In our bustling retail landscape — today’s most competitive market — it’s hard to believe that many online merchants, particularly those based in the U.S., avoid access to global transactions. When considering U.S. cross border e-Commerce is expected to bring in $203 billion by 2021, it should be a no-brainer for online retailers to consider capitalizing on the growth potential that exists beyond American borders.
But even with online transactions being more popular than ever before, payments fraud and security scams run rampant across the online commerce exchange — a paramount concern for merchants apprehensive about expanding to international markets.
Many U.S.-based online merchants are only looking to sell domestically by offering traditional payment methods because of the lack of education on global e-Commerce and local payment methods. Truth is, international markets open up new global sales possibilities for U.S.-based retailers. When leveraged across international regions, recent PPRO research highlights just how vital local payment methods are.
Let’s dive into some of these top misconceptions in retail payments fraud and security, and reveal why local payments are much safer than some merchants may think.
Myth 1: Global payments are riskier than the domestic ones.
Many U.S.-based online retailers believe that selling cross-border is far riskier than selling domestically. This is evidenced by the fact that only 36% of U.S. merchants sell to international consumers. Local payment methods or LPMs are a way for U.S. merchants to expand globally. LPMs are payment methods, outside of traditional credit cards and brands such as Visa and Mastercard, that expedite the needs of various geographies, cultures and domestic economies across the globe. A majority of LPMs have their own security features built in to the payments. These security features, like multifactor authentication, are linked to specific banks that individual consumers belong to.
Fact: Cross-border payments made with LPMs are just as safe as domestic ones and in many cases, safer than traditional payment methods.
Contrary to popular belief, these local payment methods are favored worldwide and make reaching global consumers easier and safer. For example, in China 49% of online transactions occur by e-wallet and only 23% by credit card. Offering push payment methods where the customer initiates payment are less risky because the merchant does not need to collect any payment data from the customer. This approach can help to reduce exposure to chargebacks due to fraudulent purchases with stolen cards. The merchant is forced to refund the cardholder, usually after the goods have already been delivered. With push payments, chargebacks are not possible as the transaction is securely authorized by the payer. This not only protects the merchant from financial loss, but also allows for higher conversion rates as merchants do not have to worry about rejecting orders to protect themselves from fraudsters.
Myth 2: Frequent online shopping will lead to fraud and security breaches for consumers.
With data breaches being a common threat to consumers, the access to personal data in online shopping is often a top concern. There are some qualms among U.S. merchants in conducting global e-Commerce; are these payments safe, and how do I reach global consumers? However, with the rise of digital and mobile payments, much of this risk can be averted through safer LPMs like e-wallets that don’t give merchants access to a consumer’s full bank account. There is a global smartphone penetration of 53%, and this figure rises in major markets like Asia and Western Europe.
Fact: E-Commerce is perfectly safe and sound for online shopping, as retailers can offer various local payment methods to further protect global consumer information.
Bank transfers are becoming increasingly used globally, as 49% of e-Commerce transactions in Germany are facilitated by this method. Bank transfers are the process of moving money directly from a consumer's bank account to a merchant. This is performed via redirect during checkout, either through a real-time or offline transfer process. Offering payments such as these are seamless for global consumers and keep consumer data out of harm’s way from savvy hackers. By using your bank login details and the redirect for the payment method, consumers’ personal account information is not directly shared with the merchant, further reducing the risk of the payment, This enhanced consumer experience is vital as 14% of consumers will abandon a purchase if they can’t find their top payment method. It's further proven by the fact that 23% will abandon if they don’t trust payment security and 15% will abandon if they find paying too tricky.
Myth 3: Cashless payments increase a consumer’s chance of fraud.
Digital payments are on the rise, yet many merchants believe these cash and cardless payments are unsafe. They prefer to offer traditional card and cash payments; however, this may no longer be the most secure payment option.
Fact: Many cashless payments like e-wallets can actually decrease the likelihood of fraud.
E-wallets are registered online money accounts that can be loaded and used for payments. They can also serve as a database to store various payment method information, eliminating the need to carry physical payment cards or personal data in various locations. E-wallets offer two-step authentication and encryption, further securing consumers’ personal information. These digital payments are becoming increasingly favored compared to traditional payments. For example, cash only makes up 6% of online transactions in France.
LPMs offer U.S. merchants the tools to expand their business outside of U.S. borders. E-wallets and bank transfers are great ways to reduce the risk of fraud while making payments easier for global consumers. Around the world, consumers want to feel safe when they shop and are looking for a seamless experience. LPMs check both of the boxes as they present the safety and ease that many card-based payments cannot.
Steve Villegas is VP of Partner Management, PPRO Group. Villegas is a sales, marketing and business development executive with over 20 years of experience building and managing sales, partner development and marketing teams that have delivered profitable results, built market share, and exceeded revenue goals while outperforming competition.