Growth in the travel sector depends on being able to take payments from customers wherever they are in the world. However, cross-border payments come with fees and compliance requirements that, left unoptimized, cost you a portion of every booking.
In part one of our cross-border payment series, we explored how cross-border payments work. Now it's time to tackle cross-border payment fees and compliance requirements. In this article, we cover:
- What cross-border payment fees are
- How to reduce cross-border payment fees
- How to manage cross-border payment compliance
- How Repayd simplifies cross-border payment compliance for travel providers
Key Takeaways
- Cross-border payments, left unoptimized, chip away at your bottom line. A single booking can incur various fees.
- Local acquiring cuts fees by making international payments look domestic, reducing costs and boosting payment approval rates.
- Multi-currency pricing converts at checkout, moving FX exposure to the customer and allowing you to settle in your favored currency.
- PCI DSS, PSD2 and SCA, AML and KYC and card scheme monitoring all carry penalties for non-compliance.
- A Repayd travel merchant account reduces the costs and eases the compliance burden that comes with cross-border payments.
What are Cross-Border Payment Fees?
Cross-border payment fees apply whenever a business processes a transaction between two countries. For travel providers, that means any time a customer pays with a card issued by a foreign bank or a booking involves converting one currency into another. Here are the most common cross-border payment fees:
Foreign Transaction Fee
Financial institutions charge a foreign transaction fee when they process a payment through a foreign bank or currency, and it usually comes to between 1.3% and 3.5% of the total transaction value.
Currency Conversion Fee
Currency conversion fees are charged whenever one currency is exchanged for another. They are charged as a flat amount or a percentage of a transaction, covering the cost of converting funds (along with the risk that comes with changing exchange rates). FX fees are typically charged at 1% to 3% of the transaction value.
Wire Transfer Fee
If you pay suppliers via bank transfer, you'll be charged a wire transfer fee. Cross-border wire transfer fees generally cost between $35 and $50 per transfer – this covers the cost of moving money across international banking networks and meeting the legal checks that come with it.
Card Network Cross-Border Assessment Fees
A cross-border assessment fee is a specific type of scheme fee charged by card networks when your customer's card provider operates in a different country than your acquiring bank. It applies even if both banks use the same currency. These fees range from 0.4% to 1.4% of the total transaction amount and cover the risk and regulatory complexity that come with processing international transactions.
How to Reduce Cross-Border Payment Costs
Accepting international payments doesn't have to come with sky-high fees and unpredictable conversion costs. With Repayd, you can reduce fees, increase conversion and give customers a familiar payment experience that encourages them to complete the checkout process. Here's how:
Use Local Acquiring
Cross-border card transactions tend to cost more because the customer's issuing bank and your acquiring bank are located in different regions – that mismatch comes with cross-border interchange fees, extra scheme costs and a higher chance of payment declines.
Local acquiring solves this problem by routing a payment through an acquirer in the customer's own country, meaning the transaction is treated as domestic. This lowers interchange, reduces scheme fees and boosts payment approval rates.
Offer Local Payment Methods
Customers prefer to pay with methods they already know and trust. Giving them limited payment options creates mistrust, friction and ultimately leads to fewer bookings. Instead, offer local payments to increase conversion, reduce card scheme fees and avoid unpredictable FX costs that eat into your margin.
Convert Currency at the Right Stage of the Payment Process
You don't need to time the market or batch large conversions – you just need to convert at the right moment. Multi-currency pricing allows you to charge customers in their own currency while you receive settlement in your currency. The conversion happens at checkout, rather than after it.
This approach is cost-efficient because the FX exposure moves to the customer, and the markup they pay is typically lower than what the card schemes would charge if it came to them. You receive settlement in a predictable currency and your customer pays in a currency they recognize.
