The 2024 Black Friday and Cyber Monday shopping extravaganza shattered expectations, delivering record-breaking sales for merchants and payment processors, and assuaging concerns about dampened consumer spending in the face of persistent inflation. The five-day period from Thanksgiving through Cyber Monday witnessed a remarkable 8.2% surge in US consumer spending, reaching a staggering $41.1 billion. Black Friday itself claimed the lion’s share of this growth, boasting a 10% increase to $10.8 billion. Payment processors like Stripe and Adyen also reaped the rewards, processing a phenomenal $31 billion and $34 billion respectively over the holiday weekend. These impressive figures underscore the resilience of consumer demand and the continued growth of the e-commerce sector.
Beyond the headline-grabbing overall sales figures, a more nuanced trend emerged: the burgeoning role of cross-border spending. E-commerce platform Shopify reported a 24% year-over-year increase in total sales, reaching $11.5 billion over the four-day period from Black Friday to Cyber Monday. More significantly, the proportion of cross-border orders within Shopify’s total sales rose for the first time since 2021, climbing from 15% to 16%. This seemingly modest percentage point increase translates to a substantial 31% surge in cross-border orders, a growth rate significantly outpacing both the previous year’s performance and the overall growth in total orders (23%). This data clearly indicates that cross-border sales are not only expanding rapidly but also contributing a larger share to Shopify’s revenue stream.
This upward trajectory in cross-border spending is also enriching payment providers. Stripe, for instance, reported that a significant 10% of its total processing volume during the Black Friday to Cyber Monday period stemmed from cross-border transactions, amounting to 43 million transactions – representing 9% of the company’s total 465 million transactions. Interestingly, the average transaction value for cross-border purchases was notably higher, hovering around $74, compared to $66 for domestic transactions. This difference suggests that international shoppers may be more inclined towards higher-value purchases, presenting a lucrative opportunity for merchants and payment providers alike.
Despite the promising growth in cross-border e-commerce, significant challenges persist, particularly regarding price transparency for transactions involving currency conversion. Consumers often face uncertainty about the final cost of their purchases until they receive their credit card statements. This lack of transparency stems from the complexities of foreign exchange rates and fees, which can vary considerably depending on the card issuer and payment corridor. Previous research has revealed that these charges can often exceed the amounts disclosed in banks’ terms and conditions, leaving consumers feeling misled and potentially discouraging future cross-border purchases.
Efforts are underway to address this opacity and reduce costs associated with cross-border payments, including those arising from e-commerce transactions. The G20, for instance, has outlined a roadmap aiming to cap global average retail cross-border payment costs at 1% by 2027, with no single corridor exceeding 3%. However, data collected by FXC Intelligence for the Financial Stability Board reveals that person-to-business (P2B) payments, which encompass a significant portion of cross-border card transactions, are currently exceeding this target. The weighted average total cost for a $100 P2B payment in 2024 remained stagnant at 2.04%, identical to 2023 figures, with over 60% of country corridors surpassing the 3% ceiling. Regional variations exist, with North America showing a slight improvement in average costs, while the East Asia and Pacific region experienced a slight increase.
This issue of opaque and potentially high charges on cross-border purchases presents both a challenge and an opportunity for the e-commerce sector. While unclear pricing can deter some consumers, the substantial growth in cross-border transactions during Black Friday and Cyber Monday clearly demonstrates the market’s potential. Savvy merchants and e-commerce providers are capitalizing on this trend by offering international customers the option to pay in their local currency, providing greater price transparency and fostering trust. This strategy not only enhances the customer experience but also allows merchants to capture the revenue generated from foreign exchange conversion, rather than relinquishing it to banks or other intermediaries in the transaction chain. While some products will always be predominantly sold domestically, the burgeoning volume of cross-border purchases, particularly during peak shopping seasons, underscores the importance of incorporating cross-border strategies into broader e-commerce planning.
