Towards the end of last year, CyberSource commissioned an independent survey of senior executives in a range of organisations in France, Spain and the UK, and one of the things we explored was their growth ambitions for 2014. We found that 86 per cent are planning to increase their focus on expanding eCommerce into new markets. No other plans — including investing in mCommerce, harnessing big data, optimising business operations and improving the user experience — scored more highly as a growth priority.
No Easy Formula
One of the challenges of expansion initiatives is choosing the right markets, and there’s no easy formula for doing so. For any potential country, you need to understand the maturity of the eCommerce market for your goods and services; its delivery infrastructure; the competitive landscape; the political, legal and economic factors that affect the country’s risk profile; and the likely impact of local norms on everything from marketing and sales to fulfilment and customer service.
With so much to consider and plan for, it can be easy to overlook payment management. This can be costly; even those with experience in eCommerce expansion may find their plans potentially derailed by an unforeseen payment-related issue in the next country they target. While I’d certainly never argue that adapting to the unique payment landscape of a new country is the only or most important critical success factor for eCommerce expansion, it is critical, with a direct effect on:
- Customer reach and sales conversion
- Time to revenue
- Cost of expansion
Let’s look at each in turn.
Don’t falter at the last stage
Imagine you’ve done everything right in targeting a new country: everything is in place, and customers are flocking to your localised site and filling their carts.
But when they get to the checkout page, they change their minds. You only take credit cards, and although they do have one, the card spending limit is low and its interest rate is high, and usually they buy online through interest-free instalments — a payment option you don’t offer. Or they don’t change their minds, but their transactions are routinely rejected by your fraud screening process because the card they’re using has been used by someone else.
These aren’t theoretical examples; instalment payments are common in Brazil and Mexico, while in India it’s common for families to share a card.
Most of the businesses we talk to are at least generally aware that different countries have different payment preferences. But, as the sharing of cards in India illustrates, differences usually go deeper than preferred payment methods.
From a sales conversion perspective, behaviour that affects fraud management is at least as important as differences in payment method preferences, and usually less obvious. Minimising chargebacks without blocking genuine orders in a new market calls for a fraud management strategy combining very specific local knowledge and fraud management expertise. Every business needs a plan for setting up an informed fraud management strategy from day one in any new market, or it runs the risk of high fraud costs or lost sales at a time when it can least afford either.
Can you afford delays?
Time to revenue in a new market depends directly on how quickly you can establish payment processing capability there. Cross-border transactions attract higher fees, and sometimes higher rejection rates from issuing banks, so you may prefer to establish a relationship with a local acquirer or payment processor.
It can take time to establish local processing connectivity, unless you take advantage of an existing connection offered by a payment service provider. Companies have told us of having to wait six months or more; I know of one company that actually had to delay a launch into a new country, because it didn’t appreciate what was involved in organising payment processing.
Unanticipated delays can also be caused by local mandates, if you’re not aware of them and don’t plan accordingly. They’re not always as obvious as data protection laws, tax calculation requirements, or direct debit regulations. For example, in some Asian countries merchants can’t host their own checkout forms; they must be hosted by a payment provider or the bank. In Brazil, some of the top banks automatically decline internationally originated transactions presented in the Brazilian real (through Dynamic Currency Conversion, for example).
One thing you just do not need when establishing yourself in a new market is to be faced with last-minute changes to your checkout architecture or processes for lack of awareness of such requirements. Again, local knowledge is the key to avoiding these pitfalls.
Build in Scalability
Because there’s a lot to get right and the details differ from one country to the next, the complexity and cost of payment management tends to multiply as you expand into more countries.
This has knock-on effects; especially for IT, with its central role in the eCommerce payment process. Checkout pages must cater to multiple languages and currencies, as well as multiple device formats and operating systems. Effective fraud management calls for specialised application support. Every form of payment requires connectivity to the relevant acquiring and payment processing organisations, and must be integrated with financial, logistical, customer service and other applications. Clearly IT costs can spiral as the number of countries and methods of payment increase.
Exponential growth of complexity and cost can catch even experienced expanders unaware; especially if they’ve found country-specific workarounds to challenges instead of solutions that are adaptable and scalable as more countries are added. It’s worth thinking about your medium- and long-term objectives even as you start expanding, or you risk finding that growing costs affect your ability to turn a profit in attractive new markets down the line. Consider starting out with a payment management platform designed to cater to the realities of different countries, to scale as you do, and to avoid much of the IT complexity caused by expansion.
The World is your Oyster
My intention here has been to forewarn and forearm businesses, so that their eCommerce expansion doesn’t falter for lack of appreciation of the strategic importance of payment management. While I’ve drawn attention to the many ways in which things could go wrong, it’s equally important to realise that every issue that I’ve raised can be successfully managed to achieve even the most ambitious expansion objectives.
Payment management knowledge and tools exist to help you speed time to market, improve customer reach and conversion, and reduce cost and risk. The important first step is to be aware of just how specialised an area it is, and of the many ways in which domestic competence is not a predictor of competence elsewhere, so that you can seek the appropriate help.