A Guide to International Payment Preferences
Free Book Preview Money-Smart Solopreneur
Protect your sales, profit and brand by downloading this free, comprehensive guide to understanding and preparing for EMV credit cards. Businesses that fail to update their payment processing systems by Oct. 1, 2015 will be exposed to new and possibly devastating liabilities. Prepare your business today.
Global e-commerce promises huge opportunities for merchants but, as is often the case with buried treasure, there are many challenges to overcome and no clear map to follow. One of the most overlooked but important of these obstacles involves online payment methods.
The latest research indicates that 68 percent of consumers have abandoned an online retail site due to its payment process. Almost half of them chose not to complete a transaction because they weren't offered their preferred payment option. This makes it clear exactly how crucial it is that merchants provide prospective customers in each locality with their payment method of choice, as well as staying on top of new payment options as they become available.
Offering a variety of credit card schemes is not always enough though -- in some countries, credit cards aren't the payment method of choice. Here, a short guide to payment preferences around the world.
In the U.S., buyers predominantly use credit cards, although eWallets are also very popular. One 2014 survey found that 79 percent of respondents had made payments using PayPal, and 40 percent through Google Wallet.
Europe is a diverse payment market. Credit card sales are becoming increasingly popular, but many customers still prefer real-time banking options through which they're redirected to their online bank accounts to submit payment. Some payment methods are pan-European, but most are localized per country.
Localized European payment methods
Almost half of all online transactions in the U.K. are paid by credit card. Debit cards account for some 35 percent of e-commerce payment. PayPal is the country’s third most popular online payment method. Although alternative payment methods are not yet widespread in the U.K., a new digital payment ecosystem called Zapp is expected to have a significant impact on online payments when it's launched later this year. Zapp puts near real-time payments on buyers’ mobile phones through their existing mobile banking application, enabling secure payments between consumers and merchants.
In France, Carte Blue debit cards account for 85 percent of all e-com transactions. Carte Blue recently introduced a voice authorization security mechanism to ensure greater ecommerce cybersecurity. Other payment methods used in France include credit cards and PayPal.
In the Netherlands, iDEAL is a popular payment method in online stores. When checking out, the customer authorizes the pre-filled payment instruction. Once payment is authorized, the amount due is debited from the customer’s account and transferred to the merchant’s bank account.
In Finland and Sweden, real-time bank transactions account for up to 35 percent of the market share. Finland has 10 bank brands offering different real-time banking solutions, and Sweden has four.
Klarna is a major payment method offered by more than 15,000 e-stores in Sweden, Norway, Finland, Denmark, Germany, the Netherlands and Austria. About 20 percent of all e-commerce sales in Sweden go through Klarna.
Pan-European payment methods
SEPA (Single Euro Payments Area) is a European Union payment-integration initiative currently in the making. Its aim is to simplify bank transfers denominated in Euros. A total of 33 European countries are taking part in SEPA, in addition to 28 EU member states, the four countries in the European Free Trade Association and Monaco. SEPA, which doesn't distinguish between national and cross-border transactions, will handle credit transfers and direct debits. Direct debit will enable creditors to collect funds from a debtor’s account if a signed mandate has been granted by the payer to the biller.
The SOFORT payment platform offers currency conversion and is used in 10 European countries (Germany, Austria, Switzerland, the UK, Italy, Spain, Poland, Hungary, Slovakia and the Czech Republic). This method doesn't require a second account (wallet) or registration. A multi-level authentication process and one-time validity ensure secure transactions.
For the Japanese, payment method mistrust is a big issue when it comes to online shopping. Many customers prefer to pay for online goods with cash at convenience stores called Konbinis. After credit cards, Konbinis constitute 25 percent of the market. So if you’re selling in Japan, Konbini is a vital payment method.
Alipay dominates online payments in China, claiming 60 percent of market share. This platform recently launched a mobile wallet application, offering online-to-offline payments. PayEase is another popular payment service provider, enabling comprehensive payment services like mobile payments via SMS, internet banking, call centers and POS terminals.
Cash on delivery is also quite popular in China, and UnionPay credit cards play a central payment role for merchants entering the Chinese market.
The Russian Federation’s most widespread payment method is Qiwi, which offers self-service kiosks that are active around the clock. They are located in malls and on the streets, similar to ATMs. Payments can also be made on WIN PC terminals, which are widely used in mobile dealer shops.
Yandex is another widely used payment service that offers online stores a universal payment solution for accepting online payments. The platform enables merchants to accept the most popular payment methods in Russia and other CIS countries, including bank cards, credit cards and the Yandex.Money and WebMoney e-wallets. Currently, more than 65,000 online stores accept Yandex.Money and 22 percent of Russians regularly use it to make payments.
Internet bank payments are the preferred choice in India, but prepaid cards and cash payments are also widely used. Mobile payments are rapidly gaining popularity in this region.
Mobile payment systems are on the increase in the Asia-Pacific, with more than two-thirds of those acquainted with the methods using digital wallets and SMS payments last year.
The greatest cause of shopping cart abandonment in Mexico, Peru, Argentina and Colombia is the fear of security risks. As such, local and regional online payment sites are still the most trusted methods. DineroMail and MercadoPago specialize in the Latin American market.
As a rule, Brazilians have fairly low credit card limits, so almost half of online purchases are made via installment plans. Boleto Bancário is also popular; this payment process is comparable to wire transfer and cash payment methods. After receiving a pre-filled Boleto Bancário bank slip, the customer can pay for the online purchase using cash at any bank branch or via authorized processors like supermarkets or regular banking points.
In Africa, the mobile payment market has proven to be more popular than banking services. In fact, mobile payment users already outnumber bank account holders. M-Pesa is a widespread mobile-phone-based money transfer and micro-financing service that enables users to deposit, withdraw and transfer money using a mobile device. This system enables users to deposit money into an account stored on the user’s cell phone, send payments using PIN-secured SMS text messages and redeem deposits for cash.
So how can a retailer keep track of these and hundreds of other localized alternative payment methods? Many merchants have adopted data-driven, flexible payment platforms that enable them to offer optimal payment methods in every location. The result is a pleasurable shopping experience that buyers will be eager to repeat.