Building local payment experiences as a global company

The increasing number of payment methods and the users’ rising expectations from merchants to offer local and personalized payment experiences means that merchants now need to accept more payment methods than ever before. According to Credit Suisse, over 500 alternative payment methods (APMs) are now used by millions of customers across the globe, making this task more challenging as businesses expand the geographical footprint of their operations. This fragmentation of payment acceptance space is not limited to any specific region but can be observed everywhere.

COVID-19 acted as a big accelerator in terms of e-commerce usage and consumer behavior shifted to safer ways of paying cashless, which ultimately led to the massive adoption of APMs. And merchants are paying attention. Recently, Global Payments released its 2022 Commerce and Payment Trends Report, where they surveyed over 100 businesses and issuers from around the globe. Results clearly indicate a high awareness and willingness of merchants to increase their acceptance of APMs: 

• 65% of merchants plan to add buy-now-pay-later (BNPL) solutions 
• 60% of merchants plan to add digital wallets
• 60% of merchants plan to add QR-code payments
• 51% of merchants plan to begin accepting digital invoices

After analyzing worldwide research from several sources (including GlobalData, Statista, and eMarketer), the report also discovered that APMs will account for the highest share as a payment method category in eCommerce with an estimated 51.7% by 2024 globally.

The importance of supporting APMs

From a merchant’s perspective, there are the following key advantages to supporting APMs:

• Better user experiences: offering a wider range of payment methods helps to provide a tailor-made and localized user experience in every market. Users that can find the payment methods they are accustomed to are much more likely to complete the transaction, leading to higher conversion rates. In addition, having alternative options further helps to recover orders in case any of the originally selected payment methods are having issues. 
• Cost efficiencies: local APMs often build cheaper channels to fund them, making these cheaper than accepting credit cards or doing cross-border acquiring. This helps merchants to reduce payment costs per transaction. 
• Access to new user segments: in many markets, APMs have been able to gain adoption with the unbanked share of the population that might not have access to traditional payment instruments. Introducing these payment methods presents a great opportunity for merchants to access these user segments. 

Assessing different options to unlock new payment methods

There are different approaches merchants can follow in order to introduce new payment methods. These are usually between integrating directly, extending integrations with existing Payment Service Providers (PSPs), or leveraging payment orchestration products.

Integrating directly is usually the most complex path that brings a set of technical and other challenges to overcome, such as:

• Legal process: since money and critical infrastructure are involved, payment contracts must be reviewed carefully by multiple departments (e.g., legal, finance, tech) from both sides to ensure all the important points are captured, and the risks are mitigated. This can take a good amount of time. Sometimes, even signing an NDA takes several months. 
• Language barriers: this can be a considerable hurdle to success when dealing with international payments - scoping out integration or negotiating commercials with partners that do not speak English can be tough and require translations of multiple documents into the local language. 
• Documentation quality & timezone differences: depending on the partner's maturity, it is quite often that documentation is not fully capturing all the details, and further clarification is needed. This sometimes can take more time than the actual coding part of the integration when the communication channels are not very efficient, and partners are in different time zones.  
• Testing: it is always good to sufficiently test before launching new payment solutions to ensure everything is working as expected. International merchants often experience challenges with testing alternative payment methods due to a lack of real accounts available or some additional local requirements (e.g., local phone number).
• Operations: certain providers might not be able to support some operations via their APIs, like pre-authorizations, refunds, or partial capture. This requires additional efforts from merchants and might require solutions outside of what the provider is offering to close the gap. 
• User experience: different payment methods may require additional data or steps (e.g., in-app authentication) to successfully finalize a transaction. There can also be multiple ways of integrating a payment method. You must support the most optimal integration experience and onboard your customers seamlessly. 

• Reconciliation: providers have different reporting structures, quality, and settlement cut-off times. The more providers you work with, the more effort it will take to unify and standardize this part of the process.

Leveraging existing PSPs is certainly much simpler but comes with potential issues like being limited to the payment method coverage of your existing PSP (it becomes much more difficult if not already offered) or being more expensive as the PSPs are adding a markup on top of the original pricing and sometimes it is not possible to get rates directly from the APMs. 

Using payment orchestration products brings the advantages of both approaches together - merchants abstract the technical complexity to avoid in-house investments to build and maintain integrations while keeping the full commercial flexibility of negotiating pricing directly with alternative payment methods or local acquirers. In a nutshell, payment orchestration is a software layer between merchants and any 3rd parties (PSPs, acquirers, fraud-prevention solutions) that are utilised as part of the payment processing flow. It helps to standardise the integration for merchants through a unified API layer while handling the complexity of mapping requests and responses with 3rd parties. This significantly reduces the effort to introduce new integrations and maintain the existing ones. Additional capabilities like a reconciliation engine and reporting further help to streamline payment operations.

Global connectivity with Payrails

With a steep increase in the adoption of digital payments, changing payment habits, as well as the rise of local payment methods globally, enterprises are operating in an increasingly complex and fragmented payment environment. 

As part of Payrails OS, we have built payment orchestration capabilities to help merchants easily add new payment methods and local acquirers in order to improve user experience, increase conversion rates and reduce payment costs. We focus on solving the technical complexity while merchants keep full control of commercials. 

Our team of payment experts has directly worked with over 100 providers across 85 countries. Get in touch with us to chat about your specific payment challenges and how we could help you to solve them.