Consumers in the developed world tend to think of their financial systems as complex, particularly as compared to the developing world. And while that is not an entirely incorrect perception, it might just be a little bit skewed. When it comes time to pay in a store in the U.S. and Western Europe, the decision is actually pretty simple because the picture is fairly dichromatic — cash or card.
The new or the new — mobile wallets — coexists side by side with the old — <gasp> checks and even cash, but they are clearly at the extreme. The overwhelming majority of the time that a customer pulls out her wallet in a store, they are paying with a plastic card.
That picture changes somewhat when one shifts online. Cash by and large drops out of the equation, but it remains basically dichromatic. Developed world consumers will either make a payment with a card, or from a bank account using some variation on the Automated Clearing House (Pan European Automated Clearing House).
But actually dichromatic is a bit unfair when it comes to developed world online payments - for two, oddly opposite reason. The first is that that balance is tipped, particularly in the U.S., toward card payments. The second is that online payments are increasingly likely to include a third feature: an intermediary mobile wallet.
Taking a step back and a more global look at the development of payments, particularly online, it quickly becomes apparent that simplicity is more than exception than the rule when it comes to how consumer pay on the Web.
“While credit cards are still dominant, if merchants do not offer alternative payments, they are missing out on a large percentage of the world market,” Martin Schrimpff, Head of Global Sales and Business Development of global payments facilitator PayU, told PYMNTS in a recent interview. “In India, 17 percent of online payments are made via bank transfers. That represents millions of consumers. In Latin America, without alternative payments, less than 50 percent of the online buyers would be able to pay, simply because a large percentage of the population does not have a formal banking product.”
PayU would know, as it specializes in providing local payment solutions for both local and multinational online eCommerce operations and connection those merchants with consumers and then making it possible for said consumers to pay those merchants. And its roster of merchants served is likely recognizable to anyone with even a passing familiarity with logos — including such household names as Adidas, Estee Lauder and Groupon, among others.
And what it’s learned it the last year of processing payments on five continents for over 160,000 merchants and 10 million consumers is that it pays to be flexible. Like really flexible — PayU works with over 250 distinct payment methods. And while that may seem extreme or unduly complex, according to the company that is just the reality of the developing market.
“In a country like Argentina, cash payments make up a high percentage of the overall transactions. Most merchants in the U.S. do not even know that online transactions can be paid in cash and usually are in many markets where we operate. For another example, in a country like Poland, pay-by-link is far and away the most used payment method, even though the credit card penetration is quite high,” explained Schrimpff.
And this pattern, PayU’s data reflects, is common across the globe for its total uncommonness for developed world merchants. Other than Argentina - Mexico and Brazil see huge cash penetration for online purchases, installment payments are part of half of all online transactions in Turkey, and in Russia a full 40 percent of all transactions are payouts.
PayU doesn’t offer a diverse solution set because it is showing off — it pretty much doesn’t have a choice in the technicolor payments landscape.
“PayU will open more alternative payment methods, and therefore expand the market potential of consumers engaging in eCommerce. This is a way for unbanked populations to join in the world of eCommerce, where we see a lot of interest and opportunity.” PayU’s Schrimpff noted.
Making eCommerce accessible to anyone, anywhere is a simple sounding goal that (as the 2015 figures on developing economy methods demonstrate) is more complex in execution than it is in concept. Online payments did not, in most cases, sort of spring into an economy full formed — and has instead grown up and around the financial norms of the societies it has entered.
But merchants worldwide want to tap into those developing market customers, and developing market customers want to be tapped - the trick is finding way to make that connection happen. The good news, according to PayU, is that those connections are getting easier to make and, with right tech, the world of eCommerce can be a very inviting place.
“Our goal as PayU is to open the door to any consumer in any of our 16 markets to purchase products or services online, and a channel to achieve this goal is via alternative payments.”
To download the full .pdf, click here.