A full 2.14 billion consumers around the globe are projected to be shopping online by 2021, presenting a tempting opportunity for the subscription businesses that can tap into this robust international customer base. Consumers do not necessarily share the same payments and shopping preferences across countries, however, so firms looking to remain competitive should tailor their approaches to each locale.
Consumers want familiar, intuitive navigation and purchasing options, and international businesses need to simultaneously offer buying experiences that meet those expectations and remain compliant with shifting local regulations. Subscription providers entering new markets must compete against domestic companies that are already in sync with how local consumers like to pay and shop. Providers that want to achieve localization must attend to all aspects of the purchasing experience, noting which payment methods are popular and have high penetration as well as keeping up to date with changing commerce policies.
This month’s Deep Dive examines key strategies subscription merchants can use to succeed in international markets.
Matching Payments to Local Preferences
Companies must translate all parts of the shopping experience, and that includes payment options. Doing this correctly requires providers to note which currencies and purchasing instruments consumers in each market prefer to use with recurring expenses.
Failing to provide convenient currency options will be detrimental to businesses’ bottom lines. A report found that 25 percent of consumers will abandon online shopping experiences if they cannot pay in their preferred currencies. Those who are willing to convert currencies themselves, meanwhile, may misunderstand how much they will actually be paying. The currency converters customers may find from online searches typically rely on mid-market interbank exchange rates, which are unlikely to match the retail rates involved in the sale. Furthermore, banks tend to charge currency conversion and foreign currency purchasing fees, costs that are not reflected in online currency converters’ calculations and that leave customers feeling cheated.
Presenting each market’s consumers with their favored recurring payment methods is also critical to persuading new signups and retaining existing customers. Credit cards tend to be popular in the U.S., but won’t cut it in the U.K., for example. A 2019 report found 43 percent of consumers there are “very unlikely” to use credit cards for online recurring purchases, 48 percent prefer to use direct debit and 12 percent would choose to use digital wallets. Catering to British consumers thus requires an approach that is attentive to local habits. This is often direct debit, which 90 percent of U.K. consumers reported using to pay for some or all of their recurring bills in 2017.
Consumers who are not presented with their desired payment methods might abandon the subscription signup process and select competitor companies instead. Meeting local transaction preferences is even more important to startups and fledgling businesses, which do not have long-established positive customers relationships on which they can lean. They must instead build out their user bases by making it clear they can provide convenient, appealing buying experiences.
Attending to Accessibility and Market Penetration
Providers would also be wise to check that the payment instruments they offer are widely available in target countries, or risk creating unsurmountable barriers to customer purchasing. The average U.S. consumer had at least three credit cards in 2018, but merchants cannot expect credit card-only checkouts to fly in Asia, where less than 10 percent of consumers in Indonesia, Thailand or Vietnam had credit cards as recently as 2019. Mobile payments are popular in these countries, in use by 47 percent to 67 percent of their populations.
Subscription providers turning attention to Denmark, meanwhile, must again adjust approaches to match local trends. Mobile and digital wallets only represented 20 percent of payments in 2017, while bank transfers and payment cards together comprised 75 percent.
Merchants must work to continually stay abreast of new purchasing preferences trends, thereby ensuring they offer the methods most widely available and popular in their desired customer markets. Indians are increasingly using mobile payment solutions for bills, online shopping and other purposes, for example, and mobile wallets are expected to experience a 148 percent compound annual growth rate (CAGR) in the country between 2019 and 2024.
Economic conditions are similarly known to shift preferences in the U.K. Consumers there are often more interested in direct debit for recurring bill payments in periods of high consumer confidence or economic growth, but more reluctant to use merchant-initiated methods in times of greater economic strain. They frequently prefer to have tighter control over exactly when they pay bills during the latter.
SCA’s Ecosystem Changes
Payment instruments’ popularity fluctuations are not the only purchasing ecosystem changes to which subscription providers must adjust. The legal landscapes surrounding transactions also experience frequent shifts, and businesses must be ready to respond, stay compliant and remain permitted to sell in those locations. The U.K.’s SCA rules are among the latest developments, impacting merchants that seek to enable credit card payments worth more than certain euro values. The change will be enforced in March 2021 and entail stricter customer verification requirements than the traditional method of requesting credit card numbers and CVC codes. Merchants will thus need to undergo tighter authentication or use payment methods exempted from SCA’s scope, such as direct debit.
Subscription providers stand to gain greatly from reaching and serving customers around the globe as more consumers turn to the internet for their purchasing needs. Making these transactions easy for international customers takes thoughtful strategizing, however. Creating a truly international service requires that subscription providers pay careful attention to payment methods’ popularity and accessibility in each market, and that they keep up with shifting local commerce requirements and regulations.
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