisation and FX conversion
The issuer authorises the transaction in the customer's currency. If the merchant and customer currencies differ, an exchange rate is applied.
Technical infrastructure ensures that the final settlement amount is calculated correctly, accounting for any margin, interchange fees, and international scheme fees before the funds are cleared.
Why it matters
Authorisation rate optimisation
International transactions frequently face higher refusal rates due to issuer fraud filters and technical mismatches. By utilising local acquiring and smart routing, merchants can mimic domestic transaction profiles.
This reduces the frequency of hard declines and allows for more effective retry logic, which is critical for maintaining revenue when expanding into markets with conservative risk appetites or distinct regulatory requirements.
Interchange and fee management
Cross-border transactions attract higher interchange rates and additional scheme fees compared to domestic ones. Effective categorisation of transactions and the use of regional MIDs can lead to significant cost reductions.
Understanding the difference between intra-regional and inter-regional fees allows businesses to structure their entities and payment flows in a manner that minimises the erosion of profit margins by bank charges.
Regulatory notes
PSD2 and SCA Compliance
The Payment Services Directive 2 mandates strict authentication for transactions within the European Economic Area. Merchants selling into this region from abroad must be prepared for issuers to request 3-D Secure challenges.
Failure to support these technical standards can lead to widespread declines across the EEA, as banks are legally required to refuse non-compliant transactions unless specific exemptions apply.
Scheme Cross-Border Rules
Visa and Mastercard have specific rules regarding where a merchant can legally acquire transactions. Generally, a merchant must have a physical presence or a legal entity in the region where they are using a local acquirer.
Navigating these scheme rules is essential to avoid fines or the termination of Merchant Identification Numbers due to improper circumvention of cross-border fee structures.
Use cases
Direct-to-consumer retail
A merchant based in the UK selling apparel to customers in the EU and USA. Using multiple MIDs allows for local processing to avoid high inter-regional card fees.
Digital subscription services
A SaaS provider billing global users monthly. Implementing account updater services and dunning management across various jurisdictions ensures continuity of services regardless of the cardholder's location.
Marketplace platforms
Platforms with international sellers and buyers require complex settlement logic. They may use FX tools to manage the payout process in various local currencies simultaneously.
By the numbers
This reflects the typical increase in approval rates observed when merchants switch from cross-border to local acquiring models, depending on the specific region and issuer behaviour.
An industry-standard estimate for the reduction in processing costs when moving from inter-regional to intra-regional transaction flows, depending on scheme fee structures.
The observed range of customers who abandon a checkout if their local currency or preferred alternative payment method is not available during international shopping.
Related terms
Book a scoping call to see how Cardflo would set you up.
What's included.
- Support for multi-currency processing to facilitate settlement in preferred regional denominations.
- Integration of local alternative payment methods to align with specific regional consumer preferences.
- Intelligent routing of transactions to local acquirers to maximise issuer authorisation success rates.
- Real-time fraud screening tailored to the risk profiles of specific international jurisdictions.
- Compliance with regional regulatory frameworks including PSD2 and SCA mandates across Europe.
- Implementation of network tokens to improve security and reduce the risk of cross-border declines.
- Dynamic 3DS logic to balance security requirements with the need for high conversion rates.
- Comprehensive reporting on cross-border fees and interchange markups for detailed financial analysis.
- Automated account updater services to maintain recurring billing success across global issuer networks.
- Management of mid-market FX rates to provide transparent pricing to international customers.
Talk to an acquiring specialist about your MID setup.
Common questions.
Why are authorisation rates lower for cross-border transactions than for domestic ones?
Lower authorisation rates are typically due to increased fraud flags associated with foreign card usage. Issuers often lack detailed risk data for international transactions and may trigger a hard decline to prevent potential fraud.
Additionally, technical discrepancies in how data is transmitted across different regional processing centres can cause failures. Using local acquiring, where the acquirer and issuer are in the same region, usually resolves these issues by making the transaction appear domestic, thereby bypassing many international fraud triggers.
What is the impact of PSD2 on cross-border ecommerce?
PSD2 requires Strong Customer Authentication for transactions where both the issuer and the acquirer are within the European Economic Area.
For 'one-leg out' transactions, where only one party is in the EEA, SCA is not technically mandatory but is often requested by issuers to manage risk.
Merchants must ensure their gateway can handle these requirements dynamically through 3DS to avoid soft declines by European banks, which now frequently enforce SCA for security.
How do interchange fees vary in cross-border payments?
Interchange fees are often capped by regulation for domestic or intra-regional transactions, such as within the EEA. However, inter-regional transactions, like a US-issued card used at a UK merchant, do not benefit from these caps and often incur significantly higher rates.
Furthermore, card schemes apply additional cross-border fees and currency conversion fees. Businesses can mitigate these costs by establishing local entities and using local acquiring partners to keep transactions within a single region.
Can alternative payment methods improve cross-border conversion?
Yes, because credit card penetration varies globally. In many markets, such as the Netherlands with iDEAL or Brazil with Pix, local alternative payment methods (APMs) are preferred over traditional card schemes.
Offering these methods at checkout removes the barrier of requiring an international credit card and aligns with local consumer behaviour, which is often essential for achieving high conversion rates in non-Western markets where card usage is less prevalent.
What is the role of a Merchant Category Code in international sales?
The MCC helps issuers identify the type of business making the charge. In cross-border scenarios, certain MCCs are flagged as high risk by specific regions or banks.
Ensuring that your MCC is accurately reported and recognised by the international acquirer is vital for maintaining a clean processing history and avoiding unnecessary scrutiny from scheme fraud monitoring programmes that could lead to higher reserve requirements.
How does currency volatility affect cross-border settlement?
Currency volatility can lead to discrepancies between the amount authorised and the final settled amount. To manage this, merchants can use fixed-rate FX windows or settle in the same currency as the purchase.
If a merchant settles in their base currency but sells in a foreign currency, they are exposed to exchange rate fluctuations between the time of authorisation and settlement. Using multi-currency accounts can help hold funds until rates are favourable.
Related industries.
Ready for velocity?
Tell us about your business. We'll match you with the right acquiring partners and the right route, typically inside a week.