Evolving technology has led to an ever-expanding list of payment methods. Across the globe, customers buying goods online are using a wide variety of methods to pay for their goods. It’s up to retailers to ensure they are providing the right options in the right markets to maximise sales.
We take an in-depth look at preferred international payment methods in different regions and the importance of offering access to these on your ecommerce platform.
It’s not all about credit cards
When setting out on your international ecommerce journey, your biggest mistake would be to assume that everyone will want to pay with a credit or debt card. This might be the case for much of the US and the UK, but in other markets, so-called ‘alternative’ payment methods are more popular.
In fact, the use of other payment methods has now overtaken cards, according to figures from PPRO. Credit cards are only used in around 22 per cent of online purchases globally.
There is thought to be around 150 well-used local payment options around the world. Depending on the marketplaces you are hoping to target with your ecommerce offering, you’ll need to do your homework on which of these options are popular in your target locations. And don’t forget – this is a constantly evolving and growing list, so update your research regularly to avoid losing valuable customers each time some new tech makes a new method possible.
What drives the differences in preferred payment methods?
Often, the type of payment method people in different countries prefer is driven by that country’s cultural norms. Understanding these cultural norms when first dabbling with international ecommerce is not an easy feat and working with localisation experts can really help you to get to grips with these factors.
Let’s look at some examples of how cultural norms can affect the payment methods preferred around the world.
Online shoppers in Germany prefer to either use an invoice payment method, such as Paypal, Klarna or Payone, or pay through a direct debit service. This reflects the German aversion to getting into debt. In fact, credit cards are way down on the list of preferred payment methods as people typically shun this type of casual debt. Invoice payments and direct debits are considered highly secure methods of payment, another factor seen as highly important in German culture.
After card payments, the second most popular payment method in China is Alipay, a mobile payment service provider. Chinese consumers are all about mobile and being able to pay through their phone is a major plus. The Chinese culture is not one particularly used to the shopping experience, as many people are experiencing wealth for the first time. Perhaps as a result of this, Chinese consumers are embracing mobile shopping as they are not tied to the bricks and mortar experience of shopping in person.
Focus on: Latin America
This entire region is a major growth area for online shopping. While the market is currently relatively small in comparison with the US and Asia, for example, the growth potential is enormous.
The major driver of the growth expected in the region is from young people buying items through their mobiles. Inexpensive mobile phones from China are flooding the market and Latin America’s youth are cottoning onto the joy and freedom of shopping online, wherever they are.
Worldpay’s 2018 Global Payment Report predicted a 19 per cent increase in ecommerce sales in the region between 2018 and 2023, which is 8 per cent above the average growth, globally. Brazil is leading the way but Mexica, Colombia and Argentina are hot on its heels.
What’s interesting about the region, from a payment method perspective, is that a significant number of people are still unbanked in this region. You may assume that no bank account means no means of shopping online, but this is not true. In Brazil, the third most popular payment method for online shoppers is Baleto Bancario, which is a nationally-offered system of payment that allows shoppers to pay in cash at an ATM or inside a bank.
In Mexico, there are similar payment voucher systems, largely offered through convenience stores, whereby vouchers with barcodes are used to help shoppers pay for online purchases in cash. Research suggests around a third of online purchases are paid this way in Mexico.
The Latin America example shows how important it is to be aware of idiosyncrasies when it comes to international payments. There are cultural and socio-economic reasons behind the vast range of payment options used around the world and it’s up to you, as a global ecommerce operator, to be aware of these preferences in order to maximise your sales.
Keeping up with the tech
It’s a no-brainer that offering local currency payments is essential for successful global ecommerce, but failing to realise the extent to which most global consumers prefer using alternative payment methods would also be a mistake. So-called ‘alternative’ payment methods include all of those mentioned above, including everything from cash vouchers to bank transfers.
Technology is evolving at a rapid pace and consumer behaviour is changing quickly in response. Everything from where people keep their money, to how they want to pay is changing – and innovations like cryptocurrencies and e-wallets will soon have an even greater impact.
As discussed above, consumers from different regions put value in different aspects of these payment methods, resulting in vastly different preferences. Ecommerce businesses have their work cut out if they want to ensure they are maximising sales by offering the right payment options to the right consumers, and this is where working with localisation experts can help.
With the right support and insights from those whose job it is to identify and monitor global cultural differences and consumer preferences, there’s no reason why you can’t get your payment method offering just right for your consumers, wherever they happen to be.