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Understanding local quirks is the key to seamless cross-border transactions
Giving seamless international payments the green light will necessitate understanding – and providing for – local requirements, say Checkout.com’s Tracy Meng and Claire Gates from PPRO
You could describe payment services provider Checkout.com and infrastructure company PPRO as among the heroes of the e-commerce explosion triggered by the COVID-19 pandemic.
They rose to the occasion as customers worldwide – even the previously digitallyshy – became used to running their lives online, each company achieving unicorn status in January 2021. Checkout.com, which works with businesses worldwide to optimise their payments, tripled its valuation to €12.3billion after raising $450million in a Series C funding round, which made it Europe, the Middle East and North Africa’s most valuable venture-backed business and the fourth-largest fintech globally.
Meanwhile, PPRO attracted more than $180million of investment to take it value above the magic $1billion and enabling it to fund further growth, after its strong, double digit, year-on-year reinvesting in developing a stronger, scalable expansion to our product suite.”
And no wonder they feel fight-ready, given the stark figures showing worldwide payments growth left to run, released by PPRO in the 2021 edition of its Payments Almanac, in November. It predicts that the e-commerce sector will grow to $6trillion by 2025, with, crucially, ‘consumers expect[ing] to make purchases with their preferred payment method’,. The latter, says Meng, is key to achieving the elusive goal of seamless cross-border transactions in an increasingly borderless marketplace.
“A lot of payment industry people call the likes of Giropays and P24s ‘alternative payment methods’,” says Meng. ”That’s a misnomer. In some regions, where 70 per cent of the population want to pay using them, they’re primary payment methods.
“So, it’s important for merchants to create the right experience, understand their customers, do the research, so that customers can see, when they’re checking
transaction volumes in 2020. At the same time, it expanded its global team by 60 per cent in 2020 and developed new strategic partnerships with local payment methods in high-growth markets, including Indonesia and Singapore.
PPRO offers a payments infrastructure for businesses (PSPs and their merchants), which allows them to offer more choice at the checkout and boost cross-border sales. In 2020, this helped it process $11billion of payments.
Both companies see this as just the beginning. Tracy Meng, global head of partnerships and partner engineering at London-headquartered Checkout.com, described the opportunity it is intent on seizing: “We don’t feel like we’ve reached some milestone where we can rest on our laurels; it’s chapter zero in our story.”
Similarly, PPRO’s chief commercial officer, Claire Gates, added: “It’s been exciting but there’s a lot for us to work on, going forward. Key, having raised the money, is
out, that their primary payment method is there as an option, and think ‘I’m going to come back to this merchant because it was so easy to shop there’. That virtuous cycle is how you build lifetime customer value, and where payments become really important.”
WORKING THE SYSTEM
“Growing global businesses using international payments is complex, Meng adds. “The best analogy is international travel, when you’re going from one country to another and have to go through border control because each country has its own regulations for what is legitimate. With payments, if you’re going from point A to point B, from the user’s bank account to –the merchant’s, replace border control with the issuing and acquiring banks.
Tracy Meng, Checkout.com
“For example, when I go to use my US credit card to buy a dress from a French boutique, the French bank might flag something as illegitimate because it doesn’t recognise it or is more familiar with the local banks. But what if someone can walk up with you to that ‘border control’ and say ‘I vouch for this credit card. I’ve seen it before, I know how it works, because I have all of the global entities and licences in place’? That’s the beauty of the innovative solutions that can help every user go through that border control line as quickly and seamlessly as possible, so that merchants never lose out on a transaction because it’s cross-border.
“That’s what PPRO, which encompasses the acquiring and processing in one and has a large portfolio of local payment merchants, can do for every single transaction, and truly make e-commerce borderless.”
Indeed, PPRO’s report suggests this could provide the answer to the industry problem that, even if they recognise their value, ‘many firms still lack the knowledge, licensing, and technology to conduct local transactions’ which, Meng believes, are the key to finally achieving seamless cross-border payments.
Developments aimed at standardising payments data, including ISO 20022, are helping, but simply understanding how people in a particular locality want to pay and then allowing them to use those methods, can make more difference than data, particularly when you consider that 77 per cent of global online purchases are made with a local payment method. In fact, the analysis also shows just how much payment styles differ between territories, stating that ‘the UK e-commerce market is worth £204.8billion and expected to grow to £257.1billion by 2025, while payment methods in different geographical regions remain disparate, with 32 per cent of UK consumers relying on e-wallets, while 24 per cent of transactions in Eastern Europe are cash-based’.
According to the report: “Western Europe is heavily dependent on bank transfer payments… 60 per cent of consumers conduct payments with digital wallets… while 72 per cent of payment transactions in China are done with wallets like Alipay and WeChat Pay [and] Latin America, by contrast, relies on card (60 per cent) and bank transfer (14 per cent).”
There is no doubt that catering for these different tastes will only become more urgent, as PPRO’s report observes that ‘use of digital payments in Europe is forecast to grow by 70 per cent between 2020 and 2025’ and ‘in 2020, e-commerce shipment volumes in Europe increased by 149 per cent for internal purchases and 123 per cent for cross-border ones entering the continent’.
Gates said of the report at the time: “This boom in cross-border e-commerce and the proliferation of niche local payment methods, has intensified the challenge for companies who seek to make transactions simple and secure. Brands need to understand these regional differences if they want to capture new customers.”
NO GOING BACK
While COVID-19 fuelled the shift to e-commerce, it is likely here to stay, adds Gates: “The global retail market has changed. It was predominantly offline, now consumers who are purchasing goods and services anywhere, they’re borderless.
“We’ve all got parents, or even grandparents, who suddenly found they could buy all their goods and services online, including groceries, and because that situation was protracted over a long period of time, people’s purchasing behaviour has changed and, one could argue, this new way is here to stay.”
Meng points out that it’s not just consumers who are catching on. “We’ve also seen merchants and businesses becoming more sophisticated at accepting payments. Now, technologies like Checkout.com, with a single API that covers gateway, processing and acquiring, puts the merchant in full control of how they optimise how they’re paid.
“That’s been a revolutionary moment for the payments industry, merchant adoption requiring us to innovate to the next level,” she says.
Integrating local payments sounds so straightforward, but it isn’t. Where do you draw the line in terms of how many local payments you integrate? And you have to integrate them in a technically-optimal way to get the right results
Claire Gates, PPRO
And Gates adds that this presents an opportunity for smaller merchants to further ‘level up’ with the giants, by catering for local payment preferences like Brazil’s Boleto and WeChatPay in China.
“Integrating local payments sounds straightforward, but it isn’t. First of all, where do you draw the line in terms of how many local payments you integrate? And you have to choose the right ones and integrate them in a technically-optimal way to get the right results,” says Gates.
“PPRO has coverage in 100-plus countries with local payment methods and which local payment method is relevant for their demographic or sector, and which isn’t’.”
Meng adds: “Businesses also need to stay ahead of the trends, from local payment methods to buy now, pay later, wallets and one-click pays, designed to make payments as seamless as possible; as well as experiential innovations such as voice and hands-free commerce through home devices or digital assistants.”
