More than 450 local digital payment methods are used around the world, and how well merchants cater to those local preferences can make or break their efforts to expand internationally.
And while cross-border merchants are picking up local payment options at a higher frequency, Chuck Huang, founder and CEO of Citcon, adoption isn’t as widespread as it needs to be.
“We still see a lot of cross-border merchants using a traditional card-based acceptance to do their cross-border eCommerce,” he told PYMNTS in a recent interview.
The problem with that, Huang noted, is that in countries such as China, India, Indonesia, Malaysia and Singapore, the credit card penetration rate “is actually very low, way below 10%.” By contrast, Alipay has 90% to 100% penetration in China, and similar widespread use elsewhere in Asia.
“So even if you reach a lot of consumers where they are, if you only support a card-based scheme on your website or mobile site, they cannot pay you,” he explained.
According to a recent tracker published by PYMNTS in collaboration with Citcon, the value of cross-border payments in the global retail sector is predicted to reach $3.6 trillion by 2022.
“[Merchants] cannot just rely on the traditional payment scheme,” Huang said. “They have to expand their payment capabilities to support the local payment methods.”
Finding the Right Partner
Expanding payment capabilities will often mean selecting one or more new payment gateways to supplement the traditional ones that focus on credit card transactions. When doing so, Huang said merchants need to keep two important considerations in mind.
The first is whether a gateway supports enough payment methods to cover a large customer base. Without the top two or three payment methods, Huang said, merchants will be missing out on a substantial number of shares.
The second is ensuring that the gateway and payment methods integrate seamlessly into the existing commerce environment to avoid slowing down the checkout process.
“If you don’t implement those things correctly in checkout, the friction will be pretty high,” Huang said.
Many local payment methods also have an advantage over card-based payments because they’re mobile-based, which leads to better conversion rates and less friction, he added. For example, a credit card requires a customer to enter credit card numbers, an expiration date and other verification information, but most local payment methods simply require a username and password or the scanning of a QR code.
“So, all of these kinds of checkout experiences have proven far more smooth than the traditional card-based scheme, but just make sure that the gateway you select can really take full advantage of this,” Huang said.
A full, independent integration can take a merchant several months. But many gateway partners offer pre-integrated solutions that can plug into many eCommerce platforms, shortening that process to just a few weeks.
“You need to make sure gateway partners have that kind of solution in place,” Huang said. “Otherwise, you won’t be able to take advantage of those QR-based or contactless checkout options.”
Huang said merchants have to decide whether they’re going to settle in the local currency or that of their home country.
When doing so, he said, it’s important to identify that a payment provider can cover not just foreign exchange issues, but also local tax and compliance laws. Some international currencies can be used for consumer products but not investments, and having a partner that can help sort through those issues is a boon.
“International, cross-border payment processing is far more complex than domestic payment processing,” Huang said. “So, you need to make sure those payment providers can really deal with the international cross-border payment capabilities.”