Growing Faster with Cross-Border eCommerce

Growing
Faster with
Cross-Border
eCommerce
POSITION PAPER>

The eCommerce market is growing exponentially. Retail eCommerce sales accounted for over 7%
of the total retail market worldwide last year and were worth $1.7 trillion.1
That figure is expected
to more than double to roughly $3.6 trillion by 2019.2
The three biggest eCommerce markets,
China, United States and Japan have seen annual eCommerce spending exceed $767 billion,3
$595
billion4
and $114 billion respectively.5
Increased eCommerce activity, regulation (on interchange fees and the Payment Service Directive
II, or PSD2, in particular)6
and the gradual elimination of cash from points-of-sale, are all vital
developments for businesses to consider. But what does that really mean for online merchants
who want to expand cross-border?
Regina Lau, Chief Strategy Officer of Ingenico ePayments, shares her insights into the eCommerce
environment and the key elements merchants should take into account when growing online.
Overview
2 / Going Cross-Border and Growing Online

The number of businesses focusing on
electronic forms of payments is climbing
rapidly as cash is disappearing around the
world. In Sweden, physical currency now
accounts for just 2% of its total economy,7
making it well placed to become the world's
first truly cashless society. In Europe, only 10%
of all transactions are conducted with cash and
North America accounts for more non-cash
payments than any other region.8
The Bank of Korea (Korea’s Central Bank) is
planning a cashless society by 2020.9
A recent
study from the bank found that credit card
use is rising and the ratio of those picking
cash is falling year-on-year.10
Similarly, cash
payments are on the decline in Kenya. 90%
of adults now send and withdraw money, pay
bills or buy goods and services via text and
without requiring access to a bank account.11
Technology has improved access to essential
goods and services for some of Kenya’s
poorest citizens.12
There are many factors driving growth in
non-cash payments. New digital payment
solutions that deliver instant or real-time
online payments are being installed across
different point-of-sale channels. The ease and
speed of online shopping and online payments
is dramatically increasing. And merchants
are augmenting their acceptance of both
international and local payment methods to
specifically target their customer base and
improve interactions with online shoppers. All
of these elements are important to consider
when developing an online strategy or looking
to expand into new international markets.
The eCommerce Boom

While offering domestic payments is certainly
important, companies should understand that
growing their business beyond a certain point
will require offering customers a choice of
payment methods that appeal to international
consumers as well. Cross-border payment
volumes are growing several times faster
than domestic payments and the preference
for purchasing beyond national borders is
particularly strong in some parts of the world.
According to recent research conducted by
Forrester, global cross-border B2C eCommerce
will more than double over the next five
years, reaching $424 billion by 2021.13
As a
share of total online commerce, cross-border
transactions are projected to rise from 12% in
2015 to 15% in 2021.14
In Australia, 12 million people,15
or 65% of
the population now shop online, growing
by well over 10% in just the last four years.
While domestic online shopping is typically
their starting point, Australian eShoppers will
look to foreign sites if they perceive better
availability of products elsewhere. Meanwhile,
a number of Australian brands have been
expanding rapidly into Asian, North American
and European markets, as their early entry
into eCommerce has continued to drive
international demand.
The number of eShoppers are higher still in
one of the world's best-connected countries,
Japan. Following only after China and the
US, Japan is one of the largest eCommerce
markets worldwide, where 77 million - 70%
of the population - shop online. There, the
electronic payments landscape is heavily
dominated by credit and debit card purchases,
with bank transfers trailing far behind.16
Being able to buy higher quality goods for
lower prices is one of the main reasons that
Chinese shoppers will look overseas for a wide
range of items, such as cosmetics, healthcare,
electronics, clothing and maternal items.
Moreover, their cross-border shopping isn't
limited to the Asia-Pacific region alone and
a large percentage of the Chinese population
will shop further around the world if they can
easily find and buy what they are looking for.
When businesses operate domestically they
really only need to know what’s happening
in their own country. But when businesses
go beyond their borders, not only do they
need to customize their offering to new target
customers, they also need to understand local
regulatory requirements and make sure they
are optimizing operations to ensure costs do
not spiral out of control. Essentially, businesses
need to ensure that they are technically
and operationally prepared for international
expansion, especially in the online space which
is growing very rapidly.
Online Expansion

