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Georges Berzgal, vice president EMEA, global ecommerce, Pitney Bowes

For the first time ever, eWallets such as PayPal and Alipay are outpacing credit cards as a method of payment for cross-border online shopping. The emerging trend, identified by Pitney Bowes in its 2017 Global Ecommerce Study1, raises concerns for online retailers accepting only credit cards as a payment method.  With 70% of consumers now shopping online outside their own country, businesses must respond to consumers’ changing payment choices or risk losing customers at the checkout.

Fully 41% of global respondents surveyed use eWallets as their preferred method of payment, more popular than using credit and debit cards, bank transfers or mobile wallets. This varies from country to country, with the figure as high as 64% for shoppers in Australia and 61% for shoppers in Germany. Year-on-year growth is highest for Mexico, which has seen a rapid increase of 37% in the number of cross-border shoppers using eWallets since 2016, and a decline in the number of credit cards as a preferred payment option.  This popularity of eWallets is reflected in figures collated by Statista, which identified that in the third quarter of 2017, over 218 million PayPal accounts were active worldwide2, a figure which has increased every quarter since 2001.

Marketplaces driving eWallet take-up

Consumers are increasingly using marketplaces – such as eBay and Etsy – for their online shopping. 62% of online cross-border shopping is spent on marketplaces as opposed to 38% on retailers’ own websites, according to the Pitney Bowes study. Marketplaces widely accept eWallets as a method of payment, so the trends may well be interconnected: consumers become more used to the convenience, and it’s easier to check out when mobile shopping, so it could be that marketplaces are driving up the use of eWallets.

However, there are some variations in eWallet usage between countries. Shoppers in Germany primarily use eWallets, by far the most popular method of payment for cross-border shopping: 61% prefer this method, followed by 26% credit cards and 10% mobile wallets. India is the only country which equally uses credit cards, eWallets, and debit cards or bank transfers. Yet eWallet hasn’t gained traction so far in Japan, Hong Kong, and South Korea, where credit cards are still the main payment option for cross-border purchases.

Buyer protection

 The study also revealed that 21% of respondents are concerned that personal information could be compromised. In the US, this figure rises to 30%. eWallets bring with them strong levels of buyer protection, and buyers are aware of this: PayPal, for example, monitors transactions 24 hours a day, seven days a week, and transactions are encrypted, too. Buyers can even be reimbursed for damaged or missing items. The more security-conscious buyers become, the more attracted they will be to those payment methods which provide them with better protection. Credit cards, under the Consumer Credit Act, must provide protection for purchases over £100 and below £30,000, but many online transactions fall below that threshold. A debit card does not carry the same reimbursement protection, although most major banks will flag unusual transactions and contact their customers accordingly. With this in mind, it becomes clear why eWallets are increasing in popularity.

Mobile wallets still in early stages of adoption

The study also researched the take-up of mobile wallets such as ApplePay. Just 4% of consumers, on average, said this was their preferred payment method when shopping online cross-border. The study shows that the payment method is still in its infancy in the majority of countries surveyed. China and South Korea have the highest levels of adoption, at 10% and 7% respectively, and the US follows closely behind at 6%. Across Europe especially, the take-up rate is low, and although the UK’s adoption rate is consistent with the global average of 4%, France’s usage has dropped since last year.

This could be because consumers are using mobile wallets for in-store, physical purchases of lower value, and prefer alternative methods of payment for shopping online, but more widespread usage in physical transactions is likely to influence usage for digital transactions – if you’re using it in Costa, for example, you’re more likely to turn to it if offered it on a retailer’s website. It could also be that further education is required before retailers include ApplePay as a payment method on their ecommerce sites.

Payment power

With average cross-border order values (AOV) 17% higher than domestic AOV, it comes as no surprise that 93% of retailers plan to offer cross-border shopping by the end of 2018. However, as retailers extend their businesses overseas, they must take time to identify the preferred payment options for shoppers in each region and to look at growth in payment methods. It isn’t just a case of ‘We’re expanding to China, we should offer Alipay.”

For some regions, payment methods are the result of cultural behaviours: some countries have an aversion to building debt, and fees may discourage merchants’ acceptance of credit cards, which makes their usage a less common practice.

Understanding these preferences is crucial. One in five shoppers are put off if their preferred payment option isn’t available – that’s 20% of potential business. With $4 trillion worth of goods left abandoned at the online checkout, retailers can’t afford not to address this3.

In the study, 37% of consumers surveyed said they would be more willing to buy cross-border if they were given payment options they prefer. This figure rose to 49% for India, 48% for Germany and 47% for China. It was cited as higher in importance than offering discounts and sales; than offering an easy returns process; and was even preferred to offering native language on a website.

Ecommerce companies must track emerging payment trends

Businesses must look at the emerging payment trends and currency preference for each country, as well as those methods which are in decline. Retailers are already exploring accepting Bitcoin and other cryptocurrencies, for example. Subway accepts Bitcoin, and Microsoft and X-Box do so for some transactions. Some retailers are hesitating, however, due to its fluctuations, with only three out of the top 500 online merchants4 offering it but again, this differs from country-to-country: China and Japan are two of the countries with highest Bitcoin take-up, according to a report in Business Insider5.

Historically, it’s fair to say that technology disruption in payment methods and preferences have been on the slow side. Now, digital transformation is accelerating the pace of change. Businesses need to understand the differences in consumer behaviour and preferences country by country and structure their business to respond to this change.

By Georges Berzgal, vice president EMEA, global ecommerce, Pitney Bowes

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