In our previous post, we provided an introduction to key terms in the banking industry. This time, we will focus on basic types of payments that you may encounter in your business.

PAYMENT TERMS:

B2B

B2B, which stands for Business-to-Business, refers to commerce between two enterprises as opposed to transactions between a business and an individual customer. The size of most B2B transactions is larger than B2C (Business to Consumer) transactions because generally an enterprise will be seeking to buy a large inventory of items to sell to end users. B2B purchasing may also involve raw materials used to manufacture finished products or services. B2B deals may be subject to bidding processes and negotiations, so payments are rarely immediate. 

B2C 

The term Business-to-Consumer (B2C) refers to the process when a company sells products and services directly to consumers who are their end-users. Most enterprises that sell to consumers can be referred to as B2C companies. B2C payments can take various forms: many B2C transactions take place on websites, where consumers buy products directly from online retailers. Today, many B2C purchases are conducted on mobile apps. When dealing with cross-border payments, businesses should offer familiar payment methods at each location and generate personal relationships with customers.

C2B 

C2B, which stands for Consumer-to-Business, is a system in which an end user or consumer provides a product or service to an enterprise, which then uses it to complete a business process. Another C2B model is when a consumer allows a business to market a service or product on their website or blog in exchange for a fee. A different form of C2B is when an end user announces a need and businesses compete to meet it.

C2C 

The C2C (Consumer-to-Consumer) business model involves transactions between two consumers. This type of commerce is typical of intermediary auction websites such as eBay, Etsy and Craigslist, but the site does not take responsibility for the quality of the products. In C2C transactions, prices are negotiable and the purchasing process is simple. These websites usually provide convenient payment methods such as PayPal, credit cards, debit cards and mobile apps.

As a rule, it is worthwhile to keep your eye on developing payment trends and new models. The ability to facilitate payments for both enterprises and individual buyers is key to your commercial success.

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As opposed to fiat currency, cryptocurrency is not connected to governments or central banks. Using a ledger system, cryptocurrency transactions are anonymous and decentralized. Bitcoin’s value, for example, is determined by demand and market supply at any given time, much like precious metals. Due to the fact that no government regulations apply to cryptocurrency and transactions are untraceable, there is a risk of abuse of the system for illegal activities including terror funding and drug trafficking.

Some advantages of using cryptocurrency for payments

Despite the risks, cryptocurrencies have several significant advantages as well:

• Lower fees

When utilizing credit and debit cards, and handling transfers, foreign transactions, false declines and many other types of financial activities, there are fees involved. These fees tend to mount up and become quite costly. Cryptocurrency payment gateways charge only 0.5 to 1% per transaction. Most cryptocurrency accounts that take the form of a digital wallet are free.

• No chargebacks

One of the major banes of credit card use for payments is chargebacks.The cancellation of credit card transactions by purchasers can be extremely costly for merchants. But when it comes to cryptocurrency transactions, the basic rule is that they cannot be reversed. 

• Securing personal data

Consumers are concerned about how retailers, service providers and financial institutions retain extensive amounts of sensitive personal data from an individual’s name, address and email to credit scores and net worth. When performing cryptocurrency transactions, data is converted into numbers, or cryptocurrency wallet addresses, so private information is not revealed. 

• Cross-border payments

Cryptocurrency payments are not classified according to countries. There are no cross-border fees, and no limitations on accessing funds. As banks and credit card companies are not involved, users can make payments, pay bills and shop independently.

More service providers and retailers are accepting cryptocurrency

Cryptocurrency acceptance is becoming more widespread among large service providers and retailers. AT&T recently became the first mobile carrier to accept bill payments in cryptocurrency. The Shopify ecommerce platform allows its merchants to accept Bitcoin payments through BitPay.

Microsoft permits users to deposit Bitcoin in their Microsoft accounts for the purchase of movies, games and apps in the Windows and Xbox stores. The large retailer Overstock has been accepting Bitcoins and other major cryptocurrencies since 2014. Paypal also allows merchants to accept Bitcoin through Braintree. There are many small businesses that are accepting cryptocurrency payments today.  

What lies in the future for cryptocurrencies?

Cryptocurrencies like Bitcoin lack basic stability because they are not a pegged currency. By nature, they are more like a commodity asset for trading like precious metals. Some enterprises (like Facebook) are introducing stablecoins which are pegged to certain currencies, thereby securely anchoring cryptocurrency. But this would stand in contradiction to the decentralized (and uncontrolled) nature of cryptocurrency.

COTI recently developed the world’s first DAG (directed acryclic graph) protocol for creating decentralized payment networks and stable coins. Other technologies are expected to emerge and innovate cryptocurrency norms. Time will tell what form cryptocurrency payments will ultimately take.   

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Our new eBook A Merchant’s Guide to International Payments offers an overview of preferred payment methods in various geographies worldwide.

Read A Merchant’s Guide to International Payments.

