It's difficult to escape the ongoing news surrounding the U.S. president’s “trade war,” and what could potentially unfold. Recent headlines have left many e-commerce merchants feeling uncertain, as it's still unclear how cross-border sales could be affected.
Regardless of the trade war we currently face, e-commerce growth rates around the world have skyrocketed in recent years. Despite what’s been recently predicted, the e-commerce landscape shows no signs of slowing down.
In Europe alone, e-commerce sales grew by 16 percent last year. People are finding the goods and services they need online and have the availability of shopping worldwide. Cross-border e-commerce has seen a significant increase in recent years, with shoppers frequently making purchases from merchants outside their home country. Globally, a huge part of this progress can be attributed to the use of local payment methods (LPMs, also referred to as alternative payment methods or APMs) as a preferred option as opposed to credit cards.
PayPal’s recent research suggests Mexico appears to be one of the most vulnerable markets that could be affected by the trade duress, as the country may be deterred by increasing prices. According to PPRO’s research, Mexico is one of the three largest e-commerce growth markets in the world (at 59 percent), along with Indonesia (78 percent) and the Philippines (59 percent).
While 56 percent of consumers shop outside their home country, half of these shoppers have abandoned a purchase not because of price and affordability, but because their LPM wasn't supported by the particular retailer. At a time when buying goods or sending money can be accomplished in a few keystrokes, more and more international shoppers are reaching beyond their regions and countries for specialty products that can’t be found locally or are simply more affordable or better quality than in their home countries.
LPMs aren't going anywhere. In fact, LPMs are projected to account for 55 percent of all global online purchases by 2019. By 2021, the percent of payments made via a credit card are predicted to decline from 29 percent to 15 percent. Meanwhile, the amount of e-wallet transactions are predicted to double, from 18 percent to 36 percent.
LPMs have drastically evolved in variety and complexity over the past five years. In coming years, more and more consumers will use LPMs as their primary means of payment — perhaps even more than credit cards. We’re already seeing this trend in several regions around the world. In China, for instance, more than half of payments are made via e-wallets, and only 16 percent of the population have a credit card. Furthermore, LPMs are more popular than cards in mainland Europe.
E-commerce growth is impacted not only by the economy, but also by technology, convenience and ease of use as well. The bottom line is simple: Merchants will have a much better chance of global e-commerce success if they carefully consider new markets, offer goods and services targeted to that market, and provide preferred local payments options. In fact, PayPal — which recently announced leading a $50 million investment round to accelerate PPRO’s growth in the e-payments space — accounts 21 percent of its business to cross-border transactions.
All things considered, beyond looming fears of trade tariffs impacting cross-border e-commerce, online merchants that find success with cross-border selling accept the payment methods preferred in local markets to reduce the occurrence of abandoned shopping carts and capture more sales.
Steve Villegas is vice president, partner management, PPRO Group, a full-service partner for PSPs and payment providers in the e-payment environment as well as an e-money specialist for corporates and consumers.
Related story: How to Effectively Sell Cross-Border in 2018