Cross-border transactions continue to gain traction around the world, with a staggering $156 trillion expected to cross international borders annually by 2022.
In Europe for example, more than 400 billion consumer transactions are expected to occur in the region each year by 2025, representing a compound annual growth rate (CAGR) of 13%.
Read the PYMNTS report: Cross-Border-Retail-Payments
This data gathered in a recent PYMNTS report on cross-border retail payments further revealed that while these payments ranged from multibillion-dollar corporate acquisitions to small value remittances sent by migrant workers, one of the fastest growing market segments was individual consumer transactions for goods and services.
Produced in collaboration with mobile wallet payment provider Citcon, the report cited the increasing popularity of mobile commerce as a major contributor to this growth, with mobile commerce is expected to account for $3.1 trillion in purchases in the next five years, a 70% jump compared to the $2.1 trillion in mobile commerce purchases last year.
This surge in mobile cross-border commerce over the past several years can be mainly attributed to the rapid rise in smartphone adoption across the world, particularly in emerging economies where 83% of adults currently own one and increasingly use it to purchase a wide range of items from toilet paper to computers to automobiles.
With this growth in mobile device ownership, mobile payment methods such as digital wallets have increased, with purchases at the point of sale (POS) made with wallets expected to swell to 30% by 2023, up from 22% in 2019. eCommerce transactions are seeing even higher rates of mobile wallet use, and are projected to increase from 42% in 2019 to 52% by 2023.
This rapidly changing eCommerce paradigm has forced merchants to quickly adapt to the new normal, adopting new systems to meet consumers’ growing preferences for mobile commerce.
One feature that merchants are adding to satisfy cross-border mobile consumers is free shipping. This significantly reduces the financial burden on the buyer who would normally incur fees from the shipping company when shipping items internationally in addition to duties or tariffs leveled by the receiving country.
Per the report, 37% of merchants offered free shipping in 2016 but this number jumped to more than 59% in 2021, indicating that free shipping gave merchants a boost to better compete against eCommerce giants like Amazon and its Amazon Prime service, while helping them meet the increased demand for eCommerce due to the pandemic-induced decline in brick-and-mortar sales.
Shopping convenience is also a key driver of mobile cross-border sales, leading merchants to explore and integrate various features of their own such as saved customer profiles and product recommendations, with support from government agencies in some instances.
For example, at the height of the pandemic last March, the European Union financial watchdog encouraged payment companies to refrain from using cash to help curb the spread of the coronavirus and promote more contactless payments.
Read interview with Market Pay CEO: Merchant Involvement in European Payments Initiative Has Been Less Than Satisfactory
According to Frédéric Mazurier, chairman of French payments firm Market Pay, that European Banking Authority (EBA)-led initiative gave “a strong push” to the development of contactless transactions in the region, particularly when the limit on contactless payments was raised from 30 euros to 50 euros (about $54).
But the biggest challenge merchants face when accepting mobile cross-border transactions is accepting the variety of payment options that consumers desire.
According to the PYMNTS report, payment methods offered by the average eCommerce merchant to its customers in 2016, 2017 and 2021 each fell below the average number of currencies offered each year, at 6.1, 7.8 and 10.8, respectively.
This goes to show that while there is undoubtedly customer appetite for commerce with different countries, there may not be a wide enough variety in payment methods to satisfy every customer.
Overall, merchants will need to harness every tool available to offer fast, convenient and secure cross-border mobile payments in order to fend off competition and gain market share. Merchants who fail to do so risk losing significant business to the growing list of competitors entering the cross-border space.