U.S. e-commerce finds a way into cash economies
As more U.S. e-commerce merchants look to accept cross-border payments, they must contend with payment processes that are less straightforward than they are used to — but which consumers have come to expect.
For example, Atlanta-based PPRO is working with Oxxo convenience stores in Mexico, to establish a multi-step system for accepting cash vouchers for online purchases.
Mexican consumers purchasing products online can choose the Oxxo payment option, and get moved to a site PPRO operates to issue a voucher for the cash amount. The buyer then takes the voucher to an Oxxo store and pays the cash amount. The store clerk then issues the payment through PPRO to the merchant and provides shipping information.
"If this process was in the U.S., it probably would never happen," said Steve Villegas, vice president of partner management at PPRO. "Here, we click on Amazon and get the product in two days."
But consumers in countries with less robust internet understand there are extra steps they would have to take to purchase online, Villegas added. With the bulk of money transfers from the U.S. going to Mexico, consumers there are already used to going to a store or money transfer site to pick up funds.
"They like the experience of online shopping through mobile, but they maybe don't have a bank account or payment cards to use," Villegas said. "The extra steps of a payment voucher are very much inherent in these cultures, and there is a lot of cash use in Mexico."
Oxxo has also partnered with Visa in the past year to address financial inclusion in Mexico, essentially seeking to set up basic prepaid accounts for the unbanked. PPRO also concentrates on Asia, helping merchants accept the various payment methods available in China and other regions.
It's a niche Atlanta-based PPRO understands well in its role in bringing local payment methods to e-commerce. PPRO works with acquirers of all sizes, including major players like First Data, Global Payments and Worldpay, to provide merchants a single platform for payment methods used in local segments of 175 countries worldwide.
"We operate like a payment gateway, but we are actually an acquirer and the gateway is part of our solution," Villegas said. "We are white label, so we sit on the back end of this process and no one knows who we are, other than the providers we work with."
PPRO is not alone in its ability to convert cash into an acceptable online payment method, but it has garnered enough attention to its scale to have the likes of PayPal and Citigroup take notice.
Both of those companies invested in PPRO last year, participating in a $50 million funding round. PayPal was seeking to expand its international reach through a company like PPRO, which provides acquiring, collecting and processing for payment service providers.
The concept that PPRO embraces has various iterations, including PayPal Cash and prepaid card issuers like GreenDot and American Express that allow loading of cash in retail locations. PayNearMe delivers a similar cash payment option concentrating on digital accounts.
"Unbanked, underbanked, and cash-preferring consumers have a very difficult time buying online for obvious reasons," said Richard Oglesby, president of AZ Payments Group and a senior analyst at Double Diamond Payments Research. "In economies where a large percentage of the total population is cash-preferring or underbanked, it means that the entire economy is lagging in e-commerce growth."
Companies like PPRO provide cash users with the ability to transact online and therefore "make the entire world of e-commerce available," Oglesby added. "Consumer habits change slowly, however, and each economy and consumer is a bit different."
That's where PPRO feels it has an edge, in that it handles payment methods of various kinds, from special bank transfer setups to the more common conversion of cash to payment vouchers.
In doing so, merchants can also compete against the likes of Amazon, which has its own system that doesn't rely on vouchers. With Amazon Cash, the user can deposit cash into a virtual account to spend on Amazon.com.
"There is a lot of opportunity to increase online sales if the unbanked or underbanked population has a way to pay online," said Thad Peterson, senior analyst with Aite Group. "PPRO is a high friction model, but since there are few alternatives that could be easier or faster, consumers could be willing to go through a lot of hoops to be able to purchase online."
As online and mobile commerce continues to take share from the physical world commerce, "it makes sense that consumers without traditional payment cards would want to participate," Peterson said.