Cross-border card acquiring is an arrangement in which a merchant's card payments are processed by an acquirer based in a different country or region from the one where the transaction is treated as taking place, typically because the merchant sells to customers abroad through a single acquirer in its home market. The term is also used more loosely for any acquiring where the card issuer and the acquirer are in different countries. It is the alternative to local acquiring, in which a merchant uses an acquirer in each market where its customers are.
Cross-border acquiring is common for online merchants expanding internationally, because one contract and one integration can cover many countries. It comes with higher costs, lower approval rates in some markets and regulatory limits, which lead larger merchants to combine cross-border and local acquiring. The fees involved include cross-border interchange and network cross-border charges, which form part of a merchant's overall cross-border payments costs.
Cross-border card acquiring in plain terms
Imagine a shop in one country that sells to customers all over the world by mail order, and banks all its takings with its home bank. Every time a foreign customer pays, the money has to travel across borders, change currency and pass through extra checks, and each step adds cost and delay. Some foreign banks are also suspicious of payments coming from abroad and refuse more of them.
Cross-border acquiring is that set-up for card payments. It is simple to arrange, but a business with many customers in a particular country often finds it cheaper and smoother to open a local account there.
How it works
A merchant signs with an acquirer in one country, usually its own, and sends all its card transactions to it, wherever the customer's card was issued. The acquirer routes them through the card networks to issuers in many countries. When the issuer is in a different country from the acquirer, the network treats the transaction as cross-border, applies cross-border interchange and fees, and may convert currency. The merchant is usually paid in one or a few settlement currencies, and customers may see the charge in a foreign currency or be offered dynamic currency conversion.
Costs and approval rates
- Higher interchange. Inter-regional and cross-border interchange rates are usually higher than domestic ones.
- Network cross-border fees. Networks add scheme fees on cross-border and currency conversion transactions.
- Currency costs. Conversion spreads or an FX mark-up may apply to the merchant, the customer or both.
- Lower approval rates. Issuers often decline more foreign-acquired transactions, especially card-not-present ones, because they see them as riskier, which can cost more in lost sales than the fees themselves.
Some local payment features, such as domestic debit networks, instalment plans or local authentication methods, may also be unavailable through a foreign acquirer.
Network rules and regulation
Card networks generally require an acquirer to be licensed or authorised to acquire in the country where the merchant is located, with defined exceptions. In the European Economic Area, an acquirer authorised in one member state can serve merchants across the EEA through passporting, which makes cross-border acquiring within the region routine. Elsewhere, a merchant's legal location, determined by factors such as where it is incorporated and operates, decides which acquirers may serve it. Some countries add their own requirements: India requires payment system data to be stored only in India, and several countries require domestic transactions to be processed by domestic switches. Merchants sometimes use a merchant of record or payment facilitator that holds local licences in many markets.
Cross-border versus local acquiring
| Factor | Cross-border acquiring | Local acquiring |
|---|---|---|
| Set-up | One contract and integration | Contracts and often a local entity in each market |
| Costs | Higher interchange and cross-border fees | Usually lower network fees |
| Approval rates | Often lower for foreign cards | Usually higher, since transactions look domestic |
| Local features | Limited | Access to domestic schemes and methods |
Many large merchants use both, routing transactions through a local acquirer where they have volume and a cross-border acquirer elsewhere, often with multi-acquirer processing or a payment orchestration platform to choose the route for each payment. Whether a transaction counts as domestic depends on network rules about the merchant's location, not merely on where the acquirer is, so merchants cannot simply book sales through a local acquirer without a genuine presence in that market.