A beginner guide to accepting payments beyond the borders of Indonesia for homegrown business

The basic nature of every business is to grow as part of their survival instinct; the moment a business stops growing, it will also be the business’s death sentence. The most common route for businesses to do this is by expanding their market; be it domestically (tapping to other demographics of the targetted market) or expanding internationally.

Specifically for businesses who choose the latter option — expanding internationally — one often find themselves stumped with the question of; how?

The simplest way to do this nowadays, where businesses no longer need to establish physical brick and mortar presences in order to grow, is via social media, be it starting small by social selling, establishing an eCommerce website, and partnering with a shipping company that ships worldwide (for non-digital goods), or partnering with local partners at the target country — the sky’s the limit, basically. However, there’s still one crucial thing to consider when you want to expand your business overseas, and that is accepting payments.

Accepting overseas payments is actually not as simple as turning on payment methods at your website — it requires a bit more thought especially on your target market’s paying habits and preferences.

Deciding on which payment method to support is the most common challenge that local brands often encounter when planning for overseas expansion. Some pointers on things to consider:

• Your payment experience needs to be able to support local currencies

Most of the time, accepting payments in local currencies is a must; otherwise, customers will need to work out the complexities such as exchange rate and comprehension of the price itself — which adds huge friction to customers’ purchase experience. This could potentially discourage customers from completing the purchase as the longer it takes for customers to do so, the lower the checkout completion rate usually be. This can be handled with a combination of displaying a dynamic conversion rate (be mindful to display the actual charged rate during checkout to protect you from potential disputes due to currency differences!) or accepting a local payment method instead.

• How common it is to use your chosen payment method in your target market?

If supporting a local payment method (with all the associated local regulations) is something that you don’t want to deal with early in your expansion plan, supporting a payment method that can accept overseas payments universally is also a good first step. But it’s also important to take care to understand the usage rate of your chosen payment method in your target market — as it represents the customer’s familiarity and level of comfort in using the payment method, along with the friction associated with it.

For example, card payment is the universal payment method that almost every business can accept everywhere. But, in Indonesia itself, for example, credit card utilization is considerably low compared to other countries with the exception of select demographics and product types. If an overseas company from another country wants to expand its business in Indonesia, accepting only credit cards as the sole payment method may yield a lower penetration rate, especially if they are selling goods that are not often paid with cards (e.g. goods with low price).

On the other hand, cards are statistically the most popular payment method in countries such as the United States, while Europe has more or less equal preferences between digital wallets and cards. Having this preliminary knowledge might help you to have a better sense in understanding your numbers — e.g. you might see a lower penetration rate early on, but it might not be because your product is not a good market fit, it could be a matter of payment method market fit problem instead.

Start with a payment method that’s accepted universally in your target market

At this point, you may be wondering what kind of payment method you can provide to expand your business overseas. My recommendation will be to start with the simplest choice which is credit/debit cards as it’s a universally accepted payment method. As you gauge and have a better understanding of your most important target markets, exploring to accept which local payment methods that are the most popular and suitable for your business will be the logical next step.

One thing to watch out for is to understand that most of the time — payment acceptance is heavily regulated by local laws of every country, and failure to understand the regulations governing it might net you with some headaches (e.g. fraud or even worse, compliance-related penalties). It’s fair however to think that the complexities behind each of the payment methods might not be something that you want to worry too much about early in your expansion roadmap.

My suggestion will be to pick just a couple of popular payment methods in your most important target countries; prioritizing those which have shared popularity in your other target countries (e.g. cards work very well in most countries, along with international digital wallets or buy-now-pay-later payment methods). After you make your pick, make sure to understand the underlying regulations that govern it (such as; is there any chargeback mechanism that I should know of? What is the maximum payment amount supported in one purchase? Are there any products prohibited to be sold by this particular payment method’s regulations?) and its suitability to your industry and product’s pricing. This should help you to get settled especially for the first few years of your expansion roadmap.

If you’re starting from Indonesia, Midtrans will be able to help you to accept card payments from overseas. Reach out to our team and we will be more than happy to share with you some pointers e.g. what countries usually are the popular target market for businesses in your industries, recommendations on fraud patterns to watch out for, chargeback best practices, and others.