A recent PayPal study17
estimated that by
2018 there will 130 million active cross-border
shoppers in the US, spending more than
$300 billion. Yet fewer than 25% of US
merchants are currently set up with full cross-
border acceptance capabilities. In Argentina,
40% of digital buyers made a cross-border
transaction in 2015, compared to 45% in Brazil
and 60% in Mexico and Canada.18
These figures
demonstrate the clear trend that eCommerce
is growing on a global scale. However, cultures
and customers' preferences remain varied
around the world, highlighting the importance
of localization.
To be sure, specific payment methods are
more commonly used in certain verticals or
countries. In Canada and the US, consumers
predominately use credit cards and debit
cards, followed by PayPal. But in Russia,
although international cards are accepted,
Qiwi, Yandex and WebMoney eWallets are
more commonly used. In China, people prefer
to pay with Alipay's eWallet or their local card
scheme, China UnionPay. And in Brazil, most
consumers prefer the post pay method, Boleto
Bancario. Businesses that want to expand
really need to take local payment cultures into
account. Failing to provide those choices to
customers, could ultimately result in the loss
of valuable business.
But it’s not just about payment methods alone.
The reality is that most consumers that shop
online and across borders are looking for more
competitive pricing and a wider variety of
goods and services. And once they’ve found
what they are looking for, having the ability
to pay in their local currency and with their
preferred payment method is a main source of
conversion. Once companies understand all of
the factors that influence consumer behavior
in each market, they can make informed
decisions on which payment methods to offer
and which business model to adopt.
Within eCommerce circles, we often talk
about the customer experience, which is
absolutely crucial. When customers are making
a purchase, they expect their chosen payment
method to be accepted and they want to
know immediately that their transaction was
successful. If they have any concerns about
the process, they will not hesitate to abandon
the transaction and they might never return.
Payment Cultures
and Customer Experiences

Advances in technology have led consumers
to expect fast and easy transactions across
all channels and all geographies, and seamless
payments is a vital part of that process. The
less that consumers have to ‘think’ about
making a purchase and the smoother the
transaction is, the more they will shop online
and cart abandonment will be reduced. At the
same time, merchants must balance ease and
speed with security, to minimize the potential
for fraudulent transactions. Merchants that fail
to deliver on all of these elements are more
likely to lose trust and harm relationships with
their customers.
Businesses can work with their payment
services provider to pinpoint the best ways
to optimize the user experience they create.
Again, this can be done by understanding the
way customers interact and engage with their
website, and once this is streamlined, it can
open up new opportunities for growth.
It’s also important to remember that
consumers are heavily influenced by
recommendations and word of mouth. For
example, reviews on TripAdvisor can have
more influence than expensive advertising
campaigns. In today’s world, it has become
extremely easy for consumers to express their
views online, so merchants need to be aware
of the customer experience they are offering
and make sure that it is smooth and effortless.
In essence, it’s more than just technology,
localization and payment options – it’s about
living up to the customers’ expectations for
shopping online.
This trend is certainly likely to increase
as new generations grow into their own
spending power. Looking ahead, eCommerce
will be increasingly influenced by millennials’
heightened ability to share information
and voice their opinions. So while it is still
in its infancy, there is no doubt that social
commerce, or connected commerce, will
become a major driver of payments volume.

As the industry grows and the eCommerce
boom expands, the omni-channel future will
begin to come into effect. We often talk about
omni-channel and it is a key component in
the way eCommerce is evolving. Merchants
who can leverage their various touch-points
and gather comprehensive data will be able to
truly understand their customers’ preferences
and behaviors, regardless of time or location.
At Ingenico, we are already boosting our
presence across all channels to offer omni-
channel solutions as they evolve and come into
fruition.19
Our team at Ingenico Labs is one of many
dedicated to research and development
across the company. This group of innovators
is always working to push the boundaries of
technology and test new ideas, bringing us
closer to the omni-channel future we envision.
One such project that they are heavily focused
on is the ‘buy button’ on social media, which
ties into the future of social eCommerce that
we anticipate.
Already, 56% of consumers who follow
brands on social media sites do so to view
their products and 33% of ‘social shoppers’
use social media to browse for potential
purchases.20
Volumes will take time to develop
and mature, but it is clear that consumers
are becoming increasingly comfortable with
the idea of buying through social media. As
a result, companies are already seeing the
benefits of offering social commerce in terms
of social media marketing. This will become
increasingly apparent as millennials, who have
truly embraced mobile technology, become the
most influential customers in the eCommerce
space. Although social media is still primarily
a platform for communicating and sharing
information, as social commerce develops,
there is no doubt that consumers will shop
through these channels as well. It will be a few
years before it becomes mainstream, but this
is just one instance of how Ingenico is thinking
ahead and identifying future opportunities for
our customers. And online merchants should
be thinking about these things as well.
The Omni-Channel and
Social eCommerce Future

