Cross-border payments still need a dose of local expertise
The world of payments is one of the most innovative and fastest growing industries across the globe.
Thanks to the expansion of e-commerce, consumers are no longer stuck with only being able to shop at stores in close proximity to them. The world is starting to feel smaller and thanks to the innovations in payments, we are entering an era of untapped potential, for consumers and merchants alike.
On the other hand, one thing holding us back from reaching this potential is a lack of understanding around global consumer preferences.
This void of knowledge around the various types of payments preferred worldwide, and how to properly offer these payments to global consumers is holding back many merchants. These local payment methods, or LPMs, are the payment methods outside of traditional card and cash payments that help to meet the needs of various geographies, cultures and economies around the globe.
Currently, only 36% of U.S. merchants sell cross-border. This is partially due to a fear of growing internationally and because many merchants do not know how to effectively break into global regions. These merchants are leaving money on the table as these various global markets present a golden selling opportunity. For example, China has a $103 billion B2C e-commerce volume showcasing a major rise in spending power.
U.S. merchants should be looking to capitalize on these growth opportunities overseas. For example, the Chinese e-commerce market is worth $1.03 trillion and is growing at a rate of 18.6% per year.
Visa and Mastercard only account for 25% of global e-commerce payments, and this figure drops even further when we look regionally. Visa and Mastercard combine to only make up 3% of China’s e-payment split. LPMs are preferred globally and US merchants cannot rely on using traditional credit card payments alone.
In Germany, for example, the main methods of online payments are bank transfers. They make up 49% of online transactions, while cash is only 5 percent and cards make up 11 percent. This is a stark difference compared to payment behaviors in the United States, where 57% online transactions are facilitated by credit card.
These payment preferences significantly vary from region to region, making the need to cater payment methods to consumer preference so crucial. LPMs offer ease and comfort to consumers, while giving merchants the capability to expand their business and reach new markets. U.S. online merchants need to be strategic about how they scale globally, and LPMs are an essential tool to help ease this transition.