Selling into new markets for ecommerce brands comes with many factors to consider and technologies to implement. In the payments space alone, brands must make multiple decisions regarding which methods to accept, what kind of banking arrangement will be most efficient and what the customer experience will look like. Merchants must consider things like average order value and shopper demographics. Shoppers in many markets have access to several globally recognized ecommerce payment methods, but quite often will also use local payment methods that the retailer should consider to increase reach.
Here we look at three key payments areas to consider:
1. What Payment Methods to Offer
When selecting payment methods consider how much incremental reach a particular payment method has (i.e. how many people are likely to want to use this method), whether or not the payment method in question is likely to cannibalise existing payment methods and if it might have a negative impact on payment success rates. If a preferred payment method only has a 5% reach, it might not be the best to offer, or it would be worth testing its impact in a pilot/limited implementation. Secondly, do these payment methods result in successful orders? What payment success rate do they achieve in a given market? Our research shows credit cards have an almost 90% success rate on all transactions, but bank transfers tend to have a lower success rate – usually because there’s no credit involved, and the shopper must have the funds available at the time.
Brands must consider the shopper experience for various ecommerce payment methods. Often, the shopper is sent to an external page for payments processing. Redirection is a problem because it is not always a good experience and is out of the retailer’s control. In Germany, for example, it is common for shoppers to be transferred to an external payment page (GiroPay) where they select their bank from a drop-down menu and input their account number. It’s often not a very well-integrated payment experience. As a result, checkout conversion rates are low. The merchant needs to strike the balance between reach and conversion.
2. Domestic Acquiring
Domestic acquiring is when the acquiring bank (a bank or financial institution that processes credit or debit card payments for the retailer) is in the same market as the shopper. Therefore, the payments are treated as domestic payments. That means they are less likely to be subject to fraud flags because of foreign IP addresses. Using a domestic acquiring bank in each location increases the chances of a successful transaction.
It is particularly valuable to have a domestic acquirer in emerging markets. In those markets brands may find a high level of credit cards or debit cards that aren’t enabled for cross-border ecommerce. Retailers can convert those payments that might normally get declined through domestic acquiring. Additionally, using a domestic acquirer means the retailer can often offer local payment methods they otherwise couldn’t. For example, many shoppers in Russia use Mir – a card system used by 14 million Russians. Not offering this payment method could mean the retailer potentially missing out on millions of sales.
3. Emerging Markets
In emerging markets, any shopper are unbanked. The retailer often must bridge the gap between people who have credit cards and those who don’t. For these markets, merchant need to implement a solution to ensure that customers can check out successfully.
In Mexico, for example, shoppers pay for nearly 50% of ecommerce transactions via cash-based methods such as bank transfer or via payment at OXXO, a convenience store. While this is a good solution for those without credit cards, it can create problems for the retailer.
The system allows those without credit cards to order and pay for goods at the store. But research shows that merchants only receive payment for 52% of goods ordered. That means the retailer has to hold stock for this order, knowing that they won’t receive payment for almost 50% of this stock. When the stock does not ship until the brand receives payment, it means the retailer must manage the inventory around a potential sale. This might work for retailers with a lot of inventory, but smaller merchants should consider if this is the best option.
Conclusion
Payments is a fundamental part of the ecommerce experience and crucial to the shopper journey. Therefore, selecting the best-performing, highest-converting ecommerce payment methods for each region is an important element of a localised shopping experience, and consequently a key success driver.
