Removing Barriers to Cross-Border Retail Commerce

If you ask online retailers what methods of payment they accept, most would say credit cards. But a study of global E-commerce payments found that in many parts of the world, credit cards account for a very small portion of payments made online. The conclusion? Retailers need to expand significantly the number of payment options they accept if they want to compete success­fully in the global market.

“The 2015 Global E-Commerce Payments Guide,” by pay­ments company Adyen, found that cross-border E-commerce is growing at a rate more than double that of domestic E-com­merce; the global market is expected to reach more than $2 trillion by 2017. Yet, credit cards won’t be used to pay for many online purchases. The study found that in China, 1 percent of online shoppers pay with international credit-card brands; in Germany, only 25 percent use credit cards in making an online purchase.

“The main payment method differs a lot around the world, and, in order, for a retailer to support a global customer base, it must be able to accept a wide range of payment options,” says Adyen’s chief commercial officer Roelant Prins. It is not always easy for retailers to accept a wide range of pay­ments because each form comes with its own technical and security concerns. “You need for multiple people inside your organization—from technology support to customer support to marketing—to be aware of differences in payment options and how they work. There is a huge mindset that people pay by credit card. But if you want to expand internationally, that is not always the case. You must be prepared for alternative systems.”

For example, China is the largest retail E-commerce mar­ket in the world. Yet, with just 1 percent of online purchases made via international credit cards, Asian payment com­pany Alipay has about a 48 percent market share; interbank network UnionPay accounts for about 14 percent. Tenpay, a mobile payment program, accounts for 19 percent of the market.

China isn’t the only market with a growing interest in mobile shopping. The rate of online payments using mobile devices continues to rise around the world, according to Ady- en’s Mobile Payments Index, which now accounts for more than 25 percent of all online payments made during the first quarter of this year.

Europe leads the world in adopting mobile payments; 29 percent of online purchases are made via a mobile device. The United States showed considerable growth as well, increas­ing nearly 5 percentage points to 27 percent over one 6-month period in 2015 alone. During 2015, Asian markets saw more than 20 percent of online transactions conducted on mobile devices for the first time.

To deal with the complexity, Prins recommends retailers hire a payments firm with global expertise. Even retailers that do not want to leave their current payments processors can use existing processors for domestic payments and use a global spe­cialist for foreign sales. In Europe, for example, consumers are often directed to a separate site to make payments rather than pay directly to the retailer. Settlement can also be different in the speed at which retailers receive money and the costs they pay to settle a transaction.

Fraud is also a concern, as online sales from certain parts of the world represent a much greater payment fraud threat than transactions from other areas. Retailers need help in assessing and mitigating fraud risk from various foreign transactions.

Source: Barry Berman, Joel R Evans, Patrali Chatterjee (2017), Retail Management: A Strategic Approach, Pearson; 13th edition.

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