These are just some of the considerations that
merchants should take into account as they
look to expand internationally. It’s not only
about platform stability and availability –
although that certainly is crucial as well – it’s
also about having a payments partner that can
help them take their business into the future.
Our team works hard to understand evolving
market trends and consumer preferences
and we have a large network of regional
payment experts across the globe that work
with our merchants and partners along
their eCommerce journey. Technology is
important, but it is not enough. We find
that often, in addition to our products and
services, merchants rely on our knowledge
and expertise to identify potential markets
and help them determine which currencies
and payment methods are the best fit for their
vertical or industry.
By sharing our payments expertise with
our merchants, as well as our knowledge of
consumer trends and market characteristics,
we can help them optimize their business
and make informed decisions about their
strategies. And because of that, Ingenico
ePayments is very well positioned to help
companies who want to expand cross-border
or grow online.
Going Cross-Border
and Growing Online

http://www.emarketer.com/public_media/docs/eMarketer_eTailWest2016_Worldwide_
ECommerce_Report.pdf
http://www.emarketer.com/Report/Worldwide-Retail-Ecommerce-Sales-eMarketers-
Updated-Estimates-Forecast-Through-2019/2001716
Ecommerce Foundation: China B2C E-commerce Report 2016
Ecommerce Foundation: United States B2C E-commerce Report 2016
Ecommerce Foundation: United States B2C E-commerce Report 2016
Driving Change PSD2 and the MIF Regulation, ACI PAY.ON Payments Gateway, whitepaper
https://www.bis.org/cpmi/publ/d135.pdf
World Payments Report 2016
http://www.koreatimes.co.kr/www/news/biz/2016/03/488_199146.html
http://www.koreatimes.co.kr/www/news/biz/2016/03/488_199146.html
http://www.cbsnews.com/news/future-of-money-kenya-m-pesa-60-minutes/
http://www.cbsnews.com/news/future-of-money-kenya-m-pesa-60-minutes/
https://www.forrester.com/report/Global+CrossBorder+eCommerce+Sales+Will+More+Than+
Double+In+The+Next+Five+Years/-/E-RES133599
https://www.forrester.com/report/Global+CrossBorder+eCommerce+Sales+Will+More+Than+
Double+In+The+Next+Five+Years/-/E-RES133599
Ecommerce Foundation: Australia B2C E-commerce Report 2016
Ecommerce Foundation: Japan B2C E-commerce Report 2016
https://www.paypalobjects.com/webstatic/en_TW/mktg/pdf/PayPal-
ModernSpiceRoutes_6markets_Eng.pdf
http://www.emarketer.com/Article/How-Cross-Border-Ecommerce-Varies-
Worldwide/1013561
https://www.ingenico.com/press-and-publications/press-releases/finance/2016/03/
strategic-plan-2020-ingenico-group.html
http://www.marketingweek.com/2016/03/23/social-commerce-how-willing-are-consumers-
to-buy-through-social-media/
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Regina Lau is the Chief Strategy Officer for
Ingenico ePayments. In her role, she oversees
strategy and pricing for the organization.
She is also responsible for making sure
that Ingenico ePayments offers the best
partnerships to our merchants, to create a win-
win for both parties. Prior to joining Ingenico
ePayments (formerly known as GlobalCollect),
she worked for American Express in various
roles, including Director of Global Merchant
Pricing and Revenue Management. She has
a B.A. from Berkeley, a MBA from Boston
College, and currently lives in Amsterdam
with her partner.
Ingenico ePayments is the online and mobile
commerce division of Ingenico Group. We
connect merchants and consumers, enabling
businesses everywhere to go further beyond
today’s boundaries, creating the future of
global commerce. As industry leaders since
1994, our innovative spirit drives us forward
across all channels. We are the trusted partner
of over 65,000 small and large merchants
who rely on us to make payments easy and
secure for their customers. With advanced
data analytics, fraud management solutions
and cross-border commerce expertise, we help
merchants optimize their business and grow
into new markets around the world.
For more information, visit
www.ingenico.com/epayments or follow us
on Twitter, Facebook or LinkedIn.
About the Author About Ingenico
ePayments

Growing Faster with Cross-Border eCommerce

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