Localization means adapting your website or checkout process to different markets worldwide so that it appears native to a user in every way. This post on payment methods for localization is the fourth of a four part series on the importance of localization when growing your business globally online.
This is part four in our four part series on globalizing your ecommerce business. If you missed the others, you can find them here:
Over 67% of online shoppers abandon their purchase if their preferred payment method is not available. While this can often be avoided by offering credit card options to online shoppers from countries like the U.S., the U.K., Australia and Canada, there are many markets where merchants will not generate significant sales unless they offer alternatives.
Although credit cards are widely used in many Western countries, others, including rapidly expanding emerging markets, have very low credit card penetration. For example, only 2 percent of Indians possess a credit card.
Moreover, credit cards are often more expensive for customers when purchasing online from companies overseas. In addition to exchange rates, credit card companies like Visa and MasterCard tack on a 1% fee for international transactions in addition to another 1-3% charged by banks that issue the cards. So even in markets where credit cars are widely used, many are now opting for cheaper alternatives.
Consequently, to successfully scale internationally, online merchants must increasingly be able accept more than just PayPal or credit cards on their ecommerce platform. Worldwide, there are over 200 alternative payment methods used when ordering online. So, providing a German customer with the option to pay using wire transfers, or a Chinese user with the opportunity to make cash-on-delivery (COD) purchases can make a huge difference in international conversions. Direct debit, credit transfers and emoney purchases are actually outpacing credit card usage in most countries today.
We’ve compiled short summaries for different regions that show that having credit cards as your only payment option may be greatly limiting your global online growth.
Overall, about half of ecommerce transactions in Europe are made with credit cards but there is great variety of domestically developed alternatives that are preferred depending on the country you are in. In the continent’s largest economy, Germans tend to be concerned about privacy when shopping online. Accordingly, 58% of online consumers prefer paying with an invoice after receiving their product or service. Wire transfers or online bank transfers are also widely used as seen by the rise of GiroPay, a system where customers pay securely through direct online bank transfers.
Similarly in Sweden, nearly four in ten shoppers prefer to pay for their online purchases retroactively via invoice. Most of these transactions are processed through homegrown ecommerce company Klarna. Direct payment (28%) and credit and debit cards (26%) are the second and third most favored options in the country.
In Western Europe, Danish and French online shoppers have largely adopted hybrid debit and credit cards Dankort and Carte-Bleu as their most popular online payment method. Another example of a widely adopted domestic payment alternative is iDeal. An impressive 89% of Dutch shoppers use the service, which allows customers to directly transfer money from their bank account online. It has handled over 400 million transactions since its launch in 2005.
In Europe’s fourth largest economy, Italian ecommerce shoppers have shown a keen interest in PayPal, with a 2014 survey finding 56% of shoppers used the alternative payment though credit cards remain the most used online payment method.
Finally, if you are expanding your ecommerce presence into Russia, cash-on-delivery must be a payment option available for your customers. Sixty-nine percent of Russian prefer to use this payment method.
The Asia-Pacific region is another diverse region when it comes to ecommerce payments. Credit cards remain the most widely used payment method overall but there are some countries that are notable exceptions. In China, COD accounts for 30-40% of ecommerce transactions and there has been substantial growth in mobile third-party payment methods in recent years. In the second most populated country in the region, Indian ecommerce shoppers also prefer COD in addition to rechargeable cash cards.
For Japanese online shoppers, credit cards are preferred by 60%, but alternative payment provider Konbini, which involves shoppers paying in nearby convenience stores, is favored by 17%. Similarly, credit cards remain the most popular online payment method for South Koreans, but electronic fund transfers and mobile payments have begun to pick up a higher proportion of ecommerce transactions.
North Americans are generally the most likely to use credit cards with about three quarters of B2C ecommerce transactions being paid via credit card. The most popular alternative in the U.S. is digital wallets while Canadians like PayPal. In Mexico, cash-on-delivery (32%) and bank transfers (15%) are the first and third most popular ecommerce payment methods. Credit cards come in second with 28%.
Alternative payments account for about half of online transactions in this region with the notable exception being Brazil where over 69% of all online transactions are with credit cards. However, Brazilians also like Boleto Bancario, a cash-like bank transfer that accounts for 24% of all online transactions and nearly 100% of all B2B ecommerce payments.
Determining your target markets’ preferred payment options is paramount for any ecommerce growth strategy. While credit cards still hold substantial sway as a preferred ecommerce payment option, alternative payment methods are on the rise, especially in emerging markets. Don’t hinder checkout conversions by limiting payment options. By localizing your checkout process, you will not only reduce cart abandonment but also effectively extend your global reach.
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