Having spent thirty minutes browsing through the website, the consumer eventually decides on the product of their choice. However, during the payment step, the consumer realizes that there is no payment method that they are familiar with and therefore abandons the cart. What a disheartening experience, both for the consumer as well as for the merchant!
In line with the dynamic changes in global online consumerism, cross-border ecommerce has been developing rapidly to offer a diverse range of digital payment options that meet the expectations of every country or region.
Your Primary Payment Option
With consumers from various cultures, languages, and currencies, online merchants are expected to offer a wide range of payment methods that meet the needs of their customers across the world. While consumers in China expect to be able to make payment via WeChat, Alipay, UnionPay and online bank transfer, consumers in Europe and the Americas prefer to pay via credit cards.
Although it is a common payment tool in ecommerce, consumers that use the digital wallet is often required to provide proof of identity e.g. biometrics, SMS messages, and allocated codes before the payment is accepted to complete the order. Widely used by online shoppers, purchases made using the digital wallet made up about 49% of online payments in 2022. The most common digital wallets available include WeChat Pay, Alipay, Apple Pay and Google Pay.
Credit and debit cards are mainstream payment methods that are globally accepted.
The credit card is a cashless payment method that comes with a line of credit and overdraft facilities authorized by the issuing bank, enabling the consumer to pay for goods and services within a spending limit. In 2022, credit cards were used for 20% of online payments. Examples of credit cards include Visa, MasterCard, American Express, Discover, UnionPay International, and JCB.
On the other hand, the debit card is issued by the consumer’s bank with no credit limit or overdraft facilities. The cardholder must deposit funds in their related account before they are able to use the debit card to make a payment. In 2022, debt card payments made up about 12% of global online payments.
Online Bank Transfers
A bank transfer is initiated by the payer, who makes a payment to the merchant by transferring funds from their bank account to the merchant’s designated bank account. In 2022, this form of payment made up 9% of global online payments.
Buy Now, Pay Later (BNPL)
With Buy Now, Pay Later (BNPL), the consumer takes delivery of the product or service purchased before paying for them. Very popular with the millennials, and Gen Z consumers, BNPL made up 5% of global online payments in 2022. Examples of BNPL include Klarna and Atome.
Prepayment includes the prepaid card and credit voucher where the consumer makes a payment of up to the face value of the voucher; or tops up the amount in prepaid card for their purchases.
This method refers to payment being made in cash e.g., when taking delivery of the product or service ordered, or in convenience stores. For convenience store payment, the consumer first goes online to place an order for the product or service and makes payment offline at the convenience store with the printed order ticket or an order number. Examples include Mexico’s OXXO and Japan’s Konbini.
Which Payment Method to choose from?
Selecting the appropriate payment method minimizes challenges and maximizes revenue for the merchant. On the one hand, the right payment method would expand and extend the merchant’s reach to their target customers, driving increased growth opportunities. Also, offering the consumer payment methods that they are familiar with would definitely increase transaction conversion rates and minimize payment costs.
So, how would the merchant’s business, target market and their customer’s choice of payment method help the merchant to gain insight into their customer’s spending habits and drive customer loyalty?
Payment Methods by Geographical Markets
Europe and the Americas: With a long history of accepting payment by credit card, the European and American markets have continuously developed their related infrastructure to support their consumers, making payment by credit card the payment option of choice. That said, the advent of digital wallets like Apple Pay and Google Pay have also caught the attention of the younger consumers who are veering towards these digital modes of payment.
Japan: In Japan, payment by credit card is the primary method of payment for online purchases, followed by internet bank transfers and digital wallets. Of special mention is Konbini, an extremely popular mode of cash payment that leverages the vast network of convenience stores, enabling consumers who have no credit cards or do not trust internet bank transfers to pay for their online purchases.
South Korea: The most widely used payment methods for online purchases in South Korea are via the credit card, debt card and digital wallets. Examples of these payment methods include BCard, KB Kookmin Bank, Samsung Pay, Kakaopay and Naverpay.
Southeast Asia: In this region, credit card usage is relatively low compared to internet bank transfers and digital wallets. The most commonly seen payment methods include Atome, RAZER GOLD, FPX, SEA BANKING, Cherry Credits, GCash, Touch’n Go eWallet, True Money Wallet, DANA and BPI.
Latin America: Consumers in the Latin American region prefer to use postpaid credit cards or cash for their purchases. Examples of these payment methods include OXXO, Boleto, Instalments, Elo, and Pse.
Middle East: Payment via credit card is not a common practice in this region as the majority of consumers prefer to pay for their purchases upon delivery. That said, online payment methods like the digital wallet oneCard is gaining popularity here.
Offering Payment Methods Befitting the Business Category
The key selling point of online retail is “speed”, offering the consumer a shopping experience that is seamless, convenient and secure. To that end, the related information already stored in the digital wallet and online bank transfers enable payments to be completed at a faster pace, resulting in an enhanced shopping experience for the consumer. Also, if the retailer is selling high-valued products or services, Buy Now, Pay Later might be an appropriate offering to drive increased order conversion.
Faced with an immense and diverse range of consumers with vastly different expectations, the online retailer must be ready to offer payment methods that are flexible and meet the consumer’s need while at the same time minimize fraudulent behavior online.
SAAS and Subscription-based Businesses
To maximize seamlessness and operational efficiency in the end-to-end payment process, merchants in the SaaS and subscription-based businesses that offer frequent and periodic payment options would offer payment methods that enable the storage of recurring payment related information for the convenience of the consumer. Examples of these payment methods include the bank card, digital wallet and debit card.
Payment methods vary from country to country, region to region, one consumer cohort to another, and from one business category to another. To that end, an online merchant who aspires to expand their business across the world, transcending national borders and cultures, being able to offer the consumer a shopping experience that is reliable and localized to meet their needs i.e., looks and feels familiar, is the key to success.
Drawing on our extensive and in-depth experience in the research and development of a diversified range of payment products and services, Oceanpayment continuously strives to meet the cross-border needs of customers across the globe with solutions customized for the local market.
With a geographical network of more than 200 countries and regions, our operational infrastructure supports more than 500 payment methods in 20 languages and processes payments in no less than 140 currencies. Our solutions and services seamlessly connect the merchant and the consumer online wherever they may be located, enabling the merchant to quickly and effectively extend their footprint overseas.