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Multi-Currency for International eCommerce

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Multi-Currency Functionality for International eCommerce

International eCommerce is an in-depth technical capability that frequently demands tailored adaptation by region, language and culture. The optimal extent of customization is essentially unending; it heavily depends on the respective environment, culture, location and laws of each individual application. This presents a huge business opportunity with a multitude of benefits, if implemented correctly.

It's quite possible to become a literal expert in a particular region (or regions) and provide significant additional value to the end user, just by continually executing at a very high level of quality and customer experience. From an end user perspective, a buyer in this case, international eCommerce should be a very streamlined, elegant, simple and noninvasive process to what they are used to and have come to expect.

As you're evaluating potential vendors, we would encourage you to consider some of the different facets of international eCommerce, one of which being multi-currency. The aspect of multi-currency is a simple, yet critical, component of international and global eCommerce. The ability to make purchases in the particular currency the end users are accustomed to -and already have their funds available in- is effectively reducing friction during the checkout process.

The ultimate goal is to continue to leverage best practices with multi-currency throughout the customer journey process, and generally be able to offer the currency each end user is looking for. There are a lot of different ways to handle this with alternative key options that can be employed, depending on the situation.

Finding All the Right Features for the Right Price

Selecting a Suitable Multi-Currency Solution for International eCommerce

Let's briefly review the most common approaches to multiple currency pricing and payment processing. One solution is to simply make a multiplication and practically apply the specific exchange rate multiplier from the original product pricing. The base price of the product could be in US dollars, on which the exchange rate is applied for the particular currency that the end user has selected (for example, euros). It’s important to ensure that there's a high enough degree of accuracy, so that the rate is within an acceptable tolerance of precision at any given time.

The rate may be updated once a week, daily, or every second. It effectively depends on the circumstances and the preferences that you might have in your business or the particular industry where you operate. But it's a solid fact that the exchange rate should be getting updated often enough. The level of detail regarding how many decimals of exchange data you're getting must also be determined, so that there's no loss of funds whenever the exchange rate is applied on top of the base product costs, sale price and offering price. A way to go is basically a multiplier simply adjusting the rate on the fly through the application, so that the end user is paying using a current exchange rate.

It's also possible to take a different approach, where customers in many countries or regions are able to go ahead and do a conversion of their selected currency as they checkout. During the checkout process there's messaging for the user, informing them how the funds are going to be processed in a different currency and the conversion will result in a small fee.

Finally, it's possible to do things like essentially building out a model where someone can purchase points, tokens, or a form of digital currency, which can be leveraged in order to have a universal kind of digital currency. It may be actual digital currency or just a representation of that through the site, where users are purchasing points that can only be used to purchase items on the website.

Providing The Most Value Possible

What Currency Option Carries the Most Value for the End-Customer

The first option of actually applying a multiplier and exchange rate to the currency is most likely the optimal scenario for an end user, as everything is seamless for them. In this case the vendor has a single base price for items, at least when the distribution center(s) are in a location with different base currency than the payment options available through the eCommerce application.

Let’s consider a scenario where we’re currently selling in US dollars, while manufacturing in a location that does all of the ERP and accounting in US dollars but would like the ability to sell in Canadian dollars or in euros. That would require the end user to be able to calculate the rates and have some sort of notification about what the offering is going to cost in their respective currency. The selection might include Canadian dollars, euros, yen, pounds or another currency. What we want for the end users is a simple procedure, where they can simply click a drop-down menu or a flag and select their preferred language and currency.

That should be the only required step for end users and, as far as they're concerned, everything on the site must be translated to their particular expectations for currency and language. Users are accustomed to seeing their currency represented in the familiar format, with the appropriate symbols and currency denominators. So, if they’re European buyers they will see euros, if they’re in Canada they’ll see prices represented properly in Canadian dollars, and so forth.

These are really critical aspects for the end user and contribute to a smooth customer experience. In order to enable that capability, without physically performing a currency conversion that applies at an exchange rate, the payment processor is typically required to be set up in a way that allows payment processing in the different currencies. So, if we offered pricing in US dollars and Canadian dollars, then we need the added ability to actually process the payments for both of those types of currencies. As the end user completes checkout and provides payment information, we must be able to process that payment with the specific currency they're sending over.

Leveraging the Optimal Solution

Alternative Multi-Currency Options & Their Application

However, the payment provider may not offer that capability, or perhaps you opted not to begin with that capability because it would take longer and cost more to implement. In this instance, what makes more sense is to offer an actual currency conversion and then charge an international fee. The typical process here is that the bank performs the currency conversion and the end users are going to be charged a small extra fee for the service. Customers will probably be accustomed to this and will expect a currency conversion fee in many cases, but it's still not an ideal solution. It’s clearly preferred to provide a more seamless and robust capability of processing payments in multiple different currencies.

Another thing to consider is appropriate data configuration so that the pricing information represents the currency-specific costs, sale price, base listing price or other factors, across all of the different currency offerings. The multiplier in the exchange rate should also be kept up to date and reflect correctly on the price. In addition, maybe a margin for customs and duties should be placed, or another kind of buffer is necessarily applied because the exchange rates are not updated frequently enough.

It becomes obvious how the optimal scenario involves a highly seamless procedure. But in reality, sometimes it's not possible to handle all currencies directly on the international eCommerce site via the payment processor. As you can imagine that functionality requires a sophisticated and well-structured initial setup to operate effectively.

A possible approach is to gradually phase into the desired scenario where everything is seamless and tightly integrated. This could be accomplished by starting out with a conversion rate and perhaps a small fee, while making sure the end user is made aware of the fact accordingly.

There could be a particular market -or markets- where it makes sense to initiate business with the direct currency purchasing functionality. While strongly encouraged, it’s simultaneously time-consuming to validate, test and work with the payment provider to process payments for each different currency.

The final option is to set up some form of representative digital currency. As mentioned above, this could be actual digital currency that has to be purchased and converted from the local currency beforehand; or it could be bought in a strongly integrated way, by getting purchased behind the scenes in a seamless fashion. Alternatively, instead of an official external digital currency, the payment method could literally be just a token or point system within the application.

In other words, each item available for sale in the application isn’t represented as a specific currency, but as a token amount instead. The currency conversion would be from the local currency to the specified token amount. The drawback of this approach is how it frequently creates confusion for the end users, hindering their ability to understand what the token amount is actually worth in real money.

This problem can be easily overcome by showing the selected currency amount alongside the token value. The idea of a token system can be really helpful, especially with a diverse pool of users (buyers or sellers) of the platform, who trade in different currencies. A token system can also avoid the substantial logistical overhead with multiple active currencies and attempts to process them through payment providers. The exchange rate or logistical issues surrounding the setup of excessive payment providers can be noticeably reduced by a token system.

The best solution for your eCommerce application depends on a number of factors. During the early phase of initiating international eCommerce, all options are acceptable. As a business continues to grow and build an international eCommerce presence, it makes sense to leverage multi-currency for enhanced integrations that literally push the payments directly to the payment provider in each local currency. Choosing this option from the beginning can result in excessive overhead, so we encourage starting small and then iteratively growing into more complex and streamlined offerings.

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