The coronavirus lockdowns and restrictions have swiftly accelerated the move toward online shopping. Consumers have now grown accustomed to the convenience and simplicity of online retail. Today, over a quarter of the global population shops online. So, it’s imperative that retailers are equipped with the right tools to maximize revenue from this growing market.
In the year ahead, we’ll see retailers rush to adopt new ways to increase sales and reduce costs, not through product innovation but through payments innovation. From localizing payment options at checkout to offering customers more ways to pay, e-commerce sellers are leveraging payment technology to open up new revenue streams in 2022.
Reduce Costs by Localising Payments
The pandemic has brought the world closer than ever before but selling internationally will remain complicated in 2022. With a rise in interchange fees looming in the US next 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 authorization rates and increased costs.
There’s a misconception with fees that ‘it is what it is and there is 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 localizing transactions in this way, merchants not only reduce cross-border fees from card issuers but increase payment authorization, since banks are more likely to approve purchases that are made locally.
To increase authorization 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 make consumers more confident in their payments. Hence its growing importance to merchants who are looking to streamline the payment experience.
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Effectively localizing global payments is now a must for international sellers looking to capitalize on the explosion of e-commerce post-pandemic.
Making the Most out of Alternative Payment Methods
As the pandemic continues to put pressure on consumer spending power and scrutinised the in-person payment experience, alternative payment methods such as Buy Now Pay Later (BNPL), digital wallets, and others will become 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 by offering installment payments to customers. In a post covid world, instant gratification has become the staple of e-commerce with consumers shopping on multiple channels from the comfort of their homes. To meet this demand – which spans internationally – merchants need to consider the alternative payment methods that are most convenient for 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.
The Rise of Embedded Payments
In 2022, we will see 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 maximization. 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 visualize 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 organize 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 retailers are facing. That being said, a strong payment partner is a 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 customize payment flows and offers.
Optimizing Payments to Save Businesses Money
By 2040, 95% of all purchases will be made online. And with 57% of today’s online shoppers making purchases from international businesses, it’s crucial that merchants hammer down the final yet most crucial element of the consumer journey – payments. Merchants who invest in their international payment strategy will be able to maximize the authorization rates, reduce costs and grow their global reach.
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