By: Marius Costin, Head of EMEA High Velocity Sales & US Global Account Team at PayU
As the world starts to tentatively emerge from the COVID-19 pandemic it’s becoming clear that the shift to online shopping is here to stay, with global e-commerce sales set to reach upwards of $4.2 trillion this year. With this in mind, merchants looking to grow their business will need to adapt their approach to accommodate an increasingly digital customer base. One way to do so is by looking beyond their own borders and tapping into high-growth markets such as Latin America and Africa.
Our recent report, “The Next Frontier: the most promising markets for emerging e-commerce leaders in 2021 and beyond,” analysed online consumer spend in 19 countries across five continents in four fast-growth e-commerce sectors: beauty & cosmetics, digital goods, fashion & gallantry and education. And our findings reveal unprecedented e-commerce spending in high-growth markets that are often overlooked in favour of more traditional, Western markets.
Make no mistake, this new dawn for e-commerce is truly a global phenomenon, but expanding across borders can be daunting and businesses will often struggle to do it alone. In fact, merchants looking to enter new markets must familiarise themselves with a multitude of different factors, including local regulation, preferred languages, currencies and payment methods in order to successfully penetrate any new market. Understanding individual market nuances will arguably be the difference between success and failure.
Market nuances and expanding across borders
With cross-border e-commerce expected to reach $4.82 trillion by 2026, ensuring that consumer preferences are met across each country and segment will be key. Businesses must have holistic expansion strategies including a thorough understanding of the local landscape and customer needs in each new market.
Take Latin America as an example. The demand for e-commerce was already growing rapidly before the pandemic and 2020 pushed this figure even further, with the market on course to reach $187 billion by the end of 2021.
According to PayU data, beauty and cosmetics merchants looking to expand their reach would do well in looking towards Latin America. In fact, beauty and cosmetics showed significant potential, growing by 133% in Latin America and reaching nearly $3.8 billion in the past year alone.
That said, expanding the customer base in the region can be complex, requiring in-depth knowledge of the local payments ecosystem. Brazil’s central bank, for example, is bringing financial system interoperability to Brazil to reduce consumer barriers to financial inclusion while reducing costs of accessing financial systems for consumers. It has launched QR-code based instant payments, which are expected to become so popular that they will account for 25% of all online payments within three years. To avoid missing out, merchants will need to implement technology that enables them to accept Open Banking and QR code-based payments.
South Africa on the other hand, is creating an innovative trading environment
for merchants to operate in. Merchants can now capitalise on the new African Continental Free Trade Area (AfCFTA) agreement, which enables improved business reach into new markets. Additionally, as Africa is a significant market for remittances, the AfCFTA gives merchants a foundation to expand their e-commerce footprint internationally, with the right infrastructure and regulations in place.
Navigating complex regulations and preferred payment methods can be a monumental and costly task for many merchants. Therefore, the best way to seamlessly enter a new market successfully is to look for a payments provider that has a single multinational API integration that eliminates the process of individually integrating each local method.
The right payments partner
Choosing the right payments partner can be difficult considering that there are a myriad of possibilities for merchants to choose from. However, the benefits of a holistic solution which offers consumers a seamless and efficient transaction experience cannot be underestimated. Therefore, when taking such an important decision, merchants should carefully consider what a cross-border payments provider has to offer and how their technology can help them grow their business. PayU Hub for example, does just this. It provides merchants with access to over 50 markets and offers the ability to process over 400 local and international payment methods instantaneously while settling transactions in different currencies.
With this in mind, it’s also important to choose a payments provider that ensures security over your customer’s data. As more and more consumers turn to online shopping, online security has never been so important. In fact, research by TransUnion revealed that global online fraud has increased by 46% since the COVID-19 pandemic. In an increasingly digital world, every level of the multifaceted payments ecosystem must guarantee that customer data is protected. Businesses with limited resources or tech knowledge should partner with a payment provider that can put security at the forefront of every product and process they deliver.
The future of cross-border e-commerce
For many merchants, international expansion strategies will be vital for reaching new growth trajectories in a post-COVID environment, and those who are geared up with unrivalled market knowledge and tech capabilities for each unique market will arguably be the ones to succeed.
If done correctly, cross-border e-commerce can offer access to billions of potential consumers, especially in high-growth markets. But in order to achieve this, merchants must look to payment providers that offer robust e-commerce offerings. A frictionless payment experience and local market expertise will help simplify the process of expanding across borders. For merchants that have the relevant technology and are equipped to handle individual market nuances, a seamless transition to cross-border sales will be theirs for the taking.