The shopping events of Black Friday and Cyber Monday showcased robust growth in the realm of e-commerce, defying concerns around consumer spending post-inflation. According to Adobe Analytics, U.S. consumer spending during the five-day period from Thanksgiving through Cyber Monday surged by 8.2% to reach $41.1 billion, with Black Friday alone witnessing a 10% rise that brought in $10.8 billion. This spike in spending has positively impacted payment processors, as companies like Stripe and Adyen reported processing volumes of $31 billion and $34 billion during the shopping weekend, underscoring the events’ significance in the retail calendar.
A prominent trend during this year’s Black Friday and Cyber Monday was the increase in cross-border spending. Shopify reported a 24% increase in total sales, amounting to $11.5 billion over the four-day period. Notably, the share of cross-border orders rose for the first time since 2021, climbing from 15% to 16%, indicating a shift in consumer behavior toward international purchases. This growth in cross-border orders hit 31%, significantly outpacing the overall order growth and highlighting its importance in contributing to the company’s revenues.
Payment providers also experienced advantages due to this burgeoning cross-border spending. For the first time, Stripe reported that 10% of its total transaction volumes during the Thanksgiving to Cyber Monday period were cross-border, amounting to approximately 43 million transactions. These cross-border purchases yielded an average spend of $74 per transaction, surpassing the average domestic transaction value of $66, illustrating that international buyers are willing to spend more and contribute to a larger pie for payment processors.
Despite the promising growth in cross-border e-commerce, challenges remain, particularly concerning pricing transparency. Consumers often face uncertainty regarding the final charges for currency conversion until they receive their credit card statements. Historical analysis has shown that fees incurred can frequently exceed those disclosed in banks’ terms and conditions. Furthermore, costs associated with cross-border payments can vary greatly depending on the provider and transaction corridor, necessitating improvements to reduce these financial burdens.
The G20 has taken steps to address these cost issues by targeting average global retail cross-border payment costs to be no more than 1% by 2027. However, data revealed by FXC Intelligence shows that the average cost for a $100 person-to-business payment is still above this benchmark. As of 2024, the global weighted average total cost stood at 2.04%, without any improvement from 2023. Certain regions, such as East Asia and the Pacific, saw their costs rise even further, suggesting that despite efforts, the goal of reducing cross-border payment costs remains challenging.
For e-commerce providers and merchants, navigating the complexities of cross-border transactions offers both challenges and substantial opportunities. The alternative of allowing overseas customers to pay in their local currencies can enhance consumer confidence while also generating additional revenue for merchants. By capturing the foreign exchange conversion fees instead of allowing banks or payment processors to absorb the costs, businesses can better position themselves to capitalize on this growing segment of the market. The increasing volumes of cross-border purchases during the busy holiday shopping season serve as a compelling reminder of the vital role cross-border transactions should play in future e-commerce strategies.