In a global economy with increasing cross-border transactions, businesses that interact with consumers based on their currencies of choice can stand out in a crowded marketplace.
The opportunities are clear. McKinsey & Company has predicted the number of annual cross-border transactions will continue to rise, reaching 6 trillion in 2022.
In addition, COVID-19 has had a tremendous effect on consumer behavior, accelerating digital commerce adoption across geographies and demographics. In the U.S. alone, eMarketer has estimated, nearly 5 million additional consumers aged 45 and older will transact online by the end of 2020, a 5.8 percent increase from 2019.
As businesses consider how to address a growing online consumer base through e-commerce channels, it has become increasingly important to account for additional cross-border volume. That includes managing the costs associated with cross-border transactions, allowing customers to shop and pay in the currency they prefer, and accurately communicating the cost of goods and services.
Providing transparency and convenience during the purchasing process can give businesses the competitive edge they need in an increasingly globalized economy.
Improving Cross-Border Buying Experiences
Use of indicative pricing, in which a seller provides a currency and amount that is an estimate rather than a firm price, is on the rise. That approach can limit transparency, resulting in customer service problems, chargebacks and disputes.
Take, for example, a consumer from the United Kingdom purchasing a bedspread online from a merchant in India. If the merchant presents the cost of the bedspread in Indian rupees, the consumer might not know the actual cost in pounds sterling. Even if the merchant presents an approximate currency-exchange rate, full transparency still doesn't exist.
A worse-than-expected exchange rate, coupled with additional conversion fees, can make the price in pounds more than what the customer actually wanted to spend.
Eliminating Friction in a Global Economy
It might sound basic, but communicating to a buyer exactly how much goods and services will cost is pivotal to creating a positive consumer experience, generating more loyalty among customers and reducing disputed transactions. In simple terms, currency is the language of commerce.
The evidence is clear that more consumers are making online purchases across borders. Providing transparency and convenience during the purchasing process can give businesses the competitive edge they need in an increasingly globalized economy.