There are many factors that affect the choice of cross-border payment methods, mainly the following.
(I) Popularity and coverage of cross-border payment methods
The popularity and coverage of cross-border payment methods are the basis and premise for choosing cross-border payment methods. The popularity of different cross-border payment methods such as credit card payment, cash on delivery, and third-party payment platforms varies in different markets around the world, and the geographical coverage and business coverage of different cross-border payment methods are also different. The choice of cross-border payment methods will also be different for a certain market or a certain type of market. In developed countries such as Europe and the United States, the financial environment is relatively mature, and e-commerce development and payment technology are also relatively mature. Credit card payment and third-party payment have a high popularity and coverage, becoming the preferred cross-border payment method in the cross-border e-commerce environment. In Africa, Latin America, Southeast Asia and other regions, the financial environment is relatively backward and the popularity of credit cards is low. Credit card payment, PayPal and other third-party payment tools are generally not the first choice, and cash on delivery is a more commonly used cross-border payment method.
(II) Preferences of transaction subjects
In cross-border e-commerce transactions, there are situations where different cross-border payment methods are caused by different payment habits, preferences and macroeconomic environment factors of the target consumer groups. This is the focus of attention when engaging in cross-border e-commerce activities and is also an important factor affecting the choice of cross-border payment methods. For example, in the Middle East and Latin America, mobile payment has developed rapidly, significantly higher than mature markets such as Europe and the United States, and has become an important cross-border payment method. In developing markets such as Africa, Russia, and India, consumers lack trust in electronic payment tools, and most consumers prefer to use cash on delivery, especially cash on delivery.
(III) Cost of using cross-border payment methods
Cross-border e-commerce sellers have much more difficulty in collecting payment than domestic e-commerce sellers. Difficulties in overseas fund settlement, slow turnover, high withdrawal fees, and exchange rate fluctuation risks are all important issues that restrict the collection of cross-border e-commerce payment. The cost of using cross-border payment methods has become an important factor affecting the choice of cross-border payment methods. The cost of using includes time cost and capital cost, and the capital cost includes transaction fees and exchange rate costs. The transaction fees of different payment methods are different, and a comprehensive comparison is required.
(IV) Security of cross-border payment funds
The risks of cross-border payment are mainly divided into two categories: one is the transaction risk caused by non-compliant transactions of third-party payment institutions themselves, and the other is the transaction risk encountered by users.
(V) Stability of cross-border payment channels
The stability of cross-border payment channels is one of the factors that should be considered when choosing cross-border payment methods. For example, some payment channels allow transactions of counterfeit brands or contraband. In the long run, their business licenses may be revoked by regulatory agencies, causing significant losses to users. In addition, the payment channel’s success rate or rejection rate should also be considered. Due to the lack of capabilities of some channels, the success rate of payment is very low, causing users to miss a large number of transaction opportunities and causing unnecessary losses.
In addition, the current popular credit card channel payment methods can be roughly divided into payment by password and payment without password. Payment by password generally requires verification and support from multiple parties such as the issuing bank and the acquiring bank. The failure rate of successful authorization is relatively high, especially in countries such as the United States that are accustomed to payment without password. The authorization failure rate can be as high as 50%. In order to reduce the authorization failure rate and improve the user’s payment experience, most cross-border e-commerce companies tend to use password-free payment. Users only need to enter the card number, expiration date and CVV2 (a number printed in the signature area of Visa/Master Card) to complete the payment process. This has increased the payment success rate, but also greatly facilitated transaction fraud by criminals.
In short, when choosing a cross-border payment method, you should consider it comprehensively and make a comprehensive comparison.