In 2007, Apple launched the first iPhone: changing the way we communicate, the way we work, and the way we bank. Eleven years later, its influence is still felt across many industries – and payments is no exception.
According to Visa’s Annual Digital Payments Study 2017, 86 per cent of millennials regularly check their balance or transfer money on their phones and tablets. Of course, there’s far more to payments than online and mobile banking. Consumers today have a diverse range of purchase options at their disposal, including touch ID, biometric ID, and voice recognition. In 2018, a customer is just as comfortable paying with a touch of their finger as they are with a credit or debit card.
The wealth of available options to pay for goods has certainly benefited global consumers. But where does it leave merchants – and especially those looking to expand into international markets?
Scaling up payments infrastructure isn’t just an operational consideration: it’s a critical part of future-proofing a business
Technology is contributing to high levels of competition in many sectors. The result is that scaling up is both a matter of survival and ambition. Many businesses must grow quickly to remain competitive. There are many ways to do this, such as: create new product lines, augment existing products with new services and to expand your client base.
Expanding into new territories and new markets can be a particularly lucrative way to scale up a business, but it can also place considerable pressure on payments infrastructure. What works for startup-level transaction processing won’t always work for an enterprise: volume will increase; fraud prevention will become more complicated; customer expectations will shift, and accordingly, available consumer purchase options will need to diversify and multiply.
New markets, new considerations
To prove this, it’s worth looking at the role played by payments in a company’s international expansion efforts.
Seizing the opportunities presented by a new market requires a plan of action for international growth. This plan should account for a new culture, a different regulatory environment, and potentially unfamiliar economic influences across many functions of the business.
Payments infrastructure is especially geo-specific. The European Union may have a supranational legal system and currency, but the citizens of its 28 member states have very different preferences when it comes to making purchases. In the Netherlands, 83 per cent of online shoppers use iDeal as their favoured payment method; in Germany, consumers use invoices, digital wallets, and direct bank transfers. Businesses shouldn’t ignore these differences: by giving consumers the option of purchasing via their preferred payment methods, they make the purchase process easier and more comfortable for them.
Consider Ireland, where credit cards amount to an overwhelming 87.2 per cent of all transactions – and compare with France, where they account for a mere 50 per cent. A single, unified ‘Franco-Irish’ strategy will therefore be rather ineffective. Countries such as Italy also have distinct payment cultures: pre-paid cards make up 15 per cent of all transactions – but people often forget to load up pre-paid cards in time for their recurring direct debits, so businesses operating here should expect higher decline rates.
Going beyond Europe, countries such as the UAE place legal restrictions on newly-issued payment cards, which can complicate the address verification process and hold up or cancel certain transactions.
International markets can often be lucrative, but businesses must have a comprehensive plan for regional variations in payment preferences - organisation that fails to do so could breach local regulations and struggle to connect with customers in new markets.
Payments without borders
International markets are only becoming more profitable. Cross-border e-commerce is becoming more widespread. According to Forrester research, international shopping will account for around 20 per cent of e-commerce sales by 2022 - that’s an estimated $627 billion. The desire for better offers, products, terms, and availability is driving consumers to look abroad.
In 2017, Alibaba’s shoppers spent around $25 billion on Singles Day – a special Chinese retail event that regularly records tens of thousands of transactions per second for the company, and more sales than Black Friday and Cyber Monday combined. The top five countries selling to China were Japan, the U.S., Australia, Germany, and South Korea: all countries with vastly different political systems, economies, and payment cultures. The consumer appetite for a bargain clearly transcends national boundaries. So how can a smaller company profit from this?
Bigger, better, and built to last
Naturally, Alibaba has more resources than the average growing business. But that doesn’t mean that a smaller company can’t scale its payments infrastructure to meet increasing demand. In fact, if it doesn’t, it will inevitably face problems that might derail its expansion plans. By ensuring that payments infrastructure grows at a good pace, businesses can scale rapidly and without friction, regardless of whether they’re pursuing domestic or international growth.
Of course, when a business expands into new regional and international markets, its payment provider must do more than simply improve its capacity and technological capability. A customer-centric approach combined with level of service is as critical as innovation: businesses must collaborate with technology partners who understand their strategic priorities and can operate seamlessly across geographical borders.
Customer comfort and ease
When a company enters a market without the right geo-specific knowledge, and without the right technology partners, there can be serious consequences. Customers who can’t access their preferred payment method may become frustrated: if they can’t pay a merchant easily, they may choose to not pay them at all – abandoning the transaction, and leaving with a distinctly sour impression of the brand.
A scaling business must create a safe, convenient, and completely frictionless payment experience: one that makes it easy for customers to pay for products and services. It can’t effectively manage expansion if some systems and processes are struggling to keep up with the pace of technology.
Planning an expansion strategy, ultimately means nothing if a company is struggling to carry its own weight. Scaling payments infrastructure is an essential part of ensuring that a business continues to grow comfortably, deliver on its approach and work to exceed their customers’ expectations.
Peter Caparso, President North America, Checkout.com
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