Are you missing out on two billion online shoppers?

This editorial was first published in our Online Payments and Ecommerce Market Guide launched on 1 November 2017. The guide features several important thought leadership editorials from ecommerce and payments industry professionals, which makes it a top-reference source for anyone involved in the payments ecosystem.

If you knew there was an ecommerce market out there growing at 33% a year, one with two billion consumers hungry for brand goods, would you ignore it? Of course not. That would be mad, even more so since such a market exists. The above figures show the growth rate for the eleven of the world’s fastest growing ecommerce markets; and here’s the thing: only around 20% of the consumers in those markets have credit cards. Most online purchases, by a large margin, are paid for by using local alternative payment methods (APMs).

This is what opportunity looks like

The world is changing and the distinction between the developed and the developing markets is eroding. For example, in China, the average wage is now on par with that received in some of the lower-income countries in the Eurozone. In Vietnam, the middle class is set to double in size by 2020, and reach 33 million people.

In the UAE, consumer spending is increasing by 7.5% a year and is set to reach an annual USD 261 billion by 2021. In Mexico, ecommerce is growing at a rate of 59% a year, and that is expected to accelerate as the Mexican government pushes ahead with the expansion of the broadband network.
Even in Europe, we can witness the emergence of new markets where economic growth and consumer demand are higher than ever before. Take Hungary, for instance; with the success of the Hungarian export industry and the diversification of industry into high value-add areas such as automotive and cybersecurity, consumers are increasingly well-off, sophisticated and in the market for leading brands (at the right price).

Apart from high growth rates, all of these markets offer important opportunities. Once they mature, consumer relationships with online retailers will be less flexible and early entrants will see a big advantage, while newcomers will have to work harder to make big profits.

Think strategies, plural

If you want to win in these markets, you cannot think of an ‘emerging markets strategy’. It just won’t work. You need to come up with several strategies because these markets are as different from each other as they are from the Western markets, familiar to many PSPs and merchants.

In China, for instance, the most common payment method is the e-wallet. Even if PayPal has a foothold in the market, the most popular e-wallets are from local Chinese providers: Alipay and WeChat Pay. Similarly, only 4% of Chinese credit cards are from global brands such as Mastercard and Visa; the remaining 96% are from local providers. In Indonesia, 27% of online purchases are paid for by bank-transfer. Most of these transfers are made using apps provided by Indonesian banks such as Bank Mandiri and CIMB. Any merchant that cannot accept payments from these providers will be at a disadvantage when doing business in Indonesia.

And then, of course, there is cash. In many of the highest-growth markets, there is a cultural aversion to debt, which makes people reluctant to embrace credit cards. At the same time, consumers do not fully trust purely online payment methods and are not yet ready to give up cash payments. For instance, in Mexico, 32% of consumers pay for online purchases in cash. This payment method is also popular in Argentina (44%) and Vietnam (51%).

Typically, these cash payments involve the consumer writing down or printing a code generated by the merchant during the checkout process. They take this code to a local partner outlet and pay for their online purchase. The merchant then sends the payment, minus their commission, and code to the online merchant, who then processes and ships the order.

The outlets involved in these transactions tend to be local convenience store networks and banks. It is impractical for PSPs, let alone merchants, to integrate with each convenience store chain in every emerging market. However, that does not mean that there is no way to get into these markets.

How to get into emerging ecommerce markets now

The first thing to recognise is that localisation – based on a detailed understanding of local market preferences and conditions – is vital. Competition for consumers in high-growth markets – from Western and Chinese merchants and from hungry local start-ups – is fierce, and consumers know it. They will not be taken for granted or settle for a second best customer experience.

This makes the localisation of payments twice as important. If consumers cannot use their preferred local payment methods, they will simply take their business elsewhere. That is why payment service providers (PSPs) need a reliable partner who can help them integrate quickly and seamlessly the most popular APMs from high-growth markets, which they can then offer to their merchants.

PPRO is a specialist in alternative payment methods. We work with PSPs to integrate locally preferred payment methods with their systems. One API and one contract give access to hundreds of APMs, instantly.

More details on facts and figures cited in this article, except those from the third-party sources linked to above, can be found in the PPRO country reports. See the PPRO site for the latest versions. The research was done by Edgar, Dunn & Company.

About Ralf Ohlhausen
Ralf Ohlhausen, MSc in mathematics and Master of Telecommunications Business, has over 25 years’ experience in ecommerce, financial services, mobile telecommunications and IT. Before joining PPRO Group, he was President Europe at SafetyPay. Other management positions on his international career path took him to Digicel, O2, British Telecom and Mannesmann-Kienzle. At PPRO, Ralf is responsible for increasing PPRO’s global reach, focusing in particular on the addition of new payment choices to the company’s portfolio.

About PPRO Group
Cross-border e-payment specialist, PPRO Group, (PPRO) removes the complexity of international ecommerce payments by acquiring, collecting and processing an extensive range of alternative payments methods for Payment Service Providers (PSPs) under one contract, through one platform and one single integration. PPRO supports international payment methods across more than 100 countries, allowing PSPs to expand their merchants’ ecommerce reach, arrange hassle-free collection and achieve higher conversion rates.