Nikhita Hyett, EU MD of BlueSnap
Consumers increasingly want simplicity and convenience in their online shopping experience post pandemic. Businesses understand this, as they have become more connected to consumers thanks to digital channels. As a result, they’re becoming attuned to the international ecommerce trends surfacing in the industry.
In the months ahead, we can expect international shopping to continue to prosper. As it continues to grow, there are three trends that will dominate online selling. Firstly, we will see merchants localise payments to increase authorisation rates and reduce costs. Secondly, businesses will use payment methods that ecommerce spenders are accustomed to. And lastly, payment technology innovations like embedded payments will take the industry by storm.
Localised payments are increasing authorisation rates
The pandemic has brought the world closer than ever before but selling internationally remains complicated in 2022. With the rise in interchange fees in the US this April, and a hike in fees for transactions between the UK and European Economic Areas post-Brexit now in play, merchants around the world are facing an unenviable choice: absorb these increased costs or pass them on to customers in the price of products or services – a move that could deter future sales. With cross border sales predicted to account for 20% of global eCommerce in 2022, the impact of higher fees will be felt across the business community in the form of decreased authorisation rates and increased costs.
There’s a misconception with fees that ‘it is what it is’ and there’s nothing merchants can do to increase cross-border conversions. But there is another way. By partnering with paytech providers, sellers can avoid cross-border fees altogether in 2022, and most importantly save money. That is, merchants can leverage a network of local banks through these payment processors to route transactions via banks in the same region as the cardholder. By localising transactions in this way, merchants not only reduce cross-border fees from card issuers but increase payment authorisation, since banks are more likely to approve purchases that are made locally.
To increase authorisation rates, we will see more merchants take advantage of local currencies and payment methods. Failing to do so would be an unnecessary barrier to increased revenue as those using local currencies are reporting a 12% increase in sales. The same goes for payment methods. Local payment methods such as the EU’s SEPA or Boleto in Brazil makes consumers more confident in their payments. Hence its growing importance to merchants who are looking to streamline the payment experience.
Effectively localising global payments is now a must for international sellers looking to capitalise on the explosion of e-commerce post pandemic.
Convenience is driving alternative payment methods
As the pandemic continues to put pressure on consumer spending power and scrutiny on the in-person payment experience, alternative payment methods such as Buy Now Pay Later (BNPL), digital wallets, and others are becoming the norm in 2022. But what does this trend mean for merchants?
With the prominence of BNPL rising over the past 18 months, merchants are expected to build on this convenient shopping method offering instalment payments to customers. In a post-Covid world, instant gratification has become the staple of eCommerce with consumers shopping on multiple channels from the comfort of their home. To meet this demand merchants need to consider the alternative payment methods that are most convenient for international shoppers.
Payment methods such as digital wallets, cryptocurrencies and bank transfers have been the most popular and growing methods amongst global merchants. The number of digital wallet users is predicted to reach up to 4.4 billion by 2025, meaning global merchants must take advantage of this growing space. Every alternative payment method may not be crucial for your target market, but it’s important to understand what your customers want to use and then let that information guide your payment offerings.
Embedded payments are growing thanks to software platforms
In 2022, we are seeing embedded payments gain popularity amongst software companies and automotive industry players. But what are embedded payments?
Under the umbrella of embedded finance, embedded payments is when software companies build payment functionality into their platforms, allowing their customers to have one cohesive experience within all aspects of their application. Software companies are particularly seeing the value of embedded payments and its quickly becoming integral to their revenue maximisation. This comes as no surprise as software companies that embed payments in their platforms see a two-to-five times increase in revenue per customer.
To better visualise embedded payments, think of SchoolsBuddy – the school-to-home management system – integrating payments into their platform. By doing so, they are able to boost their payment acceptance system and create more consistent payout schedules. Therefore eliminating a key bottleneck faced by those in the education sector. This also makes payments more convenient for parents as they can organise tuition, field trips and other extracurriculars all in one place.
Because consumers now have access to these additional features from a trusted brand they get the ultimate convenience as it reduces friction and risk whilst increasing value. As such, online merchants are integrating more financial capabilities with their online environments to create seamless experiences.
However, the resource costs and risks of implementing an in-house solution are the key barriers most software platforms (SaaS) are facing. That being said, a strong payment partner is key to successfully implementing embedded payments with minimal risk. When looking for a payment partner it’s important to look for one that lets you brand your payment offerings and customize payment flows and offers.
Payment optimisation, a key to a global customer base
When 57% of online shoppers make international purchases and cross-border payments are expected to exceed £250trn by 2027, payment optimisation becomes the linchpin to success for online businesses. Thus, reducing costs through authorisation rates, adopting trending payment technology and understanding alternative payment methods will allow businesses to capture this global customer base.
