veryone in the financial services industry can agree that the Internet has changed the way retailers do business. The Internet, and e-commerce specifically, has afforded merchants many opportunities they simply didn't have before the birth of the information superhighway.

One major advantage e-commerce offers merchants is the ability to sell internationally, without ever boarding an airplane or posing for a passport photo. Merchants need only a Web storefront to present their products to shoppers worldwide. However, merchants don't profit until those "just looking" shoppers have been converted into cash-paying consumers, and a large part of converting international shoppers into buyers requires putting them at ease.

If shoppers are comfortable with their purchases, they will be more inclined to buy and will buy more frequently. One way to put shoppers at ease is to present a shopping experience using their local currency. This includes allowing shoppers to browse the online catalog, knowing the exact and final prices and guaranteeing that the prices quoted will be the prices paid regardless of foreign exchange rate fluctuations.

Now, thanks to companies such as E4X Inc. that's not an unrealistic request. Traditionally, shoppers outside the United States who purchase from U.S. Web sites shop and pay in U.S. dollars, with the currency being converted into their local currency after the purchase has been completed.

The transaction is charged a service fee of anywhere from 3% - 8%, and that fee is split between the card issuer and card Associations. Also, there is the possibility that the quoted price will differ from the transaction price because of changes in the exchange rate, meaning that shoppers often do not know the final, converted price until they receive their credit card or bank statement.

However, there is an easier, less expensive way. When merchants use the E4X solution, consumers pay in their local currency, merchants are paid in their local currency, and both parties know the exact purchase price.

Here's how it works: The prices displayed onscreen are the guaranteed final amounts to be charged to customers' local credit cards regardless of currency-rate variations. The payment is routed through the card processor to E4X.

E4X receives the foreign currency and pays the merchant in the preferred currency. In this scenario, the fee that would have gone to the card issuer and card Associations can now be split among the merchant, processor and E4X.

"We bring the [foreign exchange] FX revenue back from the bank to the merchant side," said Yuval Tal, Chief Executive Officer of E4X. Why is this important to merchant level salespeople (MLSs)? Because if an FX provider works with an MLS, then that MLS can be included in the revenue sharing. And E4X is definitely interested in working with MLSs.

A Global Vision

E4X was founded with the vision of enabling businesses to take advantage of the global nature of the Internet by selling their goods and services in local currencies without the hassle or risks associated with currency conversion. With E4X, merchants sell their products online in the customer's local currency while receiving payment in the merchant's currency of choice.

The privately held company is based in New York and operates a research and development facility in Tel Aviv, Israel. Founded in 1999, E4X has experienced phenomenal growth in a short amount of time.

"Our business has grown exponentially ... our currency conversion and management services are now available on over 80,000 e-commerce Web sites, and our services have expanded to include detailed accounting and auditing reports as well as business-to-business (B2B) services that offer not only currency conversion services for sales to consumers, but also the conversions needed for companies to pay affiliates and vendors in multiple countries," Tal said.

In December of 2003 E4X closed a third round of financing worth $14 million, bringing its total financing to approximately $24 million. Additionally, this past July, Grow-think Research recognized E4X as one of the top emerging companies of 2004.

"The company is profitable and very focused on growing and adding value to our clients' bottom lines," Tal said.

Not Only Conversion

E4X provides a suite of multi-currency services that support online merchants' ability to conduct global business. In addition to local currency pricing services, which allow merchants to display prices in local currencies for global shoppers, the company also offers accounting and auditing tools to help merchants meet regulatory compliance obligations.

Additionally, E4X offers multi-currency reports, which integrate information into a Web interface, allowing merchants to manage and control funds and reconcile revenue at the transaction level. The company also enables merchants to eliminate currency risks inherent to cross border multi-currency sales with its currency risk management services.

"E4X provides FX hedging and reconciliation at the transaction level for the lifecycle of a transaction allowing companies to avoid FX risks as well as precisely reconcile revenue and comply with accounting and auditing requirements," Tal said.

Ideal Customers

E4X works with a variety of companies that sell goods and services online globally. "With E4X, merchants of all sizes can successfully implement sophisticated multi-currency strategies without having to devote time, headcount and operating budget to navigate the related multi-currency issues," Tal said.

The company reports that customers typically are in the travel and hospitality, online retail, and digital goods industries, and usually have large international sales volumes. E4X's customers, such as Digital River, Proflowers.com, Art.com, Net2phone and Musicmatch, are able to provide a choice of currencies for international customers, which can differentiate them from the competition.

Also, the E4X currency conversion removes any geographical barriers to a sale. The company's solution includes a currency detector (geolocation technology) that automatically displays prices in the shopper's local currency while offering a default function so the shopper can change to another currency. Other benefits to merchants include:

• Increased sales: E4X increases browser conversion by making it easier for customers to buy because it enables merchants to provide any customer, wherever they are in the world, with a local shopping experience.
  "We help businesses expand their customer base internationally by selling in multiple currencies," Tal said. Enabling customers to shop in their preferred currency helps a first time customer become a repeat customer and helps attract new ones. E4X merchants can determine how many and which currencies to display to customers.
• Less worry: Merchants can sell in a foreign currency without exchange costs or overhead, and they don't have to bother with converting currency. Merchants also enjoy the fact that they know exactly how much they will be paid. If the sale was for $20 then that is what they will be paid. They don't need to wait to determine the currency exchange rate. The price paid includes all fees, so it is the final price.
• Lower costs: When consumers purchase internationally, they are paying fees to banks and card Associations. E4X processes transactions locally so it is able to charge lower fees. Merchants lock in an exchange rate with E4X and determine the length of that rate: a day, week, month or year. Since E4X combines all transactions into one, it's able to receive lower rates from its bank, which enables it to offer lower rates to merchants.
• Additional revenue stream: By charging an overall currency conversion rate that is generally lower than the combined rate that acquiring banks and card Associations charge, E4X offers merchants an additional revenue stream. E4X pays merchants twice a month.

E4X is especially beneficial to merchants who offer subscription or recurring billing services. Without E4X's solution, customers with recurring charges would see variations in the monthly charges posted to their accounts due to exchange rate fluctuations. These variations can possibly cause refunds and chargebacks. With E4X's guaranteed exchange rates, customers see more consistency in monthly charges without exposing merchants to currency exchange risks.

An Opportunity for MLS Revenue

E4X sells directly to online merchants, as well as through e-commerce service providers, payment processors and other partners, including MLSs. The company has partnered with Paymentech, CyberSource, WorldPay, MasterCard and CanadaPost's BorderFree.com . Most recently, Internet payment service provider Paycom.net partnered with E4X. And MLSs benefit from E4X's success by helping to bring merchants to the company. "We are very dependent on the acquiring banks," Tal said. "If ISOs can bring merchants to the table, then they can be part of the party. MLSs can help ... the critical part is getting to the decision maker."

Working with E4X can be an attractive option for MLSs because there is no need for merchant training. Simply bring E4X a merchant, and they take it from there. For MLSs, FX can be a lucrative upsell to existing merchants and an attractive door opener for prospective clients.

"Unlike earlier generations of multi-currency tools, including currency conversion calculators and dynamic currency conversion, E4X's hedging and netting capabilities deliver a complete multi-currency solution that not only makes it easy for customers to buy, but also easy and quick for merchants' finance, treasury and IT staffs to implement, administer and reconcile," Tal said.

Tal sees nothing but promise for the FX industry. When asked to make some predictions for the future he said, "Better service. More e-commerce volume. More revenue for merchants and more revenue for acquiring banks." And, perhaps, more revenue for MLSs, too.