Unveiling the concealed expenses in international online trading

In the rapidly evolving landscape of cross-border commerce, the increasing mainstreamness of cross-border retail payments is a notable trend. This shift, driven by the rise of e-commerce, has significant implications for global trade. However, one complex aspect that often goes unnoticed is the impact of foreign exchange taxes on these transactions.

Cross-border transactions, whether they be payments or goods, can be affected by these taxes, which can impact the cost and efficiency of these transactions. Understanding the fees and taxes applied to cross-border payments, particularly for card payments, can be a daunting task.

These costs, including foreign exchange taxes, can significantly increase the cost of cross-border transactions. For instance, additional taxes on foreign currency exchanges can range between 1% and 35% of the cross-border transaction amount. Card issuers also apply fees on cross-border transaction fees that can be as high as 10%.

Addressing foreign exchange taxes in an efficient manner is crucial for cross-border merchants, payment processors, and card issuers. To take a significant share of e-commerce flows, these players need to be aware of local regulations and address foreign exchange taxes in an efficient way.

The implications of these taxes are not limited to the Americas. In Asia, foreign exchange taxes on cross-border transactions can vary across countries, with specific percentages. Similarly, in the Africa and Middle East region, foreign exchange taxes on cross-border transactions can range between specific percentages.

The importance of cross-border commerce is underscored by the 2019 e-commerce sales figures in the three largest markets globally—China, the US, and the UK. These markets accounted for $740bn, $561bn, and $93bn respectively, highlighting the significance of this sector. However, it's worth noting that there are no specific average customs and fee costs per source for card payments in cross-border e-commerce transactions in 2021 for these three markets.

For those interested in comprehensive research and analysis on cross-border payments globally, including our industry-leading newsletter, creating a free account is all it takes. Understanding the intricacies of foreign exchange taxes and their impact on cross-border transactions is essential for navigating this dynamic field effectively. These sometimes hidden or less known costs have big implications on the customer's journey and the overall success of cross-border businesses.