When Commerce Goes Global, Should Payments Stay Local?

PPRO Talks Cross-Border Online Commerce

In eCommerce, the readiness is all, to steal a line from Shakespeare. Merchants who have made the leap from bricks and mortar to clicks here in the U.S. have capitalized on a sea change in how we pay.

Cross-border online commerce — awash with opportunities to claim new customers and, of course, grow top lines — should quicken the collective pulse of U.S. companies.

A recent report from PPRO, titled “Is U.S. eCommerce ready to take on the World?” (done in partnership with Edgar, Dunn & Company), gives some foundation for the lure of cross-border commerce rendered in bits and bytes.

Each year, the user base for eCommerce — that is, new internet users — grows by about 248 million. That translates into an annual growth rate of about 7 percent.

But dig a bit deeper and the growth rates leap by leagues. Global eCommerce is growing by 14 percent overall. Dig even deeper than that, and you’ll find that eCommerce is growing by 18 percent in Africa, 28 percent in Asia and 25 percent in Latin America.

Though the U.S. remains a leader in eCommerce overall, cross-border efforts are relatively muted. PPRO found that a third of U.S.-based merchants sell across borders, but that percentage lags behind other nations such as Germany and the United Kingdom, where half of merchants that sell goods and services online do so across borders.

To capitalize on that aforementioned eCommerce growth in emerging markets and log sales in those regions, U.S. merchants have all sorts of work cut out for them. They must offer local payment methods — outside traditional card brands, such as Visa and Mastercard — that will help eCommerce cross-border efforts gain traction.

In an interview with PYMNTS expanding on the whitepaper findings, Steve Villegas, VP of partner management and head of U.S. for PPRO, said there are advantages already in place when it comes to cross-border revenue opportunities, as U.S.-based online merchants shift their focus outward from domestic shores.

For one thing, familiarity with mobile shopping is already in place. “Looking globally around the world, eCommerce in other nations has fallen not too far behind the U.S.,” Villegas said. That’s in part because those emerging economies have made the tech infrastructure leap to embrace smartphones, mobile money conduits and online cash systems, among other options.

At the same time, U.S. brands and merchants are already well-known globally, said the executive: “They have what I would say is a high degree of likability … other economies [and their consumers] view U.S. products and services as good quality and something to be aspired to.”

The Payment Differences

But as with so much in life, one size does not fit all — and in payments and cross-border efforts, a uniform approach is no solution. Consider the fact, explained Villegas, that in the United States, consumers often opt to use credit cards for purchases. That method does not have as much pull in other countries.

Regional stats show, as PPRO has noted, that 60 percent of consumers in North America pay for online purchases by traditional payment methods such as Visa or Mastercard, but that choice accounts for less than half of consumers in Western Europe and under a third of consumers in Asia.

The read across: Be mindful of the payment methods customers know and want, market by market, or else merchants must suffer the consequences of missed sales.

As many as 14 percent of consumers overall will abandon a purchase online if a preferred payment method is not on offer. Shopping cart abandonment leads to lost top lines, and possibly customers forever lost, too.

Villegas noted that in markets beyond the U.S., consumers “are very much dependent upon local payment schemes that have been developed over time” and that have taken root. In fact, as the whitepaper notes, by 2021, only 15 percent of online payments, globally, will be done by credit card. The local payment method, then, will be the primary means by which consumers transact.

Cross-border sales will account for as much as 17 percent of all U.S. eCommerce that same year, up from about 11.2 percent today. Conversely, merchants from Europe and China have already been successful in understanding and offering local payment preferences, where a respective 16 percent and 20 percent of online sales from those regions are made cross-border.

Still, even at this point, the U.S. maintains its position as the leading commercial center, as 95 percent of the world’s population lies outside its borders, yet it maintains only 85 percent of the world’s purchasing power. Should U.S. firms want to maintain a strong position within global commerce, they must adapt locally.

And, added Villegas, merchants should look to markets with an eye toward personalization.  Simply transplanting payment systems and business models across markets will not likely be workable strategies.

Customized web experiences mean presenting eCommerce sites in local languages and offering preferred payment methods, said Villegas. He told PYMNTS there are an estimated 300 online payment methods of significance globally. It’s imperative, for example, to know that Alipay and WeChat Pay are gaining huge traction in China, while in Europe the bank transfer method prevails, as evidenced by iDEAL in the Netherlands.

No firm can capitalize on all of those options or opportunities, Villegas remarked — but by partnering with local providers, integration and reconciliation efforts become streamlined. At the same time, education is important for merchants — they must constantly keep their attention on what is happening in the global economy and at a local level.

At a high level, said Villegas, “you have international wealth that is growing, populations that are growing even faster … and then there is the fact that many companies in the U.S. are not yet selling internationally. There is a disconnect that will be closed in the coming future,” he told PYMNTS.

For U.S. firms to tap into the potential of a global marketplace, made up of individual markets, “the tools are there … and the timing is right,” he said.

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Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border.

Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.