Any merchant has the ability to compete when it comes to selling cross-border. But competing to win, says Rick Barbari, Group VP at Digital River, is a whole different ball game. Winning at cross-border commerce not only requires a merchant to know and enable preferred payment methods like Boletos in Brazil, but also a true understanding of a specific nation’s rules, regulations and complex infrastructure. For merchants, it’s about being able to conduct commerce end-to-end, just the way the consumer expects it. MPD CEO Karen Webster recently took a jetlag-free trip around the world with Barbari to find out the key ways merchants serve their customers globally, while complexities in each foreign market remain daunting, and collectively, rather overwhelming.
KW: So we’re going to go around the world with you, and it will be a really interesting whirlwind tour of a couple of really interesting geographies that are driving cross-border payment.
Our first stop is China. So, obviously, a gigantic market – lots of consumers, lots of smartphones, and a lot of appetite to buy things cross-border via the Internet. Alipay is obviously the method of payment that many Chinese consumers have available to them – I think recent stats suggest there are 300 million digital mobile accounts. Merchants must need to accept Alipay if they want to serve the Chinese consumer, right?
RB: Absolutely. There are new stats coming out everyday, and I think that’s a reflection of the aggressive adoption of Alipay. No doubt – it has well over a 50 percent market share, and a tremendous volume of transactions around the world. And I think what we see with Alipay is that it really appeals to the consumer – it’s a safe, trustworthy, convenient and mobile-enabled capability that really does support Chinese shopping.
KW: So that’s only one part of it though, right? Payment is one thing, but there must be other things that merchants need to do to attract that consumer?
RB: Yes, definitely. So if we talk about how you as a merchant take the most advantage of the Chinese market opportunity that’s ahead of you, I really put it into two different categories. One category is your Chinese shoppers that are buying from foreign merchants, and the other is just selling locally in China. I think each one of those has unique characteristics to it.
Let’s start with the Chinese shoppers buying from foreign merchants. You have 90, almost 100 million Chinese people traveling each year – and a couple million of those will be to the U.S. Who is your Chinese consumer? Nearly 30 percent of international students that are studying in the U.S. are Chinese.
So if you think about the Chinese market, it’s not just about servicing China, but it’s also about servicing these folks who are also traveling. What that breaks down to is when they’re shopping, you want to make their experience as local, familiar and comfortable as you can. I think Alipay does a fabulous job of that, but look at Chinese Union Pay as a rapidly emerging payment method. Three and a half billion cards, with three and a half trillion dollars in processing. Union Pay is emerging like crazy.
If you think about servicing this traveling market, you have to make sure you’re accepting payment methods that are familiar to them just as they are back home.
KW: I think that’s a good point – making the experience local even if the shopper isn’t local. Let’s fly now to India – a really interesting market, and also with enormous untapped potential. But it’s also a very different market – cash-based and hard to get a credit card, and I know there are some unique phenomena in the Indian market where cash-on-delivery is a big deal. How in the world do merchants serve a consumer base that doesn’t have a credit card and likes to pay in cash?
RB: It’s difficult, there’s no question about it. I think that’s why we see India remaining as top of mind when we talk about our BRIC countries. But the penetration has been a little bit slower than the penetration into markets like Brazil, where in fact you do have infrastructure that supports what you’re talking about.
So when we think about commerce, one of those components is the payment process. Everything else around that commerce experience needs to there – everything from local sites, to local languages, to the ability to physically deliver goods and services. By the way, you also have to physically help manage the returns of those goods as well. So an end-to-end consumer experience.
In India, you’re right. The infrastructure is not necessarily what it is in larger countries that have already invested in that infrastructure. All reports that we read, everything that we know suggests that logistics are going to be the next biggest infrastructure – the ability to get physical goods and services to the consumer.
And Indian investment, just like in any emerging country, is big, complex, expensive and you have to know the local market. One of the ways we suggest merchants penetrate this market is through a local partner that has the logistics and infrastructure if not figured out, then understood. Rather than you having to recreate the wheel, leverage some of the experiences that are there.
KW: I would think that logistics is also an issue in China. I know there’s a lot of concern about counterfeit goods coming into the market, and even if the Chinese consumer purchases something, it may not end up getting to them as something they originally purchased. Logistics needs to be one of those strong common denominators in some of these markets, wouldn’t you say?
RB: Yes, there’s no question about logistics. To pick on the concept of counterfeit goods and services, what we’re seeing as an emerging trend is what I’ll call branded manufacturers. Branded manufacturers are by definition large global brands that are going directly to consumers, rather than only through third-party channels.
So take any large, electronic manufacturer that’s no longer just going to big box retailers, but that’s now enabling consumers to buy directly from them via their website. We see a lot of that in the U.S., but the reason I think it’s important is that as merchants consider penetrating some of these markets, they absolutely have to understand your point. Consumers want to make sure they are getting the true goods and services they think they are getting. Branded manufacturers have a tendency to bring that credibility to that transaction.
