Sunday , September 15, 2019

COMMENTARY: From Channel to Consumer: Humanizing Payments (Part II)

(Editor’s Note: Part I of this two-part article appeared on Friday.)

How can we in the payments business best mirror our services to fit the changing needs of a growing, global consumer base? One way is to focus on the consumer throughout the entire payment process. Almost 50% of consumers will end a transaction if their preferred payment method is not available, so being able to meet the needs of the consumer is vital.

These needs vary from region to region, which means offering a cookie-cutter solution will not work when selling in separate countries. For example, in Asia the preferred payment methods are mobile e-wallets, which account for 40% of online transactions. While in North America, credit cards are preferred in 57% of all online transactions.

Villegas: “Almost 50% of consumers will end a transaction if their preferred payment method is not available, so being able to meet the needs of the consumer is vital.”

Reaching Asian consumers means offering more mobile-focused payment methods. In China, there is a 56% smart-phone penetration, and 80% of the population is banked. In this case, cash and card payments are not effective ways to target these consumers. Ideal payment methods in this region are mobile wallets like Alipay and WeChat Pay.

Offering these payment methods will lead to more success and usage. A young, growing middle class is largely developing in Asia, so taking these needs into consideration is imperative. These consumers are making instant mobile purchases, so U.S. merchants must cater to the way they pay to tap into this growing spending power.

However, it’s not opportune to take an approach in one region and duplicate it across others. For example, Mexico is heavily reliant on cash, which makes up 26% of Mexicans’ online transactions. The country also has a low banked population at 37%, compared to the global average of 68%. Online merchants looking to sell cross-border to Mexican consumers need to consider these needs when crafting solutions, and avoid forcing different payment solutions in hopes those become adopted.

Oxxo is a local payment method that allows many unbanked or cash-dependent Mexican consumers to participate in global e-commerce through a cash-voucher system. Solutions like Oxxo can help further connect the global economy while catering to the specific payment needs of various consumers. The mindset of putting the needs of the consumer first can drive financial inclusion across the globe.

Cultural and business differences across regions lead to stark changes in payment preferences across the globe. From how consumers pay to the methods they trust, it is all built into their specific regional culture. In many parts of Europe, card use is far lower than in the U.S. as many countries opt for mobile e-wallets or bank transfers instead. In the Netherlands, an astounding 70% of transactions are completed by bank transfers.

Local payment methods (LPMs) are the key to globalizing commerce, data seems to back up this claim showing by 2020, 80% of cross-border e-commerce will be facilitated by a local payment method. As well, by 2021 U.S. cross-border e-commerce will reach $203 billion, yet only 36% of U.S. online merchant currently sell cross-border. With innovations in payments making transactions simpler and frictionless, it is now up to the merchants to expand and connect globally.

LPMs serve many purposes and can also be the rail to drive financial inclusion. There are solutions that cater to the needs of both cashless and cash-heavy populations. It is simply a matter of implementing different solutions according to the needs of various regions and their specific consumer behaviors.

With the advance of technology, it is clear that all industries must shift to become consumer-centric. Payments is no different and the solution providers and merchants that fail to change their mindset will be left in the dust.

This industry is tied to innovation. What is needed is more players stepping up to shape the consumer experience from the inside out, keeping the consumer as the primary focal point throughout the payment process.

The payment experience will continue to define which companies consumers choose to engage with. Those that cater to the needs of digital consumers will capitalize on this global shift, while those that stick with channel-centric strategies will pay a very steep price.

—Steve Villegas is vice president of partner management at PPRO Group, Atlanta.

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