The global payments industry is only a few decades old. From its inception, it has primarily consisted of Payments Solution Providers (“PSPs”) that provide hundreds of alternative payment types and offer local currency to the consumer. PSPs helped simplify the process of collecting money from the global consumer and remitting money back into their merchants’ accounts.
In this PSP-centric world, the hip, in-the-know retailer entering into Europe or Canada would set up their global solution offering credit cards in EUR, GBP and CAD, and they would enable some strange payment types called Sofortüberweisung, Giropay, and iDEAL, and then, well… they would be ready for the global market.
Well, it sounds great – if this were 2009. However, in the last few years, there has been a major shift and disruption to global retail that every retailer with global ambitions needs to be aware of.
This shift that has changed the global retailing landscape is in local consumer expectations in major countries like Australia, Canada, and most of Europe. This shift, so key to global success, is brought to you by Amazon and the top 5% of leading retailers that provide core payments connections. They all offer in-country connections, a fact that radically alters the playing field of the lightning fast global commerce space.
Still skeptical? Listen to an interview from a typical Canadian consumer here – as Darlene from Canada puts it, “All Canadians know the CAD/USD rate and have a keen eye as to whether a retailer is truly providing local payments. If the price and local connection smell a bit funny, I will take this into account when purchasing. I don’t want to pay extra conversion fees and penalties on my card. There are many more options today and I can simply purchase from another trusted retailer”.
This is the major shift in the global landscape. Changing consumer expectations means the death of the two-decade-old concept of what it means to offer global payments. In order for retailers to stay relevant, they must embrace the new model of in-country payments.
In-Country payments provide an increase in approval rates. They eliminate additional consumer fines and fees, and they are less expensive for retailers to process.
In-Country payments mean:
An increase in approval rates: cross-border transactions are declined at a higher percentage because of general fraud concerns. Providing in-country payments eliminates this extra hurdle and increases approval anywhere from 2-6%.
Elimination of consumer fees: issuing banks often charge the consumer an additional 3-5% on cross-border transactions. This is becoming more common in Australia, Canada, and across Europe. Consumers are becoming cross-border savvy, and looking for assurance that they will not see this additional fee. They want to know that they are purchasing from a payment provider who is processing in-country.
Processing savings: the cost of processing credit cards and alternative payments is often far less in other countries. Savings can be as much as 1% or more.
Knowing how beneficial in-country payments can be is the first step. Next, the question becomes, “How the heck do I keep up with the Amazons of the world!?” Amazon and other major players have hundreds of people on their payments teams alone. They have the deep pockets, global entities, technical connections, and legal advice around the world.
You can absolutely compete. The way to stay relevant and competitive is to prioritize your approach when scaling your global business. Do your own math around the cost and revenue considerations of setting up in-country connections. If you don’t have the expertise on staff to provide a clear view of all of your global payments options and how you can grow smart and fast to keep up with market expectations, work with a payments expert who can help navigate the waters.
The good news is that there is a clear path that can help retailers scale quickly without a major investment.
Retailers eager to take the step towards in-country payments can develop a connection with a Merchant of Record (MOR) Payments Provider. The MOR payments model supports a timely entry into in-country payments without a cumbersome time and resource commitment. Retailers don’t have to set up such intense infrastructure – their payments provider provides the local entities, the payments expertise, and in some cases, the support teams. According to a recent Forrester February 2015 report, 61 percent of global ecommerce firms use a third party as their MOR for at least some markets. Maybe more importantly, satisfaction is high — 96 percent of all firms reported some level of satisfaction, with 42 percent having said that they were “very satisfied,” 34 percent having reported being “satisfied,” and 20 percent responding that they were “somewhat satisfied” with their third-party merchants of record. Not a single respondent expressed dissatisfaction.1
So – Don’t panic. While traditional global payments might be dying, the world of an in-country approach can simplify the process, reduce costs, increase revenues, and allow you to maintain relevance in the market. As the lightning speed of global retail marches on, you can keep pace with a smart look at your global payments strategy.
1 Source: Forrestor Report, February 2015: Accelerate Global Growth While Reducing Risk.
Matthew Cannon is the VP of Business Development for GoInterpay. He previously led strategic deal teams at GlobalCollect/Ingenico, helping global retailers expand into Asia and Latin America. Matthew is a founding member of the Global Retail Insights Network (GRIN) and works with the global non-profit as a key payments and FX contributor. He is actively involved in the Latin American and Asia ecommerce markets and has helped lead and develop innovation summits in Sao Paulo, Buenos Aires, Singapore and Shanghai.