The Amazon Marketplace is ever-changing.
In the first week of February, a new payment service provider program was announced, altering the way sellers receive their Amazon store sales proceeds.
These changes got us thinking about payment service providers, (PSP). Zonguru also just so happened to co-host a webinar with our partner, PingPong, who happens to be a payment service provider.
What exactly is a payment service provider?
When should a seller use one, and why?
How do they help a seller’s business?
We asked a couple of colleagues from the recent webinar to describe what being a PSP means, in their own words and got these responses:
“A Payment Service Provider is a company that helps sellers receive their disbursements when selling internationally.”
“Payment service providers help Amazon and eCommerce sellers keep more of their money when they send/receive international funds.”
Different PSPs offer different products that can (potentially) positively affect a seller’s business and revenue. Here are some of the solutions different PSPs offer that help eCommerce sellers manage their business, save money and bank more revenue:
You don’t need a massive customer base in order to operate globally anymore. In fact, there are around 30 million small/medium-sized enterprises operating in the United States alone.
All you need is an international customer base and the right payment system. When looking for a payment system, you have to think about competitive rates for foreign exchange, converting sales proceeds on your terms, and more.
Cross-border eCommerce is all about global reach. Everyday, online merchants are expanding globally to expand their reach with international revenue.
Amazon currently has 17 marketplaces: USA, UK, Germany, France, Italy, Spain, the Netherlands, Japan, India, Australia, Singapore, Turkey, the Arab World, Saudi Arabia, Canada, Mexico, and Brazil.
Getting Local Bank Account Details to Sell Goods Internationally
When it comes to global eCommerce, sellers need a local bank account in the country where they want to sell their goods internationally. How does this happen if one doesn’t live in the country in question - without physically being there to open an account?
A common challenge with many online businesses is simply not having an account in the country they want to sell in. Sellers have to be able to receive payments from customers in their local currencies.
No one wants to round up a ton of paperwork, fly across the globe, and spend countless hours opening a local business account so they can conduct business abroad.
Some payment service providers specifically focus on offering solutions to online merchants for open virtual bank accounts.
These accounts are the same as you’d get if you were a citizen of that country. All you have to do is apply. Once you have an account number, you can send and receive domestic currency.
This type of virtual bank account helps money move across borders by:
Also, your financial department will love you!
That’s because they won’t have to learn how to run multiple online banking platforms, reconcile funds, and deal with all the headaches that come with having money sitting in a ton of different places around the globe.
Growth of Cross-border, Global Marketplaces
The global marketplace has become one of the very few resilient, effective, and profitable platforms to weather economic and world health crises. Fuelled by the transformation of shopping, Alibaba, Amazon, Etsy, and Taobao all reported record figures this year as consumers turned to these new 'virtual shopping malls.
By the end of 2020, an estimated two billion people made an online purchase, and the rise in users is beginning to signal a shift in online sales. As important as the U.S. market is to this growth through marketplaces such as Amazon, eBay, and Etsy – sellers can often forget that 85 percent of the industry purchasing power lies abroad.In fact, in China, e-commerce sales have recently overtaken the U.S., and the country's 'Singles Day' shopping event eclipsed Black Friday in the U.S.
At the end of December 2020, the global eCommerce market was expected to reach $1 trillion and early forecasts anticipate the trend to continue.
New cross-border payment solutions that can manage overseas logistics, pay suppliers in a local currency, and make VAT payments in real-time, becoming an international seller is easier than ever before.
How do they help a seller’s business?
Avoid Hidden FX Fees
Most merchants don’t think about the exchange rate too much. Which they should, because there’s a huge savings opportunity if done right. The problem is, when small and medium-sized businesses get their US profits, all the hidden fees have already been applied.
For example, back in August 2020 Amazon charged 3%-5% to convert currencies. Most merchants weren’t even aware of this charge, or didn’t realize there are other payment services available.
Diversifying Supply Chains
To say that lockdown restrictions affected supply chains in 2020 would be putting it lightly. At the peak of the crisis, disruption to factories highlighted the fragility of relying on one single source for inventory. With little to no option left for sellers, the shift to diversifying supply chains to mitigate financial repercussions has called for an industry-wide rethink.
However, disruption isn't new, and one of the biggest mistakes sellers often make is overlooking future risk planning and the prioritization of corrective actions.
Instead of assuming there won't be interruptions to one supply chain, consider other sources. With an abundance of cross-border services such as parcel consolidation, global fulfillment, and payment providers, sellers can - and should - explore international markets.
Manufacturer Costs & Paying Suppliers
International revenue in your PingPong account can be used to cover invoices, pay suppliers, and ensure your logistics run smoothly, all in the correct currency (with no double conversion fees!).
These systems are made with one goal in mind: helping small and medium-sized businesses save money. Sometimes, you can avoid conversion fees altogether!
On top of that, you may actually make some financial gains off of shopping supplier rates, or switching to an entirely new manufacturing facility. Why wouldn’t you use a supplier who can make your items at a lower cost?
FX rates are subject to huge fluctuations all the time. Being able to control when you want to convert your revenue into USD is another area you can save big bucks in.
Finding a platform that will convert your eCommerce sales revenue into your desired currency for a much lower rate will have a huge impact on your cross-border profitability as well.
As online commerce continues to prevail, annual in-store holiday season doorbusters promising discount deals have begun to lose their relevance. During the 2020 holiday season, deals popped up early, 24-hour sales lasted a month, and by late November, most of the 'festive shopping' had been done online.
Retail shopping events have changed, accelerated, and turned in favor of digital commerce, with sales increasing 30 percent year-on-year during the 2020 holiday season. More importance is being placed on the broader e-commerce market, and the increase in competition in an already saturated market will require sellers to work smarter.
Instead of waiting for domestic season events, think globally. By partnering with the right cross-border payment provider, sellers can enter new markets, effortlessly move money to all corners of the world, and grow a larger audience that will effectively move sales forward post-pandemic.
Discover opportunities. Maximize your sales. Grow your Amazon business!