In the dynamic world of global ecommerce, online retailers are uncovering both exciting opportunities and significant challenges. One of the biggest burdens? Understanding the true cost of international transactions.
For many, these costs are not just confusing. They’re often hidden, making it tough to stay profitable while trading across borders.
In this blog, we delve into our latest report, The real cost of international ecommerce payments, to reveal the full spectrum of fees associated with international transactions. We’ll break down each type of cost, expose unnecessary hidden fees, and offer tips for selecting the right ecommerce payment partner to fuel your ecommerce growth.
What fees are involved in international transactions?
Understanding all the fees involved when making international transactions is crucial for maintaining profitability. However, not all fees are explicit, or necessary. They may be concealed within intricate fee structures or tucked away in fine print.
Let’s start by looking at the typical fees associated with processing international transactions:
- Processing fees: Ranging from 1-6%, these fees cover the cost of facilitating online transactions. They depend on the payment provider, the locations of the merchant and consumer, the payment method, and the currencies involved.
- Authorisation fees: Many providers charge a one-off authorisation fee to verify the cardholder and allow the merchant to process the payment.
The analysis* outlined in our international ecommerce payments reportshows that processing fees can significantly eat into margins. The table below shows the typical processing and authorisation fees across five providers when a European merchant is selling to a US consumer.
Shopify stands out as the most expensive provider for international transactions, with a 3.9% fee on international card sales. In comparison, Sokin offers lower fees, such as a 1.2% domestic processing fee and more competitive transaction and authorisation charges.
*Analysis based on prices taken from payment provider websites in October 2024: https://www.paypal.com/fr/webapps/mpp/merchant-fees?locale.x=en_FR#additional-percentage-basedfee, https://www.mollie.com/fr/pricing, https://stripe.com/fr/pricing, https://www.shopify.com/pricing, https://sokin.com/business/sokin-pay-pricing/
Let’s take a look at some of the hidden fees:
- FX conversion rates: When selling internationally, receiving payments in different currencies often necessitates currency conversion or maintaining multiple external currency accounts. Some providers charge up to 3% of the transaction value to automatically convert funds to the base currency. This is on top of processing fees.
- Network payouts: This fee applies when funds are transferred from the payment network’s holding account to the merchant’s bank or settlement account. Some providers charge up to 1% for this service.
- PCI compliance: All merchants must adhere to the Payment Card Industry Data Security Standard (PCI DSS) to protect cardholder data from theft and fraud. Some providers charge an additional monthly fee for this service, while others impose a fee for non-compliance.
- Account fees: Some payment providers charge a monthly or annual membership fee for using their services.
- Early termination fees: If you end your contract before the agreed term, some providers impose a flat-rate fee.
- Minimum monthly fees: If a merchant does not reach a specified minimum processing volume each month, some providers impose a fee.
Tips to avoid unnecessary hidden fees
- Review fees structures: Look out for hidden charges to avoid costly surprises.
- Compare providers: Assess beyond just processing fees. Consider FX conversion and network payout fees.
- Regularly review statements: Check for unexpected fees.
- Prioritise transparency: Choose providers with simple, transparent pricing plans.
- Opt for multi-currency support: Select a provider that supports transactions across multiple currencies, reducing the hassle of international payments.
Why choose Sokin?
Sokin offers a comprehensive, transparent solution for international ecommerce transactions, giving ecommerce merchants significant cost savings at every step of the payment process.
Our multi-currency account structure allows businesses to collect, hold, and transact in multiple currencies, eliminating the need for third-party FX services or multiple external bank accounts. This results in faster settlement of funds and greater cash visibility, regardless of the currencies involved.
By integrating payment processing and settlement in one platform, Sokin helps online retailers avoid the time and cost involved in setting up foreign bank accounts or working with multiple payment providers. This streamlined approach allows merchants to focus on growing their business, not managing complex financial transactions.
Learn more about our Ecommerce Gateway and see how you can start saving today.