Marginal Gains #4: Recovering payments
Outside of North America, international credit cards (e.g. Visa, Mastercard, Amex) are not necessarily the most used payment methods. In China for example, only a small percentage of shoppers pay with international credit cards. And in Germany, hardly anyone uses credit cards for online purchases.
Given these market specifics, it is worth noting that as you (regardless of your business size or what industry you’re in) look at growing your business internationally, you need a payment acceptance approach tailored to each country to increase market reach.
With a huge annual growth rate, cross-border ecommerce represents a huge opportunity for many businesses to expand internationally. Yet going global comes with its own set of challenges. One of those challenges is online payments.
While it’s pretty clear that understanding the local market including regulations, economics, and cultural differences, it’s essential to drive local success. And the same concept applies to payments. You need to take local habits into account as customer payment preferences may differ quite drastically from one country or region to another.
Asia Pacific (APAC)
In the Philippines, mobile payments are gaining traction, with methods such as SMART Money and Globe GCash leading the pack. Although non-cash transactions are growing rapidly, cash on delivery is still relevant and important in countries such as India and Indonesia, particularly for retail goods.
Latin America (LATAM)
In Brazil, up to 80% of all ecommerce payments are made in installments. While the majority of shoppers in Brazil prefer to use credit cards, many of those cards are not capable of cross-border payments.
Cash-based methods like Boleto and OXXO are very popular in Brazil and Mexico. Not supporting cash-based payment methods in these markets will be a major challenge for any business, but particularly for online retailers or those targeting unbanked consumer segments.
In Germany, SEPA direct debit (a Europe-wide Direct Debit system), SOFORT (now Klarna), and Giropay account for the majority of online transactions.
The Netherlands has iDEAL as the most popular payment method. Direct debits and open invoice payments are also fairly popular.
In Russia, cards represent less than half of online transactions. The most popular local payment methods are digital wallets (Qiwi, Yandex.Money and WebMoney) as well as cash on delivery.
Most Canadian and US shoppers are Visa / Mastercard cardholders. But local payment methods still matter. According to the US Department of Commerce, over 76 million visitors went to the US in 2017, and 3.2 million were from China. These visitors are shopping at America’s ecommerce sites expecting to use their local payment methods.
While keeping customer preferences in mind, you should consider your business model when evaluating the hundreds of payment methods available. For example, handling recurring transactions with cards is easy, but there are pros and cons to doing so with direct debit.
For instance, incorrect bank account details or “insufficient funds” responses may not be triggered until days after a transaction was initially placed. Decline rates for transactions in sectors such as telecom can high in Germany or the Netherlands, due to wrong bank account details or insufficient funds in a consumer’s bank account.
Many of the world’s most popular payment methods don’t support recurring transactions, typically because they require the user to authenticate every single transaction. For subscription billers like utilities or services like Spotify, this is a serious consideration, one that may prompt them to consider moving to a prepaid or quarterly / biannual subscription model in some markets.
Depending on your business size, you may have different objectives. For example, the key focus for a large business in the United States may be on customer experience such as making a checkout look and feel the best it could possibly be.
Since Europe and Asia Pacific are more diverse, market reach and acquiring strategy tend to be more important to merchants in those markets. Small and mid-sized merchants may be more concerned about speed to market via a quick and seamless integration across different countries, where a larger enterprise may prioritize an efficient entity structure for tax purposes.
Local forms of payment are essential to unlocking customer segments and generating incremental sales in large ecommerce markets such as China, Brazil, Germany and the Netherlands. Still, you need a payment acceptance approach tailored to each country in which they operate.
Offering too many or unused payment methods will clutter your user experience and most likely decrease conversion rates. In addition, you might want to consider testing to fine-tune the relevant payment acceptance policy for their business.
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