Will A Single Digital EU Market Make X-Border Easier?

In the cross-border marketplace, consumer choice will win.

Rick Barbari, Group Vice President of World Payments at Digital River, has said it before, and he said it again in his most recent discussion with MPD CEO Karen Webster. Talking about their latest findings from the X-Border Payments Optimization Tracker, Webster and Barbari reflected upon what the initiative to create a single digital market within the EU will mean for cross-border merchants, as well as the state of the marketplace as a whole.

As cross-border eCommerce continues to expand globally, merchants and solutions providers will have to do even more to differentiate themselves. What Barbari puts forth is that the key to doing so will be found – as it so often is – in meeting consumer expectation.

KW: Couple of topics on my mind this month, and I’m hoping you can shed some light on them.

The first is the initiative within the EU to create a single digital market. This would standardize rules across the EU member countries for lots of things, mostly related to digital goods. I’m curious to get your perspective on how this initiative might influence cross-border sales.

RB: While you’re right that initial intention does appear to be focused on digital goods, it would not surprise me if this initiative ends up paving the way for further collapsing of the borders around physical goods, as well.

The concept of the single digital market makes a lot of sense to me. It revolves around 3 primary pillars that are backed up by about 16 specific actions. While we don’t need to go into all of the actions here, the 3 central concepts are: making consumer access to digital goods much easier; leveling the playing field among merchants; and maximizing the opportunity for cross-border eCommerce sales.

It presents a tremendous set of opportunities, but also, as you mentioned, some pretty interesting implications.

KW: I’m curious about the implications from the solutions provider perspective. After all, much of what they are trying to do is make the process of cross-border commerce more efficient. What kind of an impact does the EU initiative have on solutions providers?

RB: It’s probably going to make things a little more challenging for all of us.

We’re still very much at the starting line, heading down the path. An important aspect to note, first and foremost, is that we’re going to encounter a lot of significant changes in the European market. We’ll see it in everything from telecom to cybersecurity, from data privacy to compliance, and a lot of other aspects. All of those changes are not yet fully articulated.

From a merchant perspective and a third-party provider perspective, there are two key points. One is the need to understand those nuances. We’re going to have to comply – no question about it. But as these rules, regulations and changes begin to evolve, we have a tremendous opportunity to take advantage of them. To get out in front of them will actually allow us to differentiate ourselves.

And that leads into the second point: it’s going to be an aggressive market. Opening commerce to 28 new markets is going to make for a very competitive land grab, and the most successful players will be the ones who get out in front and optimize their cross-border opportunities.

KW: What are some of the opportunities for differentiation?

RB: You’re going to have to know how to play in these markets. While there will be a leveling of the playing field, from a risk and compliance perspective – even from a fraud perspective – you’re going to be serving different markets. As a provider, you need to take into account that not all things are equal.

Another nuance of that is it creates a necessity to be ready to tune. These markets all have favorite payment methods, favorite transaction types, different shopping experiences, and so on. As a provider, you’ve got to be ready to start tuning to optimize for those markets – but also know that the consumers are going to tune their expectations, as well. What’s first out of the gate might not necessarily be the final position.

KW: It’s interesting that you bring up consumers and their preferences and how they’re shaping the behaviors of players in the market.

One of the things that we pointed out in the tracker this month is the finding that Chinese consumers – who, of course, everyone wants to reach – are looking outside of China to merchants in the U.S. and South Korea. Meanwhile, for the first time ever, the Asia Pacific region surpassed North America to become the number one global B2C eCommerce market.

So Asian consumers are looking elsewhere, while the rest of the world – America in particular – is beating a path towards Asia. What do you think is motivating all of that?

RB: I find it really interesting, because you’re talking about a market that is continuing to emerge and is clearly starting to dominate, from an addressable market perspective.

We’re seeing a lot of growth in the Chinese consumer shopping experience. These are people who are traveling internationally more frequently; they’re buying online cross-border; they’re attending universities abroad…this all leads to more Chinese consumers transacting across the globe.

You highlighted one of the key points that we’ve spent some time thinking about, and that is the fact that the world as a whole is moving aggressively toward cross-border solutions. You’re right – consumers are definitely looking to Chinese and South Korean and APAC merchants. But it’s not just one nation; it’s becoming a pretty significant trend across the marketplace globally.

KW: The actual delivery of goods that are purchased cross-border is a massive logistical undertaking that can be very costly – not just in terms of shipping, but also taxes and all of the things related to it.

It seems as though, unlike the case with domestic shoppers, cross-border shoppers are willing to trade delivery time for cost. Is that what you’re discovering? And how are you helping merchants meet the expectation of consumers who would love to get things faster but might not be willing to pay for that benefit?

RB: I think you’re hitting it on the head. This is clearly a situation where – and we’ve said it before – consumer choice will win.

You articulated the situation precisely: consumers are willing to wait for the delivery of goods and services because they have already established that they are not really excited about paying more to expedite that process. That is the trend.

Consumer choice is the key, and it’s going to drive merchant behavior. As merchants think about how to satisfy consumer choice, they’re going to back up a little bit and recognize that fulfilling cross-border transactions is a logistical headache. We as providers need to create the right degree of flexibility in merchant solutions so that it’s not just a one-size-fits-all framework.

KW: In terms of that tradeoff that consumers are willing to make between the cost and the time they have to wait for an item, communication with the merchant seems to be an essential component. A consumer who’s making a purchase from someone they don’t know, who’s in another country, needs to be kept in the loop about when those goods are going to arrive.

RB: Right; and merchants are really starting to adapt to that.

Point number one – it’s absolutely clear that consumers have established their preference. They want shipping within two days, and they want it free. They’re not getting that all the time, but that’s what they want. And that’s the expectation that starting to get set.

What we’re beginning to see now – especially in some of these emerging countries – is more of a democratization, if you will, of the deliver process. We’re moving more towards Uber-like delivery capabilities, where there is a leveraging of partnerships and infrastructure to help solve for that last mile.

In our point of view, because the consumer expectation is to not have to wait very long, the concept of long delivery times in cross-border commerce is going to be a short-lived experience. We’re watching an entirely new marketplace start to emerge for the physical, last-mile delivery of these goods.

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