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How Payments Choice (And Faster Payments) Make X-Border Commerce D2C

For brands and merchants — from the largest marquee names in luxury retail to the smallest shops to artisans peddling handcrafted wares — going direct to consumer (D2C) has never been more urgent.

In an interview with Karen Webster, Emanuela Saccarola, global head of product for cross-border payments at Citi, said that digital shopping, as a trend, may have been increasing all over the world well before the pandemic struck. That trend, of course, has been accelerated in the wake of the COVID-19, and now has spurred every brand to want to engage with consumers — as seemingly every consumer ventures online.

That’s evident in recent earnings reports from consumer-packaged goods companies that saw double-digit and triple-digit percentage growth rates for eCommerce.

The companies that had dominant positions on grocers’ and big-box retailers’ shelves have now had to make a big push to establish a D2C presence, pivoting away from wholesalers in the process.

Yet many of those merchants (and any number of smaller firms), said Saccarola, have found that friction abounds when they’ve tried to accommodate the needs of consumers who want to click, pay and check out over the web.

Different D2C Models

“When you look at the direct-to-consumer model, there are many different models within that larger category,” Saccarola explained. “The system is quite complex. There are the consumers, there are the companies that are selling — and, in some cases, there is a marketplace involved.”

A streamlined payments process, she noted, has two components: collecting from the end customers themselves and, in the case of the marketplaces, paying the merchants selling through those platforms. Many companies may not have previously been able to engage and collect payments from consumers directly.

“The frictions demand that you look at how you set up that process, and what partner you choose as a payment service provider,” Saccarola told Webster — as going D2C while also accepting payments at the same time is becoming more critical for brands.

Those payment providers can offer up gateways that enable consumers to have a wide range of payment choices. As Saccarola noted, some individuals may want to use digital wallets, others prefer to be debited on their accounts via Request To Pay and others want to use credit cards. The acceleration in providing that choice, she told Webster, has compressed six years of technological advancement into six months.

Managing payment flows has been a challenge — where, in Saccarola’s words, the wholesalers are eliminated, and consumers are making “microtransactions.”

“These payment flows are high-volume and low-value compared to before, when businesses would have simplified relationships with bigger wholesalers and would have had payment terms, too,” she noted. Navigating tens of thousands of $5.95 transactions carries a set of complexity that single purchases of $595,000 simply don’t.

Marketplace Complexities

Complexities abound when collecting payments and paying out to merchants from online ecosystems and platforms, said Saccarola.

“People who are shopping online are most likely in North America, Europe and maybe some of the Asia Pacific markets, but the merchants selling on those marketplaces can be anywhere in the world. The majority are actually in China, India, Bangladesh, Philippines, Indonesia and maybe some of the Latin countries,” she said.

Those merchants want to be paid in a wide range of local currencies, and in some cases may be operating from highly regulated countries. Saccarola pointed to China as an example of a highly regulated market.

In order to facilitate “local” payments to merchants in those markets, she said, FinTech companies, payment intermediaries and banks have been working in collaboration to create new payment models. Transparency has improved, too — a bid by companies to keep their payees (the hosts, the drivers, the influencers, the merchants) happy and to build “sticky” relationships.

Instant and faster payouts can give merchants competitive advantages, a more efficient cash flow management — for now. As time goes on, faster payment schemes will become more and more prevalent across the globe and will become standard operating procedure for platforms, especially when it comes to cross border/multi-currency transactions.

There will eventually be the ability to complete cross-border instant payments, 24/7, across a large swath of countries. Frictions can be reduced and payment times can be shortened (to a matter of mere minutes and, eventually, seconds) through APIs and advanced technologies, which streamline the exchange of payment-related data and cut down on back office functions, noted Saccarola.

“Cross-border payments have a lot more friction than instant payments done domestically,” she said — but that will change. “We’re just at the very beginning of the journey.”

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