Match Currency and Acquiring Regions
Issuing banks are more likely to approve a transaction when the currency matches the customer's local currency and the acquirer is located in the same region. Intelligent routing reads each card's BIN to identify where the card was issued, then sends the payment through the acquiring partner best placed to process it as a local transaction. This boosts authorization rates and reduces false declines that lose you international bookings.
How to Manage Cross-Border Payment Compliance
Accepting cross-border payments as a travel provider is vital to your bottom line, but it comes with a raft of compliance requirements:
PCI DSS
The Payment Card Industry Data Security Standard, which was established by five major credit card providers in 2004, governs how you store, process and transmit card data. The level of scrutiny you'll experience scales directly with your transaction volume. If you process less than six million transactions a year, you are required to complete a Self-Assessment Questionnaire (SAQ), an Attestation of Compliance (AOC) and a quarterly external vulnerability scan by an Approved Scanning Vendor (ASV).
Alternatively, if you process more than six million transactions a year, you'll need cardholder security to be independently verified through an annual on-site audit, where you'll need to pass a Report on Compliance (ROC) conducted by a Qualified Security Assessor (QSA). The practicalities of meeting these requirements falls to your payment provider, so choosing a travel merchant account that is fully PCI DSS compliant keeps your customers' sensitive card data secure and ensures your business stays out of regulatory hot water.
PSD2 and Strong Customer Authentication
The Second Payment Services Directive (PSD2) requires Strong Customer Authentication (SCA), which means two-factor authentication on electronic payments across the UK and EU. It's delivered through 3D Secure 2, which prompts extra authentication checks at the point of purchase to confirm the cardholder is who they say they are. Without this level of authentication, travel businesses risk more payment failures, full liability for fraudulent chargebacks and potential legal non-compliance fines.
PSD3
PSD3 is PSD2's eventual successor, and it aims to further tighten SCA and regulatory oversight to reduce payment fraud and give consumers stronger online purchase protection. It's not a legal requirement currently, but a proposed EU legislative framework that would impose stricter fraud rules. A payment setup that aligns with today's rules may fall short once PSD3 comes into effect, so it's vital to work with a forward-thinking provider that is prepared for the regulatory changes.
Fraud Monitoring
Fraud in the travel industry is on the rise, with a 122% increase in attack volume since 2023. In response, travel providers are using fraud detection and prevention tools to defend against fraudsters. Many rely on real-time fraud monitoring systems that screen transactions as they happen, checking signals like transaction velocity and location to flag anything suspicious.
AML and KYC
Anti-Money Laundering (AML) and Know Your Customer (KYC) rules apply in most countries globally, requiring you to verify who you are dealing with and to monitor transactions for potential suspicious activity. Fall short on AML and KYC checks and you run the risk of large fines or, in the most serious cases, prosecution.
Card Scheme Monitoring
Card schemes track the fraud and dispute rates of their merchants. Visa's Acquirer Monitoring Program (VAMP) and Mastercard's Excessive Chargeback Program (ECP) encourage merchants to keep fraud and chargeback ratios low, otherwise they face automatic monthly fines, escalating per-dispute fees or, in the worst cases, losing their merchant account entirely.
How Repayd Simplifies Cross-Border Payment Compliance
Meeting all of these compliance requirements might seem intimidating at first, but Repayd is here to help. We're PCI DSS Level 1 certified, meaning we safely store, process and transmit customer card data. On top of that is 3D Secure, the authentication step that confirms the cardholder's identity at checkout, and tokenization, which replaces card details with a token, rendering them useless to criminals.
Repayd also operates within AML and KYC standards worldwide to keep your business compliant across jurisdictions, and that stops you having to track rules on a market-by-market basis. Finally, our fraud detection and prevention tools use rule-based filters and machine learning to identify and stop fraudulent activity before it impacts you and your customers.
Make sure to read part one of this series, where we cover how cross-border travel payments work step by step.
Do you want to stay compliant while reducing cross-border payment fees? Talk to the Repayd team to find out how we can help you keep more of each booking.
