Cross-border payments

Previously on our blog, we talked about cross-border sales in eCommerce. Thanks to the fulfillment service, the store's owner doesn't have to worry about the logistics issues. However, there are still several challenges that you have to face. One of them is related to cross-border payments. How can you adjust the payment infrastructure to meet the requirements of foreign customers?


Types of payments


34% of all online customers decide where to place an order based on the available payment methods. On a global scale, credit card payments are prevalent. It’s the most common payment method in every region except Eastern Europe and Russia, where debit cards are more popular.

Global Online Consumer Report, KPMG International, 2017


PayPal is another payment method popular all over the world. It’s a virtual wallet that allows you to pay via a secure online account integrated with your credit card or bank account. Other, yet less common payment methods are:

  • Bank transfers
  • Cash on delivery (COD)
  • Gift cards

 

Currency payments


Various payment methods are not your only concern. You should also enable your customers to pay in their local currency. Several options make such payment accessible:
 

  1. DCC (Dynamic Currency Conversion): The payment is sent in the customer’s bank account currency. The buyer sees the final cost in their currency, and the seller gets the amount indicated in the money request. The conversion happens in real time.
     
  2. Currency payments: 1:1, with no additional conversion.
     
  3. SEPA (Single Euro Payments Area): This solution allows you to receive money in Euros. There are no intermediaries, which frees the transaction from additional fees and accelerates the process (you can expect money on the next working day).
     
  4. SWIFT (Society for Worldwide Interbank Financial Telecommunication): It’s a SEPA equivalent on a global scale. Payments are processed in the SHA variant, which means that the cost of the conversion is split between the sender and the receiver.

 

Various payment methods: Why should you adopt them?


Currently, there is something called home bias in eCommerce. This tendency indicates that we are more willing to place an order in domestic stores. There are many reasons for this, and distrust towards the formal side of the transaction (including payment) is the major one. That’s why it’s so critical to adjust payment methods to local preferences and offer a wide range of options, where each of your customers can find their perfect match.


The Brazilian market is a good example. Although 1/3 of Brazilians don't have a credit card (or a bank account for that matter), it's a South American eCommerce empire. A new payment method has been developed to meet their needs. It's called Boleto. It offers offline-online payments regulated by the Brazilian Bank Federation. You can pay via Boleto (ticket in Eng.) in many locations thorough Brazil–in ATMs, stores, public institutions, and banks.


Customers’ preferences


GENERATIONS


The preferred payment method is determined by many factors. Apart from geographical differences, the generational differences are also substantial.
The youngest generation is keen to use credit cards, which is probably driven by that exclusive feel they offer. Millennials typically use debit cards.

DESKTOP VS. MOBILE 


The device matters as well. Desktop users prefer the Pay-By-Link option (an instant money transfer offered by an external payment platform). About 35% of consumers choose this option. The traditional money transfer is right behind. When it comes to mobile payments, these transfers hold 5th position. Mobile customers prefer the Cash on Delivery option. The BLIK platform is also becoming more and more popular and is now in 4th place in mobile payments.


Analysis of the chosen markets


We have already discussed the global customers’ preferences. Now, let’s focus on specifics. How can you adjust payments to customers’ needs in various countries?


POLAND


The Polish market is variegated when it comes to payment methods. Only the German market surpasses Poland in this regard. Poland is the leader regarding money transfers and COD parcels (96% of online stores offer them). Interestingly, in Poland, you can frequently pay for your online purchases with cash. Many Polish companies operate in the omnichannel model, and they run brick-and-mortar and eCommerce stores alike. Therefore, you can place an order online, pick it up in the chosen store, and pay for it with cash.


GERMANY


It's the country that offers the highest number of various payment methods in Europe. This means that German consumers are picky, and they expect that the store they select offers their favorite payment method (over 72% of Germans have one!). 11% of surveyed Germans said they wouldn't place an order in a store that doesn't offer their favorite payment method. For most German consumers, it's PayPal (57%) or payment order (5%). The diversified market and attachment to specific methods result in the fact that when you offer just one payment method, you can reach 60% of customer, tops. Providing the possibility of using six of the most popular methods (PayPal, invoice, credit card, payment order, instant money transfer, pre-payment) allows you to reduce the shopping resignation index to just 3%.
 


THE UNITED KINGDOM


This market is at the other end of the scale. It offers very few forms of payment. It's related to the massive popularity of credit cards, which have long been in British wallets and are also used for online payments. The second popular method is the e-payment service. There are just a few alternatives to these options. Only 12% of stores offer hire purchases. Checks and cash on delivery can be found only in 2% of sellers, so it is an excellent opportunity for foreign stores that want to attract British customers. One of the options for building a competitive advantage may be offering various forms of payment.
 


SWEDEN


Sweden is an absorptive market in terms of eCommerce. 60% of consumers buy online at least once a month. Sweden is also a country that is very patriotic about shopping. Swedes want to buy domestic products. A foreign store has a chance only if it looks like the Swedish ones, also in terms of payments. This is the second most important aspect of online shopping in Sweden (the first one is shipping and returns). The most popular form of payment is a quick and straightforward payment form. The Swedes only have to give their "personnummer" (the equivalent of the Polish Tax Identification Number). After providing it, the form is automatically filled in with the following data:

 

  • Address
  • Telephone number
  • Bank account number


This allows you to pay very quickly by a bank transfer or card. A third of Swedes choose deferred payments. Thanks to this approach, the customer has some time to collect the order and return it before paying for it.


FRANCE 


It’s the largest country in the European Union in terms of surface area. It’s also the 6th economy in the world. When it comes to online shopping, France ranks second in Europe (although it ranks first in the online FMCG segment). It is also one of just two European countries (Italy is the second one) where the postal payment order is still in use (8% of French consumers choose this option). Another interesting option is payment by check. Almost 70% of French eCommerce companies offer it. Hire purchases are even more common. Dominant (80%) are payments via credit and debit cards. Interestingly, it is in vain to find the COD option in French online stores.

 

THE CZECH REPUBLIC


It is a dynamically developing economy with an eCommerce turnover of 5 billion dollars. The Czech Republic is also one of the fastest-growing markets when it comes to cross-border online shopping. And what about payments? Even though over 80% of Czechs have bank accounts, COD is still the prevalent method. Credit cards are becoming more and more popular, but currently, only less than 20% of consumers use this method. However, instant pay-by-link bank transfers via ten local banks are prevalent.


The summary


For the vast majority of consumers, payments are one of the key aspects of choosing an online store. It is also an issue that varies significantly depending on the age, the tools used, and, most importantly, the country. Therefore, when considering expanding to foreign markets, you have to thoroughly analyze this subject and adjust the offered methods to local customer preferences.

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