PSD2 Explained: What European Digital Businesses Need to Know
Global expansion is the dream for every digital business. Whether you sell SaaS subscriptions, digital goods, or online services, reaching customers worldwide is now within reach. But with that opportunity comes significant operational complexity and payments are often the first roadblock.
The big question for growing companies in is this:
- Should you build your own payments stack with multiple gateways and providers?
- Or should you partner with a Merchant of Record (MoR) that manages payments, taxes, and compliance on your behalf?
While DIY may seem flexible, it can quickly become costly, time-consuming, and risky. Below, we explore the five most common pitfalls businesses face with MoR and payment gateways and how to avoid them.
Assuming All Payment Gateways Work the Same
Many businesses assume all payment gateways perform the same across markets. But international payments are highly regionalized:
- Declined transactions in key markets: For example, some cards may not be supported outside certain regions
- Revenue loss: Even a small 1-2% drop in approval rates can mean thousands of dollars lost monthly
- Customer churn: Frustrated users abandon checkout or move to competitors
💡 Example: A SaaS provider expanding into Asia may see their credit card approval rates drop drastically because their chosen gateway lacks local acquiring partnerships.
Pro tip: Choose a payment partner with smart payment routing that can select the most appropriate payment route based on factors such as region, currency, and payment method. This can help improve payment acceptance and reduce failed transactions.
Underestimating International Tax & Compliance Complexity
Selling internationally triggers complex tax and compliance obligations, including VAT in Europe, GST in APAC, sales tax in the US, and local digital service taxes. DIY setups often result in:
- Incorrect tax calculation or remittance: One small mistake can lead to fines and audit risk
- Delayed market entry: Time spent configuring multiple tax solutions slows growth
- Operational overhead: Constantly updating rates, exemptions, and thresholds diverts resources from product and marketing
💡 Example: A digital software vendor expanding into the EU initially misconfigured VAT settings in multiple countries, resulting in over €50,000 in fines and months of administrative work.
Pro tip: Partnering with an MoR ensures end-to-end compliance. Nexway automatically calculates, collects, and remits taxes, letting you focus on expansion instead of compliance headaches.
Treating Fraud and Chargebacks as an Afterthought
Fraud is a persistent global risk. DIY gateways often provide basic fraud checks, but these are rarely sufficient for international sales. Common gaps include:
- Chargeback management failures: Without a unified process, disputed transactions can accumulate, risking account suspension
- Region-specific fraud threats: Fraud patterns differ by geography and payment type
- Reputation damage: Repeated fraud incidents erode customer trust
💡 Example: Expanding into new markets can expose businesses to different fraud patterns and payment risks, making consistent fraud monitoring and chargeback management essential.
Pro tip: An MoR like Nexway integrates fraud prevention, monitoring, and dispute management, minimizing risk while maintaining smooth operations across all markets.
Neglecting Payment Localization and Customer Experience
Checkout friction is a silent revenue killer. Fragmented setups can frustrate customers:
- Confusing redirects: Switching between gateways causes drop-offs
-
Missing local payment options: Buyers increasingly expect BNPL, wallets, or regional methods
- Currency issues: Buyers abandon carts if they cannot pay in their local currency
Payment preferences vary significantly by market. Offering the right local payment methods, currency, and checkout experience can reduce friction and help customers feel more confident completing a purchase.
💡 Stat: Studies show 7 in 10 online shoppers abandon carts if their preferred payment method is unavailable.
💡 Example: A SaaS subscription platform saw 20% higher conversion rates after switching to an MoR with local payment methods and multi-currency support.
Pro tip: Prioritize localized, frictionless checkout experiences. Nexway enables smooth multi-currency, multi-method payments that boost trust and conversions globally.
Assuming DIY Is Always Cheaper
DIY can look cost-effective initially, but hidden costs accumulate:
- Integration & maintenance costs: Multiple gateways require constant monitoring and updates
- Compliance errors: Small mistakes can result in penalties or lost licenses
- Revenue leakage: Failed or delayed transactions directly reduce sales
- Internal resource drain: Teams spend hours reconciling systems instead of focusing on growth
💡 Example: A software vendor using 4+ providers for payments, fraud, and taxes spent over 30 hours per week managing operations, costing more than a single MoR solution would have.
Pro tip: Factor in the total cost of ownership. While an MoR may require an upfront investment, the ROI is clear: faster market entry, lower risk, higher approval rates, and reduced internal workload.
MoR & Payment Gateways: Lessons for 2025
The lesson for 2025 is simple: DIY payments don’t scale. What works in your home market won’t necessarily work across borders. As digital commerce becomes more regulated and more competitive, businesses need more than just a gateway, they need a complete operational partner.
With Nexway as your MoR, you get:
- Global reach: Sell in 140+ countries with one integration
- Tax & compliance peace of mind: Full legal coverage in every market
- Fraud protection: End-to-end monitoring and chargeback management
- Optimized conversions: Smart routing and localized checkout experiencesInstead of juggling multiple solutions, you get a unified model that accelerates growth and minimizes risk.
Want to Dive Deeper?
Wondering how a Merchant of Record differs from a payment gateway and which model is right for your business?
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