By Matt Jackson, Head of Partner Development, PPRO
Companies looking to sell to consumers from different regions across the globe can miss out on 77 percent of their potential business if they don’t accept local payment methods (LPMs), according to data from Edgar, Dunn & Company. Local payment methods can be credit cards that are only regionally enabled for local purchases, country-specific e-wallets, bank transfer payments, or buy now pay later (BNPL) installments.
Adding these payment methods to online check-out options can be as costly and complex as setting up new corporate operations, each in a different country. This leaves merchants who want to offer LPMs only two options: Tap into existing local payment method service providers, or implement the various LPMs on their own.
The first option exists because the alternative is so onerous. How bad can it be? Here are some details:
E-Commerce is a Sprint, Not a Marathon
Europe, Latin America, and APAC each have hundreds of major local payment methods unique to their region. These are competing systems, each with their own transactional infrastructure and each with their own user base. If a merchant wants to increase sales by offering a local payment method, they need to identify which ones are most used by their prospective consumers.
If the merchant is committed to performing the integration on their own, they need to ensure that the LPMs they’re considering can be supported by their financial platform. This requires a technical discovery project. If they don't have suitable in-house resources, they need to retain a consultancy.
Assuming the merchant has a platform that works—and depending on which LPM(s) they will be integrating—they may need to set up a local presence for legal and operational purposes. This involves all the registrations and licenses one would expect for any business. But, because the merchant is integrating with a payments system, there will likely be additional financial regulations they will need to navigate.
It will be wise for the merchant to engage a consultant who operates in the country to help them set up the entity, as well as a local attorney to execute the necessary paperwork and avoid legal missteps. Once the merchant has the right to integrate with the local payment methods, they can begin the actual integration itself.
This will get very technical, very quickly. A portion that is almost always outsourced, it will require a liaison from the merchant to assure the project is being executed completely while remaining in-scope and on-budget. If they're doing this on your own, they should allow a year or more to be completely connected.
Money – Anteing Up To Get In The Game
Of course, each of these steps comes with a price. Establishing a local presence will include licensing fees and may require cash reserves, as well as whatever reserves are required for transacting in the LPM.
A custom integration project is always going to be costly. And, like any software platform, it will require ongoing updates and administration. Also, the merchant should budget for the initial discovery that may or may not result in an actual integration project.
The merchant may need to retain consultants and lawyers throughout the process, in addition to budgeting whatever staff time is required for the project. This includes in-house counterparts for the many external resources required. They will also need to budget for ongoing support and maintenance.
Bear in mind that all this is required for each LPM. Each one is different, with its own entities to contract, its own technical requirements, and often its own financial requirements.
Complexity - And You Thought Ecommerce Systems Were Hard
LPMs, like any payment system, come with ongoing administrative requirements like settlements, compliance, risk and fraud mitigation, chargebacks and unallocated funds processes, etc. To manage their own implementation, a merchant will need to have administrators who monitor changes in the regulations and tend to these requirements.
Because selected/someLPMs involve an offline element such as exchanging vouchers at a physical retail location, there can be regulatory compliance issues beyond ordinary financial regulations that must be monitored and managed.
Of course, a merchant will also want to be able to capture and analyze their own financial performance data to inform ongoing business operations and strategy. This can be a part of the original integration or done afterwards. But it is the only way to assure a business is getting the full value of its investment.
Integrating with local payment methods is crucial for serious market entry into everyregion of the world. But it is a long, hard, and complicated process. It involves financial risk and it is never really done; the payments industry is constantly changing and requires constant maintenance, with LPMs being launched or modified regularly.
This is why there are specialty companies that focus strictly on platforms to simplify the integration with LPMs and enable rapid, cost-effective market access. That is also the reason even the best-known global payments processors choose to partner or outsource the set-up and management of local payment methods and focus on their core business.
Yes, you can do it all yourself. But you better be feeling adventurous… and rich.