America’s Stealthy Payments Revolution and Why Retailers Need to Pay Attention

Getting a credit card is no longer a milestone for young U.S. consumers. Among all Americans, just 14 percent don’t have a personal payment card. But for Americans under 35, that figure jumps to a third. That’s 36 million shoppers who don’t rely on a credit or debit card as their main means of payment.

This means Americans are catching up with the rest of the world. Globally, 77 percent of online sales are made using one of more than 500 trusted local payment methods (LPMs) or alternative payment methods (APMs). These payment methods are anything that isn’t one of the big globally recognized credit or debit card brands.

What’s a LPM (And Why You Should Care)

Never heard of LPMs? They include the massive Chinese e-wallet Alipay, with its 1.3 billion active users worldwide, and schemes in developing countries where typically unbanked consumers buy cash-value vouchers at convenience stores to pay for online purchases.

In between these extremes are hundreds of e-wallets, bank transfer apps, mobile wallets, and other types of digital payment methods. For most people around the world, and for the growing number of Americans mentioned above, these are the normal way of paying for goods and services online and often even offline. This is why merchants around the globe already offer these payment types, as are an increasing number in the U.S.

There’s a World of Shoppers Out There Just Waiting for You

These statistics make it clear: To succeed in the global marketplace, U.S. merchants and the payment service providers who support them must offer local and alternative payment methods for any and every market they sell in.

The global e-commerce market is worth more than $4.3 trillion. The pandemic has taken this already growing market and turbocharged it. In the second quarter of 2020 — the latest period for which there are reliable figures — the volume of cross-border e-commerce surged by 42 percent.

The good news is that American brands and retailers are well placed to compete in this growing global retail market. In 2020, the Nation Brands survey, which looks at how consumers worldwide perceive different countries, ranked the U.S. as the world’s No. 1 “national brand.”

Put simply, people around the globe think America is still cool and still aspirational. In fact, eight of the 10 most valuable brands worldwide are American brands. That has serious implications for American businesses. U.S. online retailers can tap into this goodwill and national brand value to help them grab a bigger share of the growing global e-commerce market. But to do so, they must win consumers’ trust. And that means localization.

Payment localization — offering the local payment methods people trust — is crucial to e-commerce success in any new market. A recent study by PPRO found that 44 percent of consumers will abandon a cart at checkout if their preferred payment method isn’t available. If you don’t let overseas consumers pay the way they want, you can build it, they may come, but they won’t buy.

LPMs Find a Home in America

Which brings us back to the generational evolution in the U.S. payments space. Driven by the explosion of online shopping, LPM usage is soaring in the U.S. According to a recent study, Americans use digital and mobile wallets in almost a third of e-commerce transactions, a significant rise vs. the pre-COVID figure. Over the last year, the adoption of digital payments by U.S. 18-to-34-year-olds increased by 93 percent. The way Americans like to pay is changing, and it’s changing fastest among the young, whose transactions are only going to get more important to online merchants as their numbers grow and they become more prosperous. Merchants that serve them need to get serious about LPMs.

Get Them to Buy ... With a Little Help From Your Friends

Setting up a LPM can involve a complex and time-consuming process. It often involves establishing a local business entity, registering with authorities, and having local banking relationships. If you operate in more than one market, that complexity can be multiplied many times over.

Fortunately, LPM infrastructure providers have eliminated many of the barriers, lowered the costs, and can speed the process exponentially. Such providers can be an invaluable resource for identifying which LPMs to prioritize in which markets. They then enable rapid integration to multiple LPMs through a single payments platform.

With America becoming one of the last holdouts to be won over by LPMs, the need for merchants to integrate these methods is bound to accelerate. It looks like the new generation of payments has arrived.

Cayleigh Palen is business development manager for PPRO, a worldwide local payments provider.