The world is becoming increasingly interconnected, and ambitious merchants need to carefully consider how they can sell cross-border to secure long-term growth.
According to GlobalData’s Payment Instrument Analytics, the total volume of cross-border transactions in Europe alone is set to increase by 58% by 2028, whilst global initiatives such as the G20 roadmap for enhanced cross-border payments aim to improve the speed, access, transparency, and cost of international payments by 2030.
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However, despite this, the global payments landscape is still extremely fragmented. Merchants need to implement payment strategies that address regulatory complexities in each market and effectively drive seamless transactions across a growing number of local payment methods.
Understanding how locals like to pay
The payments industry is still a very complex one, holding back businesses and excluding millions of consumers, especially in emerging markets. Many merchants continue to adapt old technologies, leveraging bank rails and innovating on the edges rather than identifying and solving core infrastructure issues.
The first thing merchants must understand when developing an appropriate payment strategy is that each individual market has its own distinct consumer behaviour patterns and payment preferences. They will often differ significantly – not only between regions, but also within regional blocs. For example, many merchants are now looking to take advantage of cross-border e-commerce opportunities within the European Union’s integrated single market, which helps them to expand into new jurisdictions, tap into new customer segments, and ultimately grow their business.
Yet, some merchants looking to sell cross-border still make the mistake of assuming an outdated ‘one payment method fits all’ approach.
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By GlobalDataEven neighbouring countries, such as Germany and France, can be wildly different when it comes to payments. France is still a card-heavy market, with the French using their card of choice for 52% of online purchases. In Germany, which is now Europe’s second-largest e-commerce market, convenient digital wallets have emerged as the leading payment option, used for 33% of transactions.
Once merchants understand how a given market likes to pay, they will also need to keep on top of evolving regulatory requirements and other market developments. For example, there are a number of upcoming changes in Germany’s payments landscape to consider. Sofort has been integrated into Klarna and the Giropay online payment system will be phased out by the end of this year. Merchants need to act swiftly to optimise their payment systems.
Adopting a payment strategy that covers multiple fronts
To stay competitive, merchants must adopt a tailored payment strategy that aligns with local preferences, minimises conversion risk, and enhances the user experience.
This is particularly true in vibrant Latin America. A young consumer base and rapidly growing middle-class demographic, combined with one of the highest internet penetration rates globally, makes LatAm an attractive e-commerce region for businesses looking to expand into new markets. A recent industry report highlights that transaction volumes are projected to reach $354bn by 2027.
Credit cards still have the biggest market share (48%) for e-commerce payment methods, but we’re seeing a decline in the use of cards in the region as a plethora of local payment methods capture consumers’ hearts and minds.
Brazilians are turning to digital payments faster than any other country in the world, and the instant payment platform Pix, powered by the Brazilian Central Bank as it aims to reduce cash use and drive competition, now makes up 16% of online payments across the top six LatAm markets.
Mexico, meanwhile, is the second largest economy in the region and therefore a strategic target for merchants looking to grow their footprint in that part of the world. The country has a diverse payments ecosystem, which includes cash-based options like OXXO Pay.
To succeed in the region, merchants need a payment strategy that incorporates every payment method that prospective customers care about, whether that’s Pix, OXXO Pay, or the wide range of local cards, such as Hipercard and Carnet, which are widely used across Latin American countries.
In addition to multiple local payment methods, the LatAm region is unfortunately characterised by high fraud rates – estimates by Mastercard revealed the region loses around 20% of total e-commerce revenue to fraud, ranking second globally after Southeast Asia. It’s therefore imperative that merchants find the right payments partner to help them navigate increasing compliance requirements and currency conversions, as well as local payment collection.
At PPRO, our focus is on enabling global merchants to offer a more localised payments experience, wherever they operate. We’re helping them access new consumers in new markets, whilst adhering to complex regulations and increasing their authorisation rates. By integrating trusted local payment methods and then optimising the customer journey to boost conversion rates, merchants can succeed globally by thinking locally.
Eelco Dettingmeijer is Chief Commercial Officer at PPRO
