Cross-border payment pricing is one of the quickest ways to draw customers away from traditional banks and outdated money transfer companies, if you get it right. It’s also one of the most simple mistakes that payment teams can make. This is one of those forums you will have, if you haven’t already, with all the payments folks.
If the price is not clear and is not fair, there’s a lot that can go awry. Individuals compare you to a bank that they have previously had. If there’s a reason they are reluctant to change, they will look elsewhere.
The problem is, the bad pricing scenario has been ingrained in the minds of legacy players, the banks and traditional money transfer companies, for decades. Confusing exchange rates, slow settlement times and hidden fees. That has been the case for such a long time that there’s no question.
Therefore, when a new platform comes into existence with an alternative solution, people are cautious. They will not get excited straight away, they want to see if it’s good first. This is where smart cross-border payment pricing can be your best bet to entice them.
I’m not sure why there’s still so many people that use legacy pricing. But it does.
The reasons behind why customers can be confused about Cross-Border Payment Pricing
The fee is the least important source of income for banks and transfer companies. They will promote a low flat rate (two or three dollars) and then quietly add three to five per cent.
Most people wouldn’t know it, since they’re not used to any other.
This trick has been going on for decades because it conceals the truth as to its actual cost. The initial impression is that it is a low cost product. However, as soon as someone juxtaposes two receiving quantities, the illusion becomes evident.
That’s your opening. Customers are being won today, not based on the fee that’s charged, but based on the total cost of the transaction, which includes the fee.
When it comes to Cross-Border Payment pricing, in order to make a well informed decision you will need to consider ALL of the costs
The No. 1 faux pas of a new platform is simply creating the same old playbook in a miniature form. It can’t be called disruption, it’s a discount.
Differentiation requires a complete disclosure of the fee, the exchange rate and what the sender will receive on the recipient side before he or she agrees to make the commitment.
Giving a good first impression yields the first sale. Being an open book gives you a second and third. This is what trust can do.
Outline the different numbers before pricing them
It’s impossible to nail payment pricing if you don’t know what your margins are, corridor by corridor. The price varies greatly according to the road.
That’s an economical and rapid way of sending to Mexico from the U.S., and it is well developed. They will most likely have to go through more people, more compliance and less liquidity in moving to a place like Africa or Southeast Asia, increasing your expenses.
Nearly all of the time, a flat rate globally means that you’re being overcharged on the easy corridors or underpaying on the hard corridors. The real cost approach will work better for pricing corridor by corridor and provide you with room to keep an eye on your busiest routes.
Evaluate your exchange rate to make it a selling point
When there are players you need to compete with, it’s important your exchange rate is near the mid market rate. There is no need to give it away, there’s a need for margin in running a business, but it shouldn’t be very large, and it should be apparent.
Some platforms even display the rate that the customer will be charged directly alongside the mid market rate. It may seem like a dangerous idea, but it is a good way to establish a lot of trust. It demonstrates that you aren’t skirting the issue, which you can’t claim of traditional providers.
Speed is part of the price too
Price is more than just a number, it’s the customer’s experience. It may only take five days to get the money transferred, but it is still as costly, as the money is stuck while you’re waiting.
When a transfer is made in minutes, folks will be content to pay a bit more for that. Good infrastructure enables you to charge an appropriate rate for your product, not the lowest rate on the block.
There are various customers with different needs, and different pricing is required for them
Not all money senders are in the same business. A person who sends a small sum of money every month is concerned about the percentage he pays. For a business with payroll, it is more important to have predictable rates and volume discounts.
Do the same for both, and you’ll fail to please one of them. Tiered pricing based on individual use of your platform puts you on the same level across the board, rather than average on the whole.
The Bottom Line on Cross-Border Payment Pricing
The purpose of beating legacy players is not to go as cheap as possible on the fees. It’s about being honest: total price clearly indicated at the beginning, pricing calculated using actual costs of the corridor, fair exchange rates, and speedy and reliable delivery.
It isn’t just about the lowest price customers are searching for, it’s the price they can trust. The first one to get that trust generally has the customer for life.
