Most shoppers who shifted online during the pandemic will maintain their digital habits indefinitely, and projections show that a growing share of eCommerce will be cross-border. The value of global cross-border payments in the retail sector is predicted to reach $3.6 trillion by next year. This represents a vast opportunity for international merchants, but they must tackle several challenges to thrive on this world stage.
A study found that more than 450 local digital payment methods are in use around the globe. For merchants looking to expand internationally, the ability to offer the payment preferences specific to each market they serve is a chief determinant of whether they will succeed. This includes providing locally preferred payment methods in international currencies with local-language web pages. More is better when it comes to payment offerings, with research showing that offering the top three preferred payment methods in any market, as opposed to just the top favorite, can boost conversion rates up to 30%.
Merchants seeking to improve sales through cross-border payments can benefit from using payment gateways. Multiple payment gateways provide intelligent routing that efficiently and securely directs customers on merchants’ sites to their desired digital payment options. Such gateways can optimize the checkout process for international customers to win — and keep — their loyalty.
This month’s Deep Dive examines the challenges global retailers face in accommodating local preferences and accepting a growing variety of payment methods. It also delves into how access to multiple payment gateways can help retailers meet these localized demands, retain customers and increase cross-border sales.
The Importance of Alternative Payment Methods to Cross-Border Success
Unique local payment methods are becoming established in many countries. Research indicates that local or alternative payment methods have grown at astounding rates during the pandemic. Digital financial services firm OVO in Indonesia witnessed a 267% increase in new users in 2020, and payment methods in Europe, such as BLIK in Poland, achieved triple-digit growth during this time. Transaction values for buy now, pay later (BNPL) provider Klarna grew 44% in the U.S. in the first half of 2020. BNPL options elsewhere saw similar figures because of economic hardships and consumers’ increasing desire for interest-free payment options.
As cross-border eCommerce transactions become more prevalent, retailers must offer more than one payment option to attract customers and avoid cart abandonment. Cart abandonment occurs when consumers leave sites without buying the items they have loaded into their shopping carts.
A report found that the average eCommerce cart abandonment rate was 70% in 2020. When retailers provided better checkout options, their conversion rates improved by 35%. Other research on shopper habits indicates that 18% of customers cancel or abandon their orders if the checkout process is too complicated, and 7% do so if there are not enough payment options.
Mobile devices have the highest rate of cart abandonment at 81%. With shopping on mobile devices accelerating in many global markets, merchants targeting cross-border traffic must optimize their mobile eCommerce platforms across the whole payments journey.
Accepting the preferred payment methods cost-effectively also is vital to retailers looking to achieve cross-border eCommerce growth. International payments involve at least two currencies, and funds converted into shoppers’ local currencies can result in costly exchange rates or fees for the business. Accepting payments from cross-border customers with no extra fees is as essential as supporting target markets’ preferred payment methods.
Gateways Route Customers to Desired Payment Options, Increasing Sales
Payment gateway software integrated into merchants’ websites enables online consumers to complete transactions securely and rapidly and is responsible for authorizing and processing payments. Many retailers use a payment service provider (PSP) to help manage payment gateways, shopping carts, value-added tax and foreign exchange (FX) rates more efficiently.
Deploying multiple payment gateways gives international shoppers more customizable payment options and can simplify their checkouts, thus gaining and retaining these customers by helping to avoid cart abandonment. Leveraging various payment gateways also allows retailers to analyze and collect shopping data that can inform business decisions and provide insights into how to optimize every transaction for every market.
eCommerce retailers looking to maximize cross-border sales need to ensure that online transactions are transparent, efficient and simple to navigate and must offer the payment methods shoppers want in each market served. Knowing one’s market and tailoring the checkout experience to its needs drives customer engagement and retention, thus enabling retailers to continue to grow their eCommerce footprint.