Unlock new markets with optimised FX

Unlock new markets with optimised FX

Merchants who want to expand into new countries can face considerable challenges when delivering localised payment experiences. They need to integrate and optimise domestic payment methods in the buyer’s local currency. Simultaneously, sellers must also address currency volatility, settlement delays and unpredictable cash flow.

While there are a lot of factors to get right, it doesn’t have to be complicated. In this blog, we share how to address common foreign exchange (FX) and settlement challenges to succeed in new markets.

The challenges of delivering local payments

When a merchant decides to enter a new market, there’s a lot to consider. They must accept payments in local currencies and work with local payment methods. And, unless they intend to establish a local operation or entity, the merchant must convert local funds into their functional currency (e.g. US dollars or euros), and direct it back into their primary bank account.

Merchants typically use an FX module, a back-office software tool, to convert currencies. These modules display dynamic exchange rates (often sourced from the previous day). However, relying solely on FX modules can present significant issues for both merchants and buyers. There can be significant lag times for settlement, with additional fees charged by banks. Lack of transparency in pricing can be problematic; buyers see the price in local currency, only to be charged more at settlement. For example, they think an item costs 2500 Mexican pesos, (MXN) and five days later, a transaction posts for 2700 MXN due to extra fees.  This uncertainty creates a poor experience for the buyer and can lead distrust and unrepeated business.  

Similarly for merchants, the use of a FX module can be problematic. It doesn’t mitigate against the risk of currency volatility. For example, say the merchant operates in US dollars and expects $150 at settlement. They sell services for 2700 MXN, but at the time of sale, MXN surges against the dollar. Due to changes in exchange rate, the merchant only receives $140 at settlement. This volatility and risk can greatly impact the business’s cash flow and margins.  

Thunes’ Accept with Currency Conversion (ACC) eases FX challenges

Thunes has solved many issues associated with FX modules to help merchants better manage the risks and costs of cross-border settlement. Our Accept with Currency Conversion (ACC) solution works as follows:

① It accepts payment in the buyer’s local currency.

② The tool converts local currency into the desired currency at optimal FX.

③ It holds and batches these transactions (already in the desired currency)

④ Thunes settles the batch at the merchant’s bank at an agreed cadence– all without additional changes.

ACC provides merchants with clear advantages

Reduced FX exposure: Converting payments to the local currency at the moment of payment protects against currency fluctuations. Merchants can receive fast authorisation for payments made through popular local payment methods such as mobile wallets. Thunes bears the risk of FX exposure so that fluctuations in exchange rates don’t impact the merchant.

Merchants can sell in their own currency: By displaying prices in their preferred currency and automatically converting the amount to the buyer’s local currency, the merchant will receive the exact amount requested. It also simplifies bookkeeping and eliminates FX exposure risk.

Transparency for buyers and merchants: Buyers can view the exact price in their local currency before confirming payment – without additional fees being debited from their accounts. Sellers benefit from not having to manage a complicated FX module with multiple pricing catalogues.

The result? The merchant bears less risk, with a more predictable cash flow–all while providing a better customer experience.  

Use case: Vietnamese merchant, Hanatoi, expands to Mexico

Consider the scenario of Hanatoi, a fast-growing Vietnam HQed merchant, who primarily operates in USD and wants to enter Mexico. The firm aims to offer Mexican customers the convenience of paying in Mexican Pesos (MXN) without the hassle of developing their own FX capabilities.

Thunes’ ACC enables the following process:

①   Hanatoi displays its product online priced at $100.

②   A customer in Mexico spots the product and hits the “buy” button.

③  Hanatoi generates a payment order of $100 for the Mexican customer and communicates the request to Thunes using an API.

④  Thunes, in turn, offers a preferred local payment method for the Mexican customer, such as Oxxo Pay.

⑤  The customer uses Oxxo to pay $100 in MXN.

⑥ On the checkout page, Thunes displays the equivalent cost of $100 in MXN just before the customer confirms payment. If the customer is happy with the MXN amount, they proceed to confirm the transaction.

ACC offers predictable cash flow and a better customer experience

① The merchant does not need to build complex systems for creating payment orders in the buyer’s currency (MXN).

② The merchant is guaranteed to receive 100 USD, as the amount is MXN precisely calculated. There is no need to manage FX modules or pricing catalogues. 

③ Customers can effortlessly purchase a product in their local currency and payment method.  Plus, they know the exact cost before confirming the payment for total transparency, and a better customer experience.

Along with ACC, Thunes connects merchants with the world’s most popular local payment methods, so they can access fast-growing markets. With one API integration, they can access Thunes’ global network to optimise their acceptance experience.

If you would like to learn more, contact us today.

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