As global e-commerce proliferates, payment platforms are stepping up to cater to U.S. merchants eager to sell their wares in emerging markets. But there can be as many risks as there are opportunities when entering a new market.
“All of the ingredients for fast growth are in place—mobile and e-commerce are exploding, regulations and compliance are encouraging growth, traditional retailers are innovating and consumers are increasingly demanding these types of capabilities,” says Ramesh Siromani, a partner with A.T. Kearney’s financial institutions practice.
Nowadays, more and more people in emerging market countries—even those without access to personal computers—have smartphones. After eons of transacting mainly in cash, residents of these countries are starting to view e-commerce as a more viable option. This translates into a business opportunity not only for merchants, but also for enterprising payments companies.
It’s not a simple process to be approved to accept payments in emerging markets. Each country has its own laundry list of regulatory and licensing requirements. There are also cultural nuances that can be hard to navigate without the help of a local partner.
All emerging markets are vastly different and a payments company has to have a separate strategy for each, says Sebastian Kanovich, chief executive of dLocal, a technology company based in Montevideo, Uruguay. In Latin America, for instance, consumers like to pay in installments, so new entrants have to support that option, he says.
“If you understand Brazil, that doesn’t mean you understand Argentina, and that has nothing to do with India or China,” says Kanovich whose company recently launched a payments platform designed exclusively for merchants seeking to do business in emerging markets.
In the U.S., many platforms focus on credit cards, but credit cards aren’t the preferred payment method in other markets. For example, the vast majority of Chinese customers have Alipay or WeChat Pay, not credit cards, says Oren Levy, chief executive of Zooz, a technology platform based in a Ra'anana, Israel, that works with global merchants and payment companies.
“It’s all about understanding your target markets and understanding what consumers like to pay with,” he says.
With all the research and behind-scenes-work involved, it takes many years for companies to be able to offer payments services in multiple regions. Mike Ward, chief revenue officer of World First, says it has taken his company 12 years to be able to effectively work in 40 countries. Just this month, the company, which specializes in international currencies and money transfer, announced a partnership with Rakuten.com, to provide exchange services in 140 currencies and 45 countries worldwide for the online marketplace’s sellers.
It’s a necessity for payments companies targeting emerging markets to keep pace with changing regulations and technology.
“Things move very rapidly. For example, only two years ago a mobile-first strategy was considered innovative—now it’s essential,” says David Nicholls, head of payment solutions at international money transfer company OFX, which gives U.S. companies local banking capabilities in multiple countries.
Despite the challenges, payments professionals envision many new opportunities coming down the pike, given how easy technology makes it to connect with other providers.
“You don’t need to build the whole infrastructure yourself. You need to find partners,” explains Christian Spaltenstein, general manager of the Americas division at AFEX, a Woodland Hills, Calif., company that provides global payment and risk management solutions.