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International payment: The importance of local payment methods

Published on November 14, 2024

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With the global e-commerce market booming and expected to reach $8100 billion by 2026 (source: Statista), marketplaces are also looking to diversify their revenues and expand internationally. As businesses seek to expand beyond national borders, they face new challenges, particularly when managing international payments. Adapting the mix of payment solutions to local habits is a strategic advantage and a necessity to increase conversion rates and build user trust.

Why internationalise your marketplace?

Internationalising a marketplace gives access to new markets, which is a significant opportunity for growth. A marketplace can reach a broader and more diverse audience by establishing a presence in several countries, increasing sales. It also means diversifying its customer base and reducing dependence on a single market. Moreover, establishing an international presence is a powerful way of differentiating a marketplace from local competitors who have not yet taken this step.

The challenges of international payments for marketplaces

  • The heterogeneity of payment methods

Each country has its own preferences regarding payment, and it is essential to offer a payment mix adapted to local expectations to maximise the chances of conversion. According to WorldPay, 77% of consumers prefer to use local payment methods when available. For example, in the Netherlands, iDeal is the most widely used online payment method, while in Portugal, MB Way is a very popular solution. In Europe, PayPal remains a key player, but it is important to consider the rise of digital wallets such as Apple Pay and Google Pay. Ignoring these local specificities could lead shopping cart abandonment because users prefer payment methods they know and trust.

  • Regulatory compliance

Each market has its own legal framework, and marketplaces must ensure that they comply with the various local laws to avoid sanctions. This includes compliance with anti-money laundering and combating the financing of terrorism (AML/CFT) regulations and data protection directives, such as the RGPD in Europe. In addition, specific obligations such as PSD2 and PSD3 (Payment Services Directive) in Europe impose high payment security and authentication standards, requiring tools such as strong authentication (SCA). 

  • Security and the risk of fraud 

Each new country brings its vulnerabilities, often with different security regulations. In 2022, online fraud will cost 41 billion dollars worldwide, and could rise to 48 billion by 2024 (Source: Juniper Research). To prevent these risks, marketplaces must implement robust fraud detection and prevention systems, such as tools for monitoring suspicious transactions, strong user authentication, among others. Working with a payment service provider with expertise in securing payments is essential to protect users' funds and data while maintaining a smooth payment experience.

  • Operational complexity 

Managing international payments introduces a great deal of operational complexity for marketplaces, particularly regarding bank reconciliation. Each cross-border transaction involves different time zones and banking systems, which complicates the management and monitoring of financial flows. Bank reconciliation, i.e. the reconciliation between payments received and sales recorded, becomes a longer and more error-prone process. To overcome these obstacles, having the right resources and skills in-house is essential or relying on a payment service provider capable of automating this process to efficiently monitor financial flows and avoid accounting discrepancies efficiently is essential.

  • User experience and abandonment rates

The user experience at checkout is a key factor in the success of a marketplace. A payment process that is too complex or that does not offer local payment methods can lead to a high cart basket abandonment rate. Customers expect a smooth, fast, and secure experience, regardless of their country of origin. If local payment methods are not supported or there is friction during checkout, there is a risk that they will leave the site before completing their purchase. To reduce these abandonments, it is essential to offer an intuitive payment interface adapted to each market while guaranteeing multilingual navigation and responsive customer support.

Seamless user experiences thanks to local payment methods

The main local payment methods 

A marketplace must offer the main local payment methods adapted to each country to succeed internationally. Bank cards are still the dominant payment method in many countries. However, they are not sufficient to meet consumer expectations in all regions. Bank transfers, mainly via the SEPA network for Europe and SWIFT for international transactions, are also widely used for larger payments or in B2B environments.

Innovative payment solutions such as BNPL (Buy Now, Pay Later) are also gaining popularity, allowing users to pay for purchases in instalments or defer payment. Digital wallets like PayPal, Apple Pay or Google Pay are also increasingly popular for their simplicity and security. Finally, offering the option of paying in local currency is a key factor in improving the customer experience. 

The advantages of local payment methods 

  • Reduced cart abandonment rates: Consumers are more likely to complete their purchases when they find payment methods with which they are familiar: 67% of European shoppers prefer to use local payment methods (Source: Paypers).

  • Customer loyalty: Offering a suitable payment experience improves customer satisfaction and loyalty. An Accenture study shows that 81% of customers are more likely to return to a marketplace that offers a smooth and secure payment experience.

  • Optimised revenues: By demonstrating that the platform understands the needs of each market and offers appropriate solutions, users have more confidence in the marketplace, which will help it to grow in the long term.

 

Choosing the right partner to offer local payment solutions 

To provide a smooth and secure payment experience, it is essential to work with a trusted and experienced partner capable of meeting a number of key requirements: 

  • It must offer a wide range of payment methods, including bank cards, transfers, digital wallets, and alternative payment solutions such as BNPL. 

  • It should enable transactions in a wide range of currencies so that users can pay in their local currency.

  • It must be able to guarantee secure payments and protect sensitive user data. Security and compliance with local and international regulations are non-negotiable criteria. 

  • It must offer a flexible, modular solution, enabling the marketplace to adapt the payment tools to its business model and needs without adding to the burden of operational management.

 

Lemonway, a PSP dedicated to the internationalisation of your marketplace

Lemonway is a payment service provider (PSP) specialising in supporting marketplaces. Thanks to its modular solution, Lemonway can integrate a wide range of local payment methods adapted to the specific features of each country. Since 2007, Lemonway has facilitated cross-border transactions, offering buyers a smooth, frictionless payment experience. As a regulated payment institution with passports in 29 European countries, Lemonway guarantees optimum security thanks to rigorous compliance measures, particularly regarding anti-money laundering and data protection. 

By choosing Lemonway, marketplaces have a partner capable of supporting their international expansion over the long term while offering their customers a secure and tailored payment experience. Would you like to find out more about Lemonway? Contact our experts!

White paper: Marketplace & finance department

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