Maximise eCommerce profits with like-for-like settlement

Our recent report Cross-border eCommerce: Key trends and strategies for global success reveals that 93% of consumers consider local currency pricing crucial to their purchasing decisions. Also, 77% are likely to abandon carts if their preferred payment method is unavailable. 

eCommerce businesses must therefore accommodate multiple currencies and payment platforms. This involves managing transactions, currency conversion, and cross-border transaction fees, and other hidden costs. To minimise these costs, consider like-for-like settlement.

What is like-for-like settlement? Why does your eCommerce store need it?

When the customer's payment matches the settlement currency, the eCommerce business doesn't have to pay currency conversion fees and thus saves money on transactions.

Typically, each cross-border transaction involves three currencies: 

• Store currency: the primary or local currency used by the online store, usually set automatically based on the store's location.

• Transaction currency: the currency displayed when the customer pays, which might differ from the store's currency.

• Settlement currency: the currency in which you receive payments, i.e., the currency you get from Shopify.

For a Hong Kong online store entering the European market, the store's currency is often HKD, the transaction currency is EUR, and the settlement currency can be HKD or USD. Each transaction would involve conversions between HKD, EUR, and USD, resulting in currency conversion fees.

Example of like-for-like settlement

If you use Shopify Payments and a European customer pays in EUR, you settle in USD. When you withdraw in HKD, Shopify automatically converts the currency with a 2% fee.

For HK$100,000 in sales, you'd pay a 2% conversion fee, which is HK$2,000. After product costs, advertising, and cross-border fees, your profit margin shrinks significantly.On top of that, due to mandatory double conversion, you pay conversion fees twice and face exchange rate risks, with transaction costs potentially over 5% of the sales.

Therefore, ensuring your payment platform supports like-for-like settlement is crucial. With the latest fintech innovations, you can avoid forced conversions, allowing you to save up to 90% on transaction fees.

Benefits of like-for-like settlement for eCommerce

• Cost savings: Avoid forced currency conversion and significantly reduce transaction fees associated with currency exchange, saving money on every cross-border transaction.

• Avoid hidden fees: On top of cross-border and currency exchange fees, some payment platforms may charge hidden fees such as third-party service fees and exchange rate markups. These fees are often revealed only after the transactions, leading to budget overruns for SMEs. Like-for-like settlement provides transparency regarding all related costs, preventing unnecessary losses.

• Mitigate exchange rate risk: For businesses with significant transaction volumes, exchange rate fluctuations can greatly impact profits. like-for-like settlement effectively mitigates exchange rate risks and provides stability and predictability in cross-border transactions.

• Faster transactions: By eliminating currency conversion, like-for-like settlement streamline cross-border transactions, improving the overall customer experience.

• Enhanced competitive advantage: In a highly competitive eCommerce market, consumers can easily find alternatives, making price a critical factor in sales. By lowering transaction costs, you can offer more competitive pricing to attract consumers and boost sales.

How do I implement like-for-like settlement?

To implement like-for-like settlement, follow these steps:

1. Choose a payment platform: pick one that supports like-for-like settlement, such as Airwallex, which offers cross-border payment solutions to help SMEs overcome geographical limitations.

2. Register locally: Make sure your company complies with local regulations and taxation laws. This not only enhances your credibility in the local market but also facilitates strategic partnerships with local brands.

3. Integrate your online store: Ensuring seamless integration between the payment platform and your e-commerce site can simplify transactions without compromising the customer experience.

4. Train your customer service staff: Educate your CS team on like-for-like settlement process to assist them with multi-currency transactions and customer inquiries.

5. Monitor transactions: Regularly review transactions and settlements to identify any potential issues early, and prevent unexpected complications.

How Airwallex help you achieve like-for-like settlement

Airwallex supports like-for-like settlements in over 11 currencies, allowing you to settle directly in the currency your customers use, without the need for currency exchange. This completely avoids all exchange fees, exchange rate risks, and hidden costs.

Additionally, Airwallex's Business Account supports 60+ currencies. You can receive payments in over 180 countries, making market expansion easy. If you need to exchange currencies, you can benefit from Airwallex's market-leading exchange rates as low as 0.2% above the interbank rate.

Case study: Grams(28) cuts down on costs with like-for-like settlements

Airwallex has helped many SMEs, including the local luxury brand Grams(28), save on cross-border transaction fees and hidden costs through like-for-like settlements.

Grams(28) targets markets in the US, Europe, Hong Kong, and Singapore, involving various currencies for payments. Airwallex's Klarna plugin seamlessly integrates with Grams(28)'s eCommerce platform, with complete setup taking only a week. Through Airwallex, Grams(28) can manage like-for-like settlements in multiple currencies, including USD, EUR, SGD, and HKD, making reconciliation a breeze.

With Airwallex’s like-for-like settlement service, SMEs can cut unnecessary expenses and reinvest resources to unlock global growth.

Open an account now to leverage like-for-like settlements and boost your business performance!

Frequently asked questions

1. Can all online stores accept payments using the like-for-like settlement?

With Airwallex, you can accept payments using like-for-like settlement. If your online store is on Shopify, you can easily integrate Airwallex's Shopify plugin with your Shopify store. Here's how you can do it:

1. Set the currency for your Shopify store.

2. Ensure that your Shopify store and payment process are configured to accept multi-currency payments.

3. Set the transaction currency and settlement currency through Airwallex.

If you use other online store platforms, Airwallex also has an API that lets you set up the solution that works best for your store. This lets you settle orders like they are in your store to avoid unnecessary fees.

2. Can I use multi-currency settlement without a local registered company?

Yes, you can. Simply set your store and settlement currencies to supported ones in your online store settings. If your platform doesn't have the currencies you want, add Airwallex to your store today. You can collect money in over 180 countries and settle it like-for-like in more than 11 currencies.