Payments: Going Global Requires Going Local

With the rapid increase in e-commerce given the pandemic, you may be considering expanding your online business beyond our U.S. borders. However, to successfully do that, you'll need to take a close look at the mindset and expectations of future customers. Even the biggest corporations have made expensive mistakes by missing the mark — e.g., Walmart's attempt to gain a foothold in the highly competitive German market, which is characterized by price wars.

This points to the significance of paying attention to regional preferences. For example, does your product range fit the target groups that can be reached? Which products, brands, designs or colors sell the fastest? The user experience is also important. What must your online store look like in order to meet the tastes and usage habits of the target audience?

Putting yourself in the customer's shoes is also important when addressing payments. Who pays what, why and how? To what extent can experiences from one country be transferred to another? Where are the differences?

There are many considerations for international success, but let’s explore one — payments — a bit further.

Europe

In Europe, only Mastercard and Visa have a significant market share. American Express has achieved respectable successes in individual EU countries, for example, in Germany. However, Germans pay for about half of their online purchases via bank transfer, preferably on open invoice. In online trade, only 12 percent enter their credit card data directly; twice as many prefer to use an e-wallet such as PayPal.

The majority of Swiss prefer a domestic bank card. Austrians swear by the eps transfer, a national standard agreed upon by the country's banks. In the Netherlands, online transfer via the local provider iDeal dominates. In Belgium, the debit card Bancontact is key. If you want to succeed in Poland, you have to offer transfers via Przelewy24 or PayU. The French are very card-savvy, but almost only use the Cartes Bancaires (credit and debit). And there's one country in the EU where it's typical to pay for online purchases in cash: Romania.

China

Handling payments can be very complex in China. Almost 80 percent of residents have been able to open a bank account starting at age 15, and online transfers with over 100 banks may need to be supported. Many Chinese also pay via credit card with China Union Pay, a state-controlled joint venture of a consortium of Chinese banks. In addition, the digital payment apps Alipay and WeChat Pay/TenPay play the key role here, particularly with young people.

Unbanked Markets

Billions of people live in countries where it’s still not typical to have a bank account. Thirty-eight percent of the world's population still belongs to the "unbanked," who have to pay cash for everything but sometimes need things they cannot buy where they live or not at a fair price. In India and Latin America, almost every second person belongs to this group; in Indonesia, according to the World Bank, it is 51 percent of the 264 million inhabitants.

However, the rate of account-less persons isn't a good indicator of the potential and dynamism of a market. In the top 10 fastest-growing countries in B-to-C e-commerce, as determined by the British payment service provider PPRO Financial, Indonesia ranks first with 78 percent growth, followed by Mexico (+59 percent), the Philippines (+51 percent) and Colombia (+45 percent). India (+27 percent) shares eighth place with China. Distance selling is also growing strongly in Malaysia (+26 percent) and Argentina (+25 percent).

So How Do You Get There From Here?

"All business is local" is an old merchant's rule. If you want to expand internationally, you not only have to know which products customers in other countries like, but also how they shop and pay.

Given the abundance of payment methods as noted above, technical infrastructures and regulatory conditions around the globe, it’s extremely challenging for retailers to handle global payments on their own. Consider working with payment services providers which can act as a gateway between the U.S. and other markets, and, if needed, within regions in the markets you want to target. With the appropriate partner for your needs, you'll be better positioned to capture the potential e-commerce business that other countries offer.

Jed Danbury is vice president at Computop, a global payment service provider. He has been working in the banking and merchant processing industry for more than 15 years.