By Steve Villegas, Vice President of Partner Management, PPRO Group
[Editor's Note: This Is the second in a two-part series exploring myths vs. facts in cross-border e-commerce. Read part 1 here.]
In our bustling e-commerce 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 merchants 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.
Ensuring consumers’ data is safe and secure is a top priority for many American-based online merchants. And, no merchant wants to fall victim to fraud, but how can they be sure transactions are secure?
Many U.S.-based online merchants only sell domestically via traditional payment methods because they aren’t educated on global e-commerce and local payment methods. Truth is, international markets open up new global sales possibilities for U.S. merchants. 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 global payments fraud and security, and reveal why local payments are much safer than some merchants may think.
Myth 1: International transactions are riskier than domestic ones.
Many U.S.-based online merchants believe that selling cross-border is far riskier than selling domestically. In fact, only 36 percent of U.S. merchants sell to international consumers. Local payment methods (LPMs), which enable U.S. merchants to expand globally, are non-credit card alternatives 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 (e.g., multifactor authentication) are linked to specific banks that individual consumers belong to.
Fact: International transactions made with LPMs are just as safe, and often safer, than traditional domestic payment methods.
Contrary to popular belief, local payment methods are favored worldwide and make reaching global consumers easier and safer. In China, for example, 49 percent of online transactions occur by e-wallet and only 23 percent 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 reduce exposure to fraud and the resulting chargebacks, where merchants are 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 because merchants do not have to worry about rejecting orders to protect themselves from fraudsters.
Myth 2: Frequent online shopping will lead to fraud and data breaches for consumers.
As data breaches have become more common, access to personal data in online shopping is often a top concern. Some U.S. merchants conducting global e-commerce worry; 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. Global smartphone penetration is 53 percent, and this figure rises in major Asian and Western European markets.
Fact: E-commerce is perfectly safe when merchants offer various local payment methods to further protect global consumer information online.
The use of bank transfers as online payment is increasing globally (e.g., 49 percent of e-commerce transactions in Germany are facilitated this way. Bank transfers are the process of moving money directly from a consumers’ bank account to a merchant. This is performed via redirect during checkout either through a real-time or offline transfer process. Payments like 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 percent of consumers will abandon a purchase if they can’t find their top payment method. Further, 23 percent will abandon if they don’t trust payment security and 15 percent 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, but this may no longer be the most secure payment option.
Fact: Many cashless payments like e-wallets can actually reduce the chances 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 consumer’s personal information. These digital payments are becoming increasingly favored over traditional payments. For example, cash only makes up six percent of online transactions in France.
LPMs offer U.S. merchants the tools to expand their business outside of US 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.
This Is the second in a two-part series exploring myths vs. facts in cross-border e-commerce. Read part 1 here.