Managing Payments During Geographic Expansion

Few, if any, businesses can afford to limit themselves to selling in one country or region.

For almost all merchants, the time swiftly comes when they must offer their goods and services to prospects around the world. Collecting customer payments, however, is far less certain: there are many ways to address the challenge, and choosing the right strategy can have a profound impact on the success of the global expansion.

Geographic Expansion Requires a Multi-Processor Approach 

For many, if not all, new merchants, getting to market quickly leads to using a full-service payment service provider (PSP) like Stripe or Adyen. These providers accelerate time to value, offering a bundle of services that are easily implemented, based on a consistent and easy-to-forecast fee schedule, and bundled with a wide array of extras to help customers transact business, from currency conversion to alternative payment methods.

Those flat fee models, however, move from convenience to obstacle very quickly, as fast-growing businesses realize it's leaving money on the table in return for ease of use. It turns out that processing fees, when considered from a global perspective, are not, in fact, consistent, meaning that merchants actually end up paying more than they otherwise might.

Beyond the question of fee arbitrage, merchants quickly discover that processors have greater success at closing transactions when they are in the same geographical location as the consumer. Both because they typically offer the right payment methods to meet consumer preferences, and because they have closer relationships with acquiring and issuing banks.

Different processors can also be better suited to particular merchants and the markets they operate in. This is certainly particularly true for those operating in what the card networks deem to be high-risk offerings—including online gaming, CBD, and travel—which full-service PSPs not only struggle to support, but can actively banish from their networks without providing adequate notification.

Maxio, a billing and financial reporting platform for B2B subscription businesses, hit this wall firsthand. As the company prepared for geographic expansion, it realized its payment stack couldn't extend beyond North America. 

"We realized we had to have an international footprint," said Jon Cochrane, GM of Partnerships and Payments at Maxio. "And then we realized our tech stack doesn't go beyond the borders of North America. This was limiting who we could service."

Maxio partnered with Basis Theory for independent tokenization, unlocking the ability to work with multiple acquirers, processors, and issuing banks across new regions. Geographic expansion was possible, without disrupting customers.

"We knew there could be instances where we had to upgrade back-end portions of our infrastructure to facilitate growth. It was critical any upgrades occur with zero disruption to our customers and most importantly, their customers,” Cochrane says. “Basis Theory was a key part of making sure zero disruption occurred.”

Maxio's experience points to a broader truth: geographic expansion doesn't just require more processors—it requires smarter orchestration and portable tokens. 

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Orchestrate on Your Terms 

When geographic expansion drives a merchant to expand their stable of PSP partners beyond a single provider, it becomes vital to ensure that the right transactions are sent to the right PSP endpoint. The classic solution is a decisioning engine, potentially powered by AI, which can examine each transaction as it is created, and select the right PSP based on a range of criteria, including:

• Which PSP is most likely to successfully complete the transaction?
• Which PSP will cost the least?
• Does the merchant need to balance out good deals without a run of chargebacks to remain in good standing?
• Would sending a transaction to a particular PSP meet volume commitments or unlock volume-based deals?

There are a range of platforms in the market that offer to automate this decisioning process. But, they, of course, add an extra layer of complexity and cost to each transaction, potentially reducing the benefit of using multiple providers. As a result, many merchants are opting for a programmable payment vault and using internal decisioning engines to direct transactions to the most favorable endpoint.

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Vaulting as an Enabler for Geographic Expansion 

Moving to a multi-processor payment system to support global business growth can be a tough project: not only does the merchant have to negotiate multiple deals with PSPs, they must also construct a plan for collecting and storing customer information. And, of course, all personally identifiable information (PII) must be managed within the PCI-DSS framework—adhering to which can be its own headache and resource drain. For this reason, using a programmable payments vault offers some key advantages to ‘going alone.’

A token vault collects and stores all customer information, returning a token to the merchant which can be used to programmatically instruct the vault to submit transactions using the stored customer data. This allows the merchant to keep the majority of their payments system out of PCI-DSS scope, and eliminates much of the administrative burden of remaining in compliance. And, of course, a vault like the one offered by Basis Theory is not associated or allied with any particular PSP, so the merchant has the option of doing business with any provider they choose, anywhere in the world.

With the vault in good standing, the merchant can start to make a decision about how they want to manage their orchestration: using an orchestration platform, or building a custom decisioning engine of their own.

Best practice is to try both options (ensuring that any orchestration platform contract is short and can be cancelled for convenience) and evaluate the outcomes: whichever delivers the highest deal close rate at the lowest cost is an easy choice as the bedrock of the new multi-processor system.

Compare both, an orchestration platform and an independent vault, to find the best path forward for your use case. See how IXOPAY compares to Basis Theory before you commit.

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