The pandemic has transformed consumer expectations for their e-commerce shopping experiences. With Main Street reopening its doors and consumers craving physical interactions after 18 months of isolation, e-commerce businesses now face new challenges that must be overcome. More specifically, they need to provide a local touch to the specific markets that they serve.
To learn more about how e-commerce businesses can thrive in the new world by approaching payments with a local touch, PaymentsJournal sat down with Bradley Riss, CCO at Checkout.com, and Don Apgar, Director of Merchant Services at Mercator Advisory Group.
Insufficient payment options cost merchants
Merchants that fail to provide consumers with the payment options they prefer are leaving money on the table. In fact, 43% of e-commerce merchants lost revenue in 2020 because they could not offer local payment methods in countries where they saw a surge in demand.
This data point highlights how important it is for e-commerce merchants to be able to cater to the payment preferences of customers that engage with their brand online. For brands serving customers in multiple markets, these preferences may vary widely. For example, while Mastercard and Visa cards are go-to payment options in the United States, they are not issued directly in China; Alipay and WeChat Pay are table stakes offerings in China, but not widely used in the United States.
“The mantra of international business—go global, think local—I think that applies more for the payments industry than really any other. You can go from France to Germany across the border, and there’s radically different consumer behavior and payment preferences,” explained Riss.
A little research into consumer payment preferences can go a long way. “It’s quite easy to say if you’re in a certain market [there is] baseline research you should be doing to help people pay and you should be offering those [preferred] payment methods to them,” Riss added.
Knowing consumer payment preferences across different markets allows merchants to provide a sophisticated yet local touch to their payment offerings. “You have to have a high level of sophistication too as you offer those payment options in markets outside your home market, not just how the consumer wants to pay, but leading that and recognizing the IP address and presenting different options based on the source of the browser,” explained Apgar.
Localizing payments is smart business
Honing in on not just great technology, but also the localization of payment methods, is a smart approach for business owners looking to improve their payment offerings. But localization encompasses more than just payment methods themselves. “[Localization] could start from a very high level, such as language, and then goes down to currency. And then, of course, it comes down to payment preferences and choices,” said Riss.
Of course, it is impossible for any single business to offer every available payment method. And that shouldn’t be the goal. Rather, merchants should strive to offer relevant payment methods that meet their business needs and align with their customers’ preferences.
There are additional considerations to keep in mind when improving payment optionality. “There [are] optimizations around pricing and, normally, conversion rates too and that is the challenge. You really need to look at each market and each payment method individually. But the good thing is that from a technical perspective, a lot of these problems can be solved by working with a single or just a couple of partners,” said Riss.
Risk mitigation is important too. “There are also different risk mitigation tools and strategies that are available to local markets, so while you want to pay attention to offering the consumer choice and optimizing things like the settlement timeframe, you also want to minimize your risk and your losses in that market using the tools that are available from the partner you’re using in that market,” noted Apgar.
Don’t forget about data
Merchants can harness high level data to make better choices around payments. “It does get to a point where there are diminishing returns, and certainly at the checkout you have to play a game of really trying to present what you think people will be paying with in those markets. And again, high level data can tell you most of this,” said Riss.
For example, a merchant presenting a payment method that has few to no click-throughs may want to abandon offering that payment method altogether. If another payment method is gaining significant traction, but is halfway down the list of payment options, merchants may want to move it higher on the list.
“To the extent that machine learning can speed that use of data, every data point that [merchants] acquire makes us collectively a little smarter, makes the merchants a little smarter about who their audience is, how their website is being utilized, [and] how their products are being purchased,” explained Apgar.
Unpacking new ways to pay
There are several emerging ways to pay that are peaking consumers’ interests. Buy Now, Pay Later (BNPL) is one of them. Interest rates have been at historic lows as BNPL has gained in popularity, which means the eventual rise back up could impact default rates. At the same time, merchants can benefit from larger cart sizes and increased sales at checkout through a BNPL option.
“It remains to be seen what the future of Buy Now, Pay Later as an ‘industry’ will be… a Buy Now, Pay Later transaction is generally more expensive for the merchant to execute than a credit or debit sale, so it’s a narrow needle to thread for the merchant to make sure they’re only presenting Buy Now, Pay Later options to consumers [that] truly do provide that lift in both basket size and sales,” said Apgar.
The long-contentious topic of cryptocurrencies as a payment method is also worth mentioning. While cryptocurrencies have historically been a digital asset rather than a transactional form of currency, that could change. “There’s real progress being made there to the point that you could actually see cryptocurrencies suddenly being a viable payment currency to put on a merchant’s website. However, everyone I’ve spoken to who’s doing this so far is seeing almost zero transactions,” warned Riss.
There are also certain businesses that have a viable reason to use non-fungible tokens (NFT). For example, gaming platforms selling digital skins may embed NFTs with perpetual royalties. While that’s just one example of how NFTs are interacting with payments, Riss predicts that more specific use cases will emerge over time.
Merchants should not approach payments with a ‘one size fits all’ mindset. Instead, they should focus on providing a local touch. This is true for both local merchants and those striving to go global.
“[Merchants] do need to localize [their] payment offerings based on customer preferences… But being small or large, it doesn’t really matter. It’s the same principles that apply. Obviously, localization takes many forms, language, currency, and payment methods, but it’s basically a stepping stone journey,” said Riss.
The good news is that high-quality payment partners make it easier today than ever before for merchants to live up to their global potential. “Our job is to make your lives easier. The idea is to connect you to a platform like checkout and then it’s a one-time initiative, it’s one contract. We normalize reconciliation and we try to take the pain out of the payments piece of going global,” explained Riss.
Good payment partners work with merchants every step of the way. “Don’t think that your provider is just there to be a one-time plug and play. They should really be holding your hand and answering any questions that you may have around markets they’re looking to explore,” he concluded.