By: Nikhita Hyett, EU MD of BlueSnap
The payments industry is revolutionising eCommerce. Powered by evolving consumer needs and global connectivity, we are seeing more merchants experiment with payment technoloy innovations. Why? Online merchants have recognised the importance of the payment experience in eCommerce.
With over a quarter of the global population shopping online, merchants are quickly realising that payments are an important revenue centre they can optimise. Historically, payments have been viewed as an “it is what it is” situation, perceived as a cost centre that shrinks business margins. But, thanks to innovations in payment technology, the payment experience has evolved into a revenue centre – where businesses profit from optimisation.
Whether it’s localising payment options at checkout or offering customers more ways to pay, businesses are leveraging payment technology to open up new revenue streams in 2022.
Localised payments are reducing costs
The pandemic has brought the world closer than ever before but selling internationally remains complicated in 2022. With the rise in interchange fees in the US this April, and a hike in fees for transactions between the UK and European Economic Areas post-Brexit now in play, merchants around the world are facing an unenviable choice: absorb these increased costs or pass them on to customers in the price of products or services – a move that could deter future sales. With cross border sales predicted to account for 20% of global eCommerce in 2022, the impact of higher fees will be felt across the business community in the form of decreased authorisation rates and increased costs.
There’s a misconception with fees that ‘it is what it is’ and there’s nothing merchants can do to increase cross-border conversions. But there is another way. By partnering with paytech providers, sellers can avoid cross-border fees altogether in 2022, and most importantly save money. That is, merchants can leverage a network of local banks through these payment processors to route transactions via banks in the same region as the cardholder. By localising transactions in this way, merchants not only reduce cross-border fees from card issuers but increase payment authorisation, since banks are more likely to approve purchases that are made locally.
To increase authorisation rates, we will see more merchants take advantage of local currencies and payment methods. Failing to do so would be an unnecessary barrier to increased revenue as those using local currencies are reporting a 12% increase in sales. The same goes for payment methods. Local payment methods such as the EU’s SEPA or Boleto in Brazil makes consumers more confident in their payments. Hence its growing importance to merchants who are looking to streamline the payment experience.
Effectively localising global payments is now a must for international sellers looking to capitalise on the explosion of e-commerce post pandemic.
Alternative payment methods are the new normal
As the pandemic continues to put pressure on consumer spending power and scrutiny on the in-person payment experience, alternative payment methods such as Buy Now Pay Later (BNPL), digital wallets, and others are becoming the norm in 2022. But what does this trend mean for merchants?
With the prominence of BNPL rising over the past 18 months, merchants are expected to build on this convenient shopping method offering instalment payments to customers. In a post-Covid world, instant gratification has become the staple of eCommerce with consumers shopping on multiple channels from the comfort of their home. To meet this demand merchants need to consider the alternative payment methods that are most convenient for international shoppers.
Payment methods such as digital wallets, cryptocurrencies and bank transfers have been the most popular and growing methods amongst global merchants. The number of digital wallet users is predicted to reach up to 4.4 billion by 2025, meaning global merchants must take advantage of this growing space. Every alternative payment method may not be crucial for your target market, but it’s important to understand what your customers want to use and then let that information guide your payment offerings.
Embedded payments on the rise
In 2022, we are seeing embedded payments gain popularity amongst software companies and automotive industry players. But what are embedded payments?
Under the umbrella of embedded finance, embedded payments is when software companies build payment functionality into their platforms, allowing their customers to have one cohesive experience within all aspects of their application. Software companies are particularly seeing the value of embedded payments and its quickly becoming integral to their revenue maximisation. This comes as no surprise as software companies that embed payments in their platforms see a two-to-five times increase in revenue per customer.
To better visualise embedded payments, think of SchoolsBuddy – the school-to-home management system – integrating payments into their platform. By doing so, they are able to boost their payment acceptance system and create more consistent payout schedules. Therefore eliminating a key bottleneck faced by those in the education sector. This also makes payments more convenient for parents as they can organise tuition, field trips and other extracurriculars all in one place.
Because consumers now have access to these additional features from a trusted brand they get the ultimate convenience as it reduces friction and risk whilst increasing value. As such, online merchants are integrating more financial capabilities with their online environments to create seamless experiences.
However, the resource costs and risks of implementing an in-house solution are the key barriers most software platforms (SaaS) are facing. That being said, a strong payment partner is key to successfully implementing embedded payments with minimal risk. When looking for a payment partner it’s important to look for one that lets you brand your payment offerings and customise payment flows and offers.
Payment optimisation means profit
A smooth consumer journey doesn’t exist without an optimised payment experience. As 57% of today’s online shoppers make purchases from international businesses, online merchants shouldn’t miss out on the opportunity to elevate their global presence. Software providers are seeing the profit capabilities and now is the perfect time for others to leverage these trends to their advantage.
Embedded payments and other alternative payment methods are at the forefront of today’s eCommerce evolution. And, adopting these trends will be the key to capturing more of an ever-growing global customer base.