How digital nomads can process payments overseas
U.S. entrepreneurs living overseas have multiple options, including PayPal, Stripe and other services
"Your Business Credit" columnist, entrepreneurship expert and blogger
“Digital nomads” are increasingly launching startups, such as internet stores, that they can operate while traveling the world. The challenge? It’s sometimes tricky to process credit card transactions when you are working from a remote location and your customers are all over the globe.
“Cross-border transactions are prone to declines and higher fees, and consumers incur additional bank charges for currency conversion,” says Christina Camacho, CEO of Current Payment Solutions in Miami.
It also can be hard to access the money you’ve been paid. If you are able to process a transaction, the bank usually will be willing to deposit the money in a bank account only in the country where your bank account is set up, rather than where you are physically at the moment.
So how do you nail down credit card processing so you can enjoy your travels? The key is understanding how your potential clients will want to pay you and then figuring out how to accept those payments in a way that is cost-effective and convenient.
Check alternative payment networks
Start by doing some market research into the markets where you plan to sell. Although Americans tend to gravitate to American Express, Mastercard, Visa and Discover, payment methods such as the UnionPay credit card and the Visa Electron debit card are popular overseas.
In some countries, your target customers may prefer to pay through a digital wallet. PayPal is one of the most popular.
“PayPal offers a huge amount of convenience and protection,” says entrepreneur Jase Rodley, principal of Otium Boutique, which provides digital marketing services to boutique hotels. Rodley, who is from Australia, currently runs his business from Andorra, which is a small principality in Europe, where he has found the cost of living is much lower than Down Under.
PayPal is available in more than 200 countries and supports 25 currencies. However, some merchants balk at the processing fees. For a transaction outside the country, PayPal charges 4.4 percent plus a fixed fee based on the currency.
“From a business owner’s point of view, the commissions from PayPal can be huge,” says Rodley.
Stripe, a similar service, is also popular among digital nomads. Stripe is supported in 25 countries. Stripe charges 2.9 percent plus 25 cents for an international transaction and may add a currency conversion fee. Merchants can use the dashboard in their account to determine what the conversion fee will be.
Merchant accounts, payment gateways
These payment services alone may not be the best fit if you do a high volume of international credit card transactions. You will probably need a merchant account with a provider that serves international markets frequently. Merchant account providers that serve merchants who do business internationally include Braintree Payment Solutions (owned by PayPal), Durango Merchant Services, 2Checkout and ProPay.
“The best practice for a digital nomad to process international payments is to work with a payment processing partner that has long-standing relationships with banking partners globally,” Jared Ronski, co-founder of the payment processing firm MerchACT, said in an email. “It opens up many options in terms of finding the appropriate merchant account for the merchant’s online payment processing needs, and it provides a ‘partner’ relationship whereby the processor can assist with other important factors, like finding the right gateway.”
A payment gateway is an e-commerce service that processes credit card payments for merchants. Gateways move information from a payment portal to a bank.
“Choosing the right payment gateway can be integral to international success,” Ronski said. “The more robust the gateway, the easier it is to automate and streamline currency conversion, accept multiple currencies and card brands, and to guard against online fraud without losing legitimate sales.”
Authorize.Net is one example of a payment gateway that has significant experience in processing international transactions. It serves businesses based in the U.S., Canada, the U.K., Europe and Australia.
Camacho’s merchant processing company, Current Payment Solutions, caters to merchants who do business in a variety of countries. Through its payment gateway, it offers merchants the ability to process payments in 75 countries, enabling them to bill their customers in the customer’s local currencies.
“If you were selling to Europe, you would bill in euros versus U.S. dollars,” says Camacho. This prevents cross-border fees. Her customers pay monthly fees and interchange-plus pricing (the interchange rate plus a markup). The total amount the merchant will pay is disclosed at the time of the transaction, she says.
Convenience, cost and time
Sometimes, even with the right merchant processor, accepting credit card payments for international transactions isn’t worth it.
“Usually there is a convenience factor, a cost factor and a time factor,” says Rodley. “Every business needs to make that choice for themselves.”
Requesting a wire transfer from your customer’s bank to your own is often the best option in these cases. “It’s a clunky old system, but it’s secure,” says Rodley.
Typically, Rodley ends up paying $30 in fees to accept the wire transfer; his customer must pay a small fee at his or her bank, too. However, for a substantial-sized transaction, that fixed $30 he pays would be less than a credit card fee.
Credit card swipe fees on domestic transactions range from about 1.5 percent for an ordinary card to 3 percent or more for premium rewards cards but will vary based on factors, such as the volume of transactions a merchant processes, according to the National Retail Federation.
Swipe fees may be more expensive if you’re operating overseas. Rodley says he has encountered fees in Asia of 3.9 percent, which can be a deterrent.
That said, Rodley finds that there are some cases in which credit card payments, even at high fees, make sense. Sometimes, getting paid quickly improves the cash flow of the business so much that it trumps the fees he would pay.
For instance, if a client has signed a contract to pay him $10,000 per month, they will probably only want to do one wire transfer a month, because of the hassle factor. If that payment is suddenly late, it could leave Rodley in a cash crunch.
To avoid that, he might suggest setting up a weekly recurring payment of $2,500 by credit card. He would have to pay the processing fees, but it would be worth it to avoid running short of cash. “Credit cards are much more convenient for me – and the client as well,” he says.
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