Financial inclusion should include consumers without cards

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When in Rome, do as the Romans do. While this axiom has become synonymous with “going with the flow,” it takes on new meaning in light of modern e-commerce, which is increasingly global in scope.

Companies of every type and size that hope to expand into new parts of the world need to figure out how to accommodate local payment types if they hope to stay relevant. No matter how global your e-commerce empire is, your customers, regardless of where they are, should find buying from you a simple and frictionless process.

From the U.S. vantage point, we may believe that winning the cross-border e-commerce is about optimizing authorization rates and adding a few alternative payment methods. But it really isn’t that vanilla, unfortunately.

While many public policy initiatives focus on the 1.7 billion “unbanked,” we rarely hear about the nearly 1 billion people who do have a bank account and a smartphone but have no credit card nor cross-border-enabled debit. In other words, they can and are transacting online, but they are unreachable to you if you limit your payment strategy to focus on the less than 6 percent of the world with a credit card. The next few years will be characterized by disruption.
Other parts of the world have never used traditional credit and debit cards the same way we do in the U.S. For example, since the launch of UPI, India’s real-time payment network, 55 percent of all online transactions happen there. And there are more than 30 real-time payment networks set to go live before the end of 2021.

Around the world, the “banked” population varies widely, and even in highly banked economies, how people pay varies drastically. While many people understand that in China consumer pay with Alipay, or how M-Pesa, the African success story in payments has transformed the economy, the story of payment diversity doesn’t end there. In Europe, virtual IBANs are much more commonly used than debit cards, in Indonesia people conduct bank transfers standing at an ATM, and across Africa in addition to mobile wallets, people are using local debit cards on the Verve network.

When you start to consider all the details, nuances, regulations, currency issues, myriad third parties and transaction security risks involved, you quickly realize why most merchants are struggling to expand globally, even with the help of major marketplaces like Amazon, Wish and Etsy.

These challenges may come as a bit of a shock to merchants who are deeply entrenched in a system where credit/debit card transactions dominate. The complexity is such that even major global brands (think Apple, Nike, etc.) must either pour massive design and development resources into building out custom e-commerce geographic expansions or trust it all to a third-party provider.

Many existing tools are point products designed to address specific payment issues in one country — if you’re trying to expand globally, this quickly adds up to a mess of hodgepodge solutions, which does nothing to reduce risk or cost or ensure a seamless customer experience.

The push to make cross-border billing more accessible, affordable, and integrated is fueled by high-octane opportunity. In mid-2017, Forrester forecast that cross-border shopping would make up 20 percent of e-commerce by 2022, to the tune of $630 billion in sales. This growth is likely to accelerate more rapidly than predicted, just like global payments.

Estimates vary, but the potential is clear. By expanding globally and leveraging local payment preferences and systems, merchants stand to gain access to billions of consumers they couldn’t reach before.

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