KW: So now let’s go to Brazil – yet another market that has idiosyncrasies associated with it. Consumers like to buy, but have particular preferences for paying on installments. I know Boleto seems to be a popular way of paying. How does a merchant get connected to the consumer in Brazil and offer something like that?
RB: So Boleto is clearly a payment method of choice. But what we’re also seeing is a continued penetration of cards, but cards that are also able to operate in installment methods. Many U.S. consumers think traditional credit card transactions are basically installment loans that can be paid off whenever they want, but credit card installments are also becoming very popular.
The key points in Brazil is understanding the complexity of expatriating money, and the complexity of the in-country government structure – exports, imports and rules and regulations for different goods and services. What makes Brazil such a complex environment is that there are so many rules and regulations. That’s not a bad thing, but if you decide to start penetrating that market, you really have to take time understand it.
KW: You have to take time to understand all of these markets, and that to me, if I’m a merchant, makes my head spin. I want to serve these consumers that now have access to me because of their access to the Internet, but the complexities within each of these markets is daunting – collectively, they’re overwhelming. How do merchants deal with all of this?
RB: I think what we’re asking is how you ensure that you as a merchant are able to compete in this environment. Anyone can compete, but competing and competing to win is a very different conversation. The Brazilian market is really complex from a tax perspective, and I think if you want to conduct commerce in that population, you have to really understand the tax structure needed – you could have a structure that could impact you 60-70 percent? That’s real.
In my opinion, you have to invest in the marketplace. You have to understand what legal structure you need, what compliance structure you need and how your operations need to live and breathe in the Brazilian market in order to truly succeed.
KW: So it also sounds like because each of these markets is so very different, really understanding how to adapt what it is a merchant is doing and offering is critical. It really does go beyond the mechanics of accepting payment and dealing with the nuts and bolts of logistics. It sounds very strategic in terms of deciding how to approach these markets.
RB: I agree. These are actually very fun conversations that we have in the marketplace all of the time. There is a lot of conversation about ensuring that you have the right payment method – payments, payments, payments. I live and breathe this stuff – I absolutely agree that you have to have the most pertinent localized payment methods in place.
However, if you are a merchant, it’s not just about being able to accept a Boleto. It’s being able to conduct commerce end-to-end, front-to-back, the way the consumer expects it.
KW: So maybe we can wrap up by getting your words of wisdom about what some of the things are that need to be considered to “compete to win” in these markets? You mentioned early on it’s acting global, but really delivering local regardless of where the activity is taking place. You talked about logistics. What key points can you leave us with?
RB: We can probably put it into a couple of different buckets. First, you absolutely need to understand how consumers like to pay. That’s a broad category – broader than just which card or wallet they like to use. It’s how they want to use it. That’s where mobile technology and the process of accepting payments methods will come into play. It does revolve around the payment capability – you cannot close a commerce conversation without executing the payment.
When you talk about bringing the end-to-end e-commerce experience together, you really have to understand the market dynamics. Here’s how we think about it: Start with understanding the governance. That’s the tax structure, the regional rules and regulations, and the imports and exports. That could be a significant investment for you.
Then, once you’ve figured out how consumers like to pay and what the government structure is in the market – then you can start to break down the logistics. Where we tend to fall back is there are partners available in these markets – leverage those partners for things that you as a payments company or you as a merchant don’t do as well at. That is, delivering goods and services in markets that are foreign to you.
As you continue to mature in that marketplace, you can build your own logistical capabilities, but not leveraging the partners initially could be huge barrier to entry.
Group VP, Digital RiverRick Barbari is Group Vice President of Payment Products for Digital River. Leveraging more than 20 years of experience, Mr. Barbari is responsible for the product offerings and go-to-market solutions of Digital River’s World Payments and global eCommerce solutions. Digital River offers clients world class eCommerce, global payment, and revenue generating marketing services. Servicing clients in over 175 global markets, Digital River is a $400M publically traded company, found on the NASDAQ at DRIV.
Prior to Digital River, Rick served at Optum Health, responsible for their Worksite Wellness business and consumer Solutions online health and wellness portal offerings servicing private portal offerings. Mr. Barbari also was responsible for the public health and wellness destination site launched as myoptumhealth.com, providing health information, health evaluation tools, and ecommerce capabilities.
Before joining OptumHealth in 2008, Mr. Barbari led product and business strategy for Scoring Solutions at Fair Isaac Corporation (FICO) in Minneapolis, where he was responsible for product evolution and innovation of consumer and corporate credit management analytic capabilities. In previous leadership roles as a senior manager in the financial services practice at Accenture, Mr. Barbari drove business, technology, and operations consulting relationships with banking and brokerage clients. He is a graduate of Gustavus Adolphus College and has a degree in Organizational Management with a concentration in computer sciences.
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