Succeeding in business in any part of our ever-globalising world is challenging. But succeeding in the developing world requires even greater awareness of local cultures and tendencies. This means adapting your strategy to suit your target markets.
This is certainly true of the complex payments world. The staggering rate at which consumers from all around the world are increasingly choosing to transact online is unquestionably a massive opportunity for online merchants.
For many people in the developed world, the payment landscape is dominated by one-time card payments. But consumers in high growth markets such as Latin America, Russia and Turkey prefer uniquely local ways to pay for their goods and services.Preferences that, if not provided by payments providers to merchants looking to grow in these markets, can prove to be a real barrier to growth.
We see that three of the main local payment methods, when offered to global merchants, have proved to be hugely effective in terms of increased online sales in high growth markets.
Cash payment solutions in Latin America
One of the defining payment trends in parts of Latin America is the continuation of cash being the preferred method of payment. For example, over 50% of all online purchases are paid in cash in Argentina and Mexico. This is an understandable statistic when taking into consideration that bank account and credit card penetration in the region sit at around 50%. It means that, without cash options, nearly half the Latin American population would struggle to gain access to the ecommerce world. This is in stark contrast to European countries such as the Netherlands and Sweden where the share of cashless online and offline purchases make up more than 90% of the total consumer market.
So the challenge for companies operating in regions like Latin America is how to best unlock this huge base of potential customers and provide a solution for them to be able to order online while continuing to pay offline. PayU’s solution has been to directly connect to local cash payment providers such as Oxxo and Boleto. Allowing consumers across Latin America to buy a plane ticket or an online gaming subscription via a website, but pay for it at their local corner shop, has proved wildly successful for merchants to expand their customer base.
This bridging of the offline and online worlds has allowed those consumers who do not have access to credit cards, or simply do not wish to use them, to participate in the online economy. That is a very powerful proposition to merchants.
Pay on Delivery in Russia
Russia is another market where we see consumers preferring to use an alternative payment method – Pay on Delivery (PoD). PoD allows Russian consumers to purchase something online but pay via card or cash upon delivery. The importance of this method should not be underestimated, as more than 75% of online orders are paid via PoD. This high adoption rate in PoD comes from the historical desire of consumers to only pay for something once received.
The ecommerce ecosystem has tried in part to shift this dependence on PoD in a number of ways such as offering 5% discounts to those who pay at the online checkout, but this has had little impact on the overall popularity of PoD, if anything there has been a slight increase in its popularity since the financial crisis.
So in summation, merchants that offer the PoD option to consumers can benefit from a real uplift in sales due to them adapting to local shopping habits.
Instalments and loyalty programmes in Turkey
When looking at the Turkish market, the story is very different. We see that nearly 90% of the payments PayU processes are made using credit cards with instalment plans attached. This tendency to break everyday payments as basic as a bag of groceries into monthly instalments might seem odd to the average consumer in Europe.
However, it is exactly these customer behaviours that can create challenges but ultimately opportunities for global merchants.
Loyalty programmes are another key part of the Turkish market. First, initiated by Garanti Bank in 2000, its Bonus Card enabled customers to collect points when they purchased goods from one merchant and spend them somewhere else. This became a win-win situation for the bank, retailers and customers. Today the Bonus Card programme has 3.6 million cardholders and over 1.000 participating retailers. The leading seven loyalty programme providers have around 94% of the market. These programmes moved the emphasis to loyalty rather than credit in the customers’ mind and are usually only available from local payment providers such as PayU.
Conclusion
In summary, what we can take from this insight into the local payment peculiarities is that the landscape changes from country to country and a ‘one-size-fits-all’ approach cannot be applied by merchants looking to expand into high growth markets.
Furthermore, when entering a new market, a clear business case must be made. Part of building this business case is to fundamentally understand how to access the large populations of these markets. Online transactions are increasing daily and, to capture that opportunity, it is imperative to understand the buying behaviours and offer the payment methods the local market demands.
About Arthur van Wijck Jurriaanse
Arthur started as an entrepreneur in early 90s in Poland. Since then, he has founded and helped run a range of companies mainly in the classifieds space. Previously he was COO of Allegro and is now global COO of PayU.
About PayU Global
PayU Global is a leading online payment service provider dedicated to creating a fast and secure payment process for merchants and buyers. Our presence in 16 high growth markets and local focus enable us to be the experts and provide the best solutions for each market. PayU makes up the e-payments division of Naspers Ltd.
This article is part of the exclusive Ecommerce Payment Methods Report 2016, an educational overview of the global payments industry. For more insights into the latest trends in ecommerce and e-payment methods developments please download a free copy here.
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