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You’ve worked hard to build a marketable product, make your brand recognizable, launch a great website, and create compelling product pages that attract international customers.
It’s just as important to devise a sound plan that maximizes payment options for your international buyers while minimizing the risk of online fraud.
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Managing your business for Global e-commerce.
Another payment option is PayPal, a third-party service that processes payments from customers’ credit cards and bank accounts and forwards you the money in a manner you select. PayPal has become increasingly popular among U.S. firms selling online to foreign buyers. Sellers like it because they don’t assume the risk of collecting the buyer’s payment information and because PayPal, which collects from the buyer’s bank account or credit card, essentially guarantees payment to the seller.
Before you enter into an agreement with any of these payment options, find out how each company resolves payment disputes and take that into account when making your decision. In certain instances, a credit card holder can dispute a charge weeks or even months after the seller has received payment.
You’ll also want to consider the costs associated with every payment option. Each has a unique cost structure that will be listed in written agreements.
The Culture of Online Fraud. Accepting online payment, even with established credit cards, exposes the seller to some risk. But there is some good news: The actual international e-commerce fraud rates for U.S. merchants fell from a 2008 average of 4.0 percent of total online orders to 2.0 percent in 2009. The drop can be attributed in part to firms that use various methods to safeguard against unauthorized use of credit cards.
Although the trends in online fraud are encouraging, U.S. firms need to continue to be vigilant. This is true especially in countries that used to be considered “safe” for e-commerce retailers. The U.S. Commercial Service has a long history of reports from U.S. exporters about online fraud coming from China and Nigeria, but now fraudulent activity is occurring in places where it was once rare; the U.S. Commercial Service is now receiving complaints about fraudulent activity in Singapore and the Scandinavian countries, among other previously low-risk countries
Charge backs. The possibility of incurring charge backs, the process where the card holder’s issuing bank requests a reversal of charges on behalf of the card holder, is one of the more frustrating aspects of accepting payment online. Weeks, and sometimes months, after having received payment and delivered goods, a U.S. exporter might hear from a credit-card holder or a credit-card firm that wants him to reverse a charge for various reasons, including fraudulent use of the card.Ways to Minimize the Risk of Fraud
Address-Verification System (AVS): An AVS—a system used to verify the identity of the person claiming to own the credit card that is available through your credit card processing company— can determine whether the address on a buyer’s credit-card account matches the address the buyer typed into your online order form. An AVS can check information for cardholders in Canada and the U.K., but not elsewhere.
IP Geolocation: This service that is available from various companies enables a seller to identify a prospective buyer’s geographic location (country, region, ZIP/postal code) based on the IP address of the computer being used. If the country or region of the buyer’s credit-card address doesn’t match that of the IP address, the seller can flag the order and then investigate or reject it.
Country Exclusions: If your company is small and if you’re just testing the export waters, you might not want to ship to countries where the risk of fraud is high. Just be sure that your site lists those countries; that way, prospective customers won’t waste time building an order that can’t be filled.
International Order Preparation Fees. Selling internationally is labor-intensive; shipping preparations take longer, plus you spend time adding product information to your inventory-management system. To recover those costs, a company might charge its international customers an international order preparation fee. Some companies opt for a flat fee, while others use a sliding scale or a percentage of the total order to determine the fee.
Introduction to Tariffs and Taxes. A tariff (or duty—the words are used interchangeably) is a tax levied by a government on the value of an imported product. In some instances, sales and local taxes and customs fees will also be levied. Tariffs raise the prices of imported goods, thus making them less competitive within the market of the importing country.
These tariffs and taxes can significantly raise the final price of your product, so you need to understand not only how these charges will affect sales and pricing and how to communicate these extra charges with your customers so there are no surprises during the purchasing process.
Delivery Methods: Advantages and Disadvantages
Delivery Duty Paid: For the buyer, this is the easiest option—the package arrives and the buyer doesn’t need to do anything other than open it. The seller, however, assumes a fair amount of risk. For one thing, he has to estimate what the tariffs and taxes will be when the order arrives, and charge the customer the appropriate amount. If the retailer calculates incorrectly, he might undercharge the customer and lose money (or lower his margin) on the transaction, or he might overcharge the client and risk losing business.
Delivery Duty Unpaid: Although the buyer in this scenario bears a more obvious burden—he has to pay additional fees when the package arrives—the seller might bear one, too. If the buyer didn’t realize that he’d be responsible for paying taxes/tariffs, he might refuse delivery of the package. Both scenarios cost the seller money; in the latter, the seller has to pay for return shipping.