Imagine this… you’re trying to find a very specific product that you really want to buy for a loved one, and when you find it online, the price is listed as €200 or ¥1,560. How much is that worth in dollars? And how much extra will you have to pay for the currency conversion? This situation might be enough for you to leave the website and look for the item somewhere else. It happens all the time, and yet, it doesn’t have to.
Your ideal customer is everywhere: not just the US and Canada. Make sure you can give them what they want and speak to them in a language they understand, especially when it comes to their money. A top reason that big brands continue to grow and thrive internationally is their keen ability to assimilate to different cultures around the world. They understand how to capitalize on global markets and recognize that conversation starts with creating the right price point that directly correlates to the buyers’ wallet. While it may seem obvious that customers prefer to pay in local currency, in reality there are a myriad of complex factors at play when selling cross-border online.
Customizing your website to the customer’s preferences
Some of the recurring questions we often get asked are: “Do I need to change my website?” “How do I create a user experience that is international friendly?” And the most important question, “How do I price my products and services in a foreign currency?”
Your website is crucial. Failing to capture a customer’s attention, especially during the payment, will drastically reduce your conversion. For example, if you are targeting international customers, the option to change the pricing to their local currency must be available and easily accessible. IP geolocation is a great tool but it should never be used to dictate shopping currency. Country flags and well labelled dropdown menus in conspicuous locations work extremely well. Remember, your customer knows best, so let them choose the currency they prefer.
For sure, it can get tricky to display all products and services in the customers’ chosen currency. You’ll need a reliable payments partner to share insights into foreign exchange (FX) methodology and currency conversion mechanics to effectively create seamless international pricing. It’s well worth the effort to be able to talk money with customers in a language that resonates and ultimately leads to higher conversion rates.
In the realm of FX and international eCommerce, a valuable payments partner is one that willingly provides straightforward and candid information around currency conversion pricing. As a merchant, if you cannot reliably site your all-in FX price, the base rate source and precise details for conversion timing, it’s time to consider other options.
The big three: transparency, exchange rates and conversion timing
A major point of contention within the payments industry is the lack of transparency into FX pricing. Generally speaking, payment providers communicate only regarding their rates for FX conversion and they typically hide their methodology and markups deep in the details of their contracts. It is far from optimal for online merchants and prevents the open conversations that lead to intelligent FX strategies.
Adding to the complexity, is the fact that the FX market is massively under-regulated and has no centralized governing body. As a result, it is nearly impossible to nail down an “official” exchange rate. This ambiguity gives payment providers leeway when it comes to defining the base rate used for conversion of payments. By playing with this piece of the equation, payment providers can erode potential profit margins and risk making products more expensive to international consumers.
Conversion timing is arguably the most important factor in FX. A lack of understanding as to when funds will be converted opens a black hole that leaves merchants unable to effectively create international pricing. Merchants also become increasingly vulnerable to FX market fluctuations.
FX and the future
There is no question that a globalized economy is great for consumers. Increased competition means they enjoy better prices and more available options. For merchants, globalization means access to new markets and more customers, but without a clear strategy, it can also lead to compressed profit margins. If used wisely, FX and currency strategy can be your secret weapon to beating back the opposition and capitalizing on new and key markets around the world. If you would like to learn more about our FX strategy, drop us line.
Michael Bilotta is the Head of Foreign Exchange North America and LATAM at Ingenico ePayments