Research the challenges associated with payments across international borders and prepare a brief

presentation of your findings. Do most e-commerce companies conduct business internationally? How do
they protect themselves from repudiation? How do exchange rates impact online purchases? What about
shipping charges? Summarize by describing the difficulties between a U.S. customer and an international
customer who each make a purchase from a U.S. e-commerce merchant.
Students should begin by using a search engine to find information about the challenges of conducting ecommerce globally. Although the text has repeatedly emphasized the global nature of e-commerce and its
potential for easily crossing international boundaries, there are a number of obstacles, and much interfirm coordination that must take place in order for e-commerce firms to truly take advantage of the global
marketplace.

The first challenge to international e-business is language. Companies who have taken the plunge into
international e-commerce have found that simple steps such as adding a native language customer-service
phone number can make sales in that country double. What holds many companies back is the price of
developing a multilingual presence online. Web pages must be translated, which can cost 25 cents per
word; and several different sites must be maintained, one for each country or language. It is also difficult
to coordinate content and branding between the sites, and there are a myriad of business systems that
must be either built or purchased. The cost of producing a Web site in another language can cost from
$50,000 on up and large projects can run as much as $2 million per language, but the upside is that it can
quickly turn foreign browsers into buyers.

Language differences aren't the only challenges: companies must be able to exchange financial
information in a variety of currencies and account for currency fluctuations. Countries also use different
formats for weights, measures, dates, telephone numbers, addresses, and other common information.
Because of this an international customer might find a standard U.S. order form confusing.

Another big problem area for e-business is global trade management. Global e-commerce firms must be
able to comply with a variety of complex regulations to engage in global trade. Analysts estimate that a
very high percentage of international orders to U.S. e-commerce sites aren't fulfilled because companies
can't handle the necessary procedures. Shipping goods across borders requires logistics software, yet
many international shippers don't yet have it. Furthermore, many e-businesses don't have e-procurement
software that can analyze the total landed cost. (Landed cost refers to all of the costs of sourcing and
shipping a product internationally, including customs management, tariffs, transportation, and cost of
goods.) The cost of these systems may be too steep for most small e-tailers budgets.

Most world cultures, especially developing nations, don't rely on credit cards, which creates even more
difficulty for international e-commerce. This is even the case in parts of Europe, Japan, Asia, South
America and much of the Middle East. Europeans generally rely on debit cards, many of which can't be

used for online transactions because their use requires a manual swipe. Forrester Research reports that
few U.S. merchants offer debit/ invoice payment alternatives, while the majority of European merchants
do.

Fraud is a huge issue for merchants going global. As noted in the text, unlike the offline world where
banks often take on the cost of fraudulent credit-card transactions, online merchants are typically
responsible for fraudulent charges. Higher shipping and tax costs, the lack of address verification
systems, and the high incidence of fraud in many Eastern European and African nations add considerable
risk to any global venture. Third-party payment gateways are incorporating fraud-protection systems, but
these services may increase already high per-transaction pricing without really providing the necessary
protections. Address-verification services work only for cardholders living within the United States,
leaving foreign transactions unchecked and at risk. As fraud increased in sophistication in the last several
years, many online firms shut down their international transaction operations.
As far as exchange rates are concerned, few online e-commerce Web sites offer any type of currency
conversion from the native sales price. This makes it extremely difficult for international customers to
assess the "true" purchase price of the item. Many times, they will not know until their credit card
statement arrives to determine how much the item actually cost. For many customers, purchasing blindly
in a foreign currency is a risk they won't undertake. Very few merchants have a default currency selection
system that will display the sales prices in multiple currencies. Many countries also levy import fees on
goods purchased from beyond their borders. The customer can only get an idea of the initial sales price of
goods; and computing the additional tariffs requires extra, often done manually, steps that can
substantially affect the final purchase cost and the buyer's decision whether or not to complete the
transaction.

Solution
Payments made across international borders means that the home currency is converted into the host
currency in the process of transaction. This is highly inefficient due to the various challenges faced by it.
The most significant challenge in any cross border payment is the adherence to local laws and practice
which exist within the domestic banking and financial structure. So, if a payment is to be made from
China to USA, it is difficult to adhere to both Chinese laws and American Law. The other challenge is the
lack of a common global standard for these kinds of payments. Apart from these there is always the ever
changing government regulations regarding foreign exchange, international payments, tax laws, etc.
Lastly cross border payments also face currency conversion rates which may vary significantly from time
to time.
Most of the e-commerce companies conduct business domestically. Only a few companies have the
necessary resources to overcome challenges of seamless international transactions. Mostly these
companies take the payment before delivering the goods, which ensures that they are not at loss, if the

customer doesnot take the good. Moreover, these companies also have strict guidelines regarding
payment of import tariff at destination country, shipping charges, etc.
Exchange rate can play a big role in the number of online purchases made. When the exchange rate is
high, consumers tend to buy from local market to save money, but when the exchange rate is low, online
purchases spike up. Similarly a high shipping charge may discourage a consumer from buying online, as
it is seen that many a times the addition of shipping charges makes the good costlier than the same good
in home country.
When a US customer makes a purchase from a US e-Commerce merchant, he only pays the amount in
dollars and receives the good. Whereas in case of an international customer, the value of the good jacks
up as shipping charges, import duty, exchange rate fluctuations add up to the base rate. Moreover there is
always the high lead time of delivery for international customers. So, mostly international customers
prefer online buying only when the good is not available in his own country or it is available for a very
cheap rate even after including all the charges.

References
The inefficiencies of Cross-border payments: how current forces are shaping the future, retrieved
from http://euro.ecom.cmu.edu/resources/elibrary/epay/crossborder.pdf, on 7th September, 2014