The global payments landscape has significantly evolved over the past decade. The rapid rise and equally rapid evolution of online and mobile commerce has given rise to a wave of new payment methods. E-wallets, in-app purchasing, and peer-to-peer payments are all products of consumers’ increasing comfort with digital commerce. In many developed markets, older payment methods, such as checks and payment on delivery, are being replaced by alternatives that make online and mobile transactions frictionless, thus further feeding consumer appetites for online shopping.
By 2020, the digital portion of global retail sales is on pace to double from $1.9 trillion to $4 trillion, according to eMarketer. That’s not counting online sales of travel and tickets!
With the growth of international ecommerce platforms like Shopify and Magento and payment platforms like PayPal and Stripe, the barriers to ecommerce are crumbling, giving life to new businesses, opening up new revenue streams for established players, facilitating economic trade, and driving technology advancements worldwide. As ecommerce continues to become increasingly global, fueled by growth of internet coverage around the world and higher levels of smartphone penetration, the forms consumers use to pay for their digital and physical goods will continue to evolve as well.
Major technology companies, such as Facebook, Google, Apple and Microsoft, which are engaging in cross-border business and providing global services, are tasked with deploying their services on top of old and fragmented payment infrastructures. This is particularly challenging in emerging markets, because each country has its own legal framework, issuers, acquirers, processors, and gateways, resulting in payment methods that may appear to be very similar on the surface but are very different under the hood. In addition, consumers in emerging markets are still relying on alternative payment methods like bank transfers, installments, and voucher-based methods involving cash. Their payment preferences vary from country to country. Companies that wish to expand into fast growing markets such as Latin America, for example, are faced with the dilemma of how to add hundreds of different payment methods in a manner that works with their technology systems and operations, or be satisfied with reaching only about 20 percent of consumers who have access to international credit cards.
This challenge has given rise to a number of increasingly important technologies and companies influencing the payment arena in markets across the world. I’m not talking about Apple Pay, Android Pay and PayPal; their worthy contributions have already been chronicled on hundreds of occasions. Stripe, however, deserves plenty of praise, as well as companies like BlueSnap and Payoneer. They are the ones powering a new breed of business such as marketplaces, content companies and ad networks, as well as some traditional online retailers and merchants, with API-based payment solutions that are global-ready and mobile-first.
Because emerging markets are so complex and so different from each other, ecommerce and digital goods companies are also starting to partner with payments technology companies with deep roots in these markets and coverage of the full locally relevant payment mix. When selecting a payments technology partner for emerging markets, merchants need to ensure that their future partner has:
- deep understanding of local nuances and banking infrastructure
- proven, robust and flexible technology stack baked into one platform
- a solid grasp on local laws and risks, as well as operational capacity to assure compliance and avoid fraud
What this means for the future of payments and global ecommerce?
While digital banking and technology evolves to encompass payments, the needs and wants of consumers are also evolving (though at different pace and with different preferences, depending on the country or region). Merchants and payment providers will rise to the occasion to meet these challenges and gain a stronger global foothold. Country-governments will also play their role in welcoming cross-border ecommerce and encouraging digital payment innovation.
We’ll see further growth in mobile checkouts, increased availability of branded payment apps that marry transactions with loyalty programs, like the one by Starbucks, as well as broader availability of multi-currency cards. As the world’s biggest tech companies work to secure customer loyalty in the payment arena, they will begin by integrating features into the desktop and mobile interfaces. Google, Apple and Microsoft will begin deploying in-browser payments, while Facebook, along with other social media and social messaging entities, will likely introduce commerce platforms and cross-border money transfers in-app.
The next few years will certainly be exciting for those of us in the fintech, mobile and e-commerce arenas, as we work together to deliver a truly borderless commerce experience regardless of where the consumer may be.