What kind of solution should you be seeking when you need to accept online payments in different markets, multiple currencies and a wide range of payment methods?

The best online payment solutions enable the following activities:

• A wide range of local payment options

If your online business operates in various foreign markets, you need to be able to offer familiar payment methods at each location. Some countries use international credit cards, but in others the population prefers local credit cards. In certain areas, debit cards or payment on delivery are the first preferences. Your payment solution should be able to offer the most suitable payment methods at each site.

• Top-level security

You need to ensure that all of the credit card and personal data you store in your system is secure. In order to maintain the highest level of security, your online payment system should feature data encryption and tokenization, 3D Secure, PCI compliance, hosted payments and other protective measures. An advanced payment solution should include all of these options and more.

• Advanced fraud detection

The growing sophistication of hackers means that attacks are becoming more rampant and harmful. But a single fraud detection level does not suit all your markets. It is best to have an adjustable fraud monitor that uses machine learning to adapt fraud screening to the specific risk level in each market. That way you minimize false positives and effectively mitigate real fraud attempts.

• All-inclusive technology

When processing payments, you need to work with various parties including a payment gateway, payment processor, issuing banks, credit card companies and other third parties. Each of these entities collects a fee for its services. Rather than attempting to deal with each of these parties separately, it is easier to integrate with an end-to-end payment solution that handles all of these processes at a reasonable fee. Check out various platforms to see which offers the best rates for all of these services.

• Recurring payments

Many online merchants offer monthly services such as gyms, child care services, gaming, cell phone companies and other sectors. By offering automated recurring payments, you ensure that your customers needn’t worry about forgotten payments, and you will always be paid on time. If you offer subscription type services, this payment model is a must for your enterprise.

• Mobile payments

With the growing popularity of smartphone use, you must be able to offer secure and easy payments via mobile phones. Look for an online payment solution that enables you to build mobile friendly pages and process secure payments via mobile apps. Ensure that the system can process mobile wallets, money transfers, credit cards and other payment options.

As a global online merchant, your aim is to provide your customers with the easiest and most comfortable payment experiences, while cutting costs and increasing processing efficiency at every market. A sophisticated one-stop-shop payment platform enables you to meet all of these needs and many more.

Learn about the bm2Pay online payments platform.   

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What is causing these changes in your payment ecosystem? How can you improve results?

Our new eBook A Merchant’s Guide to Payment Optimization offers practical tips on how to resolve payment hurdles in new markets.

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According to the EU plan, by the end of 2019, charges for cross border payments in Euros will have to correspond to fees for payments made within a country using the local currency. In a nutshell, the resolution empowers EU member states to demand that banks apply the same charges for cross-border and domestic non-euro payments. Banks will also be required to make currency conversion costs transparent, in order to protect consumers from arbitrary fees charged for currency conversions.

This new regulation is likely to impact on cross-border payments worldwide and set new precedents in the financial sector.

New technologies for lower financial fees

Today, sending money from one country to another can be quite costly. Banks in one country often have no direct relationship with banks in other countries, making it necessary to involve an intermediary bank and invoke additional fees. Visakha Thongphetsavong, CMO of the Everex fintech company, notes that fees associated with international money transfer generally range between 5% to 20% of the cross-border transaction.

Among other emerging technologies, blockchain can be used to lower cross-border fees. Blockchain enables the encryption and storage of transactions in highly secure, decentralized ledgers. By eliminating the need for intermediaries or central authorities for financial transactions, blockchain enables enterprises to save on third-party fees. According to Thongphetsavong, the technology can significantly reduce the total cost of fees to about 2% to 3% of the transaction.

If you can’t beat ‘em join ‘em

Both banks and credit card companies stand to lose funds if third parties are cut out of cross-border processes. Some credit card companies are examining ways to use blockchain to their advantage. For example, MasterCard is currently studying how blockchain technology can cut costs, facilitate settlements, and improve customer experiences.

Microsoft and MasterCard launched Mastercard Track, a global trade platform that encompasses account-to-account and card payment solutions, fraud management and payment gateway services. This tool is expected to help reduce friction in the global trading system and promote exports, especially by small and medium-sized businesses.

Blockchain and banking

Banks initially viewed blockchain as competition, but some are now adopting the technology in various blockchain-based platforms. As a real-time, open-source platform capable of transmitting data and value securely, blockchain can become the basis for new banking products and a significant source of new revenue.

According to CEBNet, 12 banks have already adopted this technology for various use cases in China alone. Additional global banks that use the technology include ALFA Bank from Russia, Yes Bank from India, and LatiPay from New Zealand.

Creating a united front

The success of blockchain-based banking depends on collaboration among worldwide banks. This kind of cooperation will enable the establishment of a network capable of supporting global payments. Blockchain’s key attraction lies in its unique network features, but it is this quality which necessitates widespread cooperation among old-school financial institutions. Time will tell if they are up to the challenge.   

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