Managing Payment Transaction Costs at Multinational Online Retailers

Abstract

Providing cost- and credit-efficient payment services to customers in e-commerce is a critical success factor for retailer competitiveness. However, country-specific payment provision strategies for internationally operating retailers are difficult to pinpoint, as existing research on the economics of payment instruments mostly focuses on transactions within one country, neglect electronic payment instruments due to data limitations, or base cost estimations on aggregated statistics or survey data. This article copes with these challenges by using a unique transaction-level data set with more than 29.1 million actual sales transactions, and examines how retailer transaction costs of online payment instruments invoice, credit card, PayPal, and prepayment differ across 14 European countries. Therein, this study identifies transaction cost differences due to country-specific pricing of payment services. Moreover, empirical results reveal that culture difference accounts for variation in customer payment timing and hence, affects retailer transaction costs when offering payment services in e-commerce. The presented research results allow retailers to holistically evaluate the efficiency of their current payment portfolio, and in developing country-specific payment provision strategies in order to reduce transaction costs and working capital requirements.

Key words and phrases:

• Cross-cultural
• cross-national
• e-commerce
• online payments
• payment transaction costs

Additional information

Notes on contributors

Robert Maximilian Grüschow

ROBERT MAXIMILIAN GRÜSCHOW ([email protected]; corresponding author) finished his Ph.D. at RWTH Aachen University, Germany. He received his M.S. in industrial engineering from the school of economics and management at Leibniz University Hannover. His research interests include e-commerce payment systems and online marketing.

Malte Brettel

MALTE BRETTEL ([email protected]) is a professor of business administration and entrepreneurship at RWTH Aachen University and at WHU–Otto-Beisheim-School of Management (part-time), Germany. He is also vice-rector of industry relations at RWTH Aachen University. His areas of research interest include entrepreneurial management and development, entrepreneurial marketing, entrepreneurial finance, and innovation management. He has published several books as well as articles in many academic journals, such as Strategic Management Journal, Journal of Product Innovation Management, Journal of Business Venturing, and Marketing Letters, and has presented his research at leading international conferences.