Unlocking potential in the burgeoning market for luxury goods in the Asia-Pacific region isn’t a job for payments lightweights. It’s serious business with major challenges.
During a recent PYMNTS panel discussion, guests Wei Jiang, president and chief operating officer at Citcon, and Tammy Phan, CEO of luxury reCommerce site Luxe Du Jour, talked about the difficulties and payoffs of learning to move payments efficiently in that part of the world.
It’s something we’ve studied in “The Emerging APAC Opportunity,” a PYMNTS and Citcon collaboration, which found that merchants lose 52% of their APAC sales to cart abandonment. It’s a staggering finding, but as Phan tells it, quite common when selling into the region.
“The problem we have is making [payments more] streamlined and accessible to our clientele. When a client wants to purchase from our Canada location, they want to be able to transfer funds easily, but we can’t open bank accounts with every country we operate in. That’s a problem we struggle with when it comes to payments.”
Jiang said it’s a common impediment. Having spent much of his career with Visa, he said, “Visa believed that to resolve this, everybody [should have] a Visa card. The result is that all the transactions can be routed through the Visa rail. That is not the answer when you go to countries or areas outside the U.S. Particularly if you go to APAC countries or areas like … Malaysia, the Visa and Mastercard penetration rate is very low.”
This is where payments localization is gaining ground more quickly now with payment processors like Citcon and others dealing in dozens of local currencies and payment methods.
Noting there are in fact hundreds of local options in sought-after APAC countries and adjacent markets like India, Jiang said it’s critical for eCommerce merchants to enable payments via popular local methods that settle in local currencies on both ends.
“That’s a big focus for Citcon. From the research we did jointly with PYMNTS, it is clearly showing that the majority of the eCommerce merchants based in the U.S., Canada and the U.K. want to expand their presence in APAC,” he said.
“The simple reason is that APAC consumer spending represents over 50% of global eCommerce spending and is growing twice as fast as the rest of the world. You cannot ignore that.”
See also: The Emerging APAC Opportunity
Regulatory Roulette
Unpacking the minutiae of differing payments regulations in adjoining APAC nations is a full-time job that sellers like Luxe Du Jour don’t have the luxury of committing resources to. Phan noted the labyrinth of different money movement regulations between markets and the complexity it adds to international commerce, which hurts both consumers and businesses.
She said, “some of the countries in Asia have a limit that they can only receive a certain amount of money, otherwise it gets frozen.” For example, “there’s only a certain amount of money that we can transfer to our Thailand location or the Hong Kong location without it being flagged and frozen [or] vice versa.”
This becomes highly problematic for a luxury eCommerce site reselling $20,000 Birkin bags across borders, as Luxe Du Jour does. “Sometimes we find that we have to break up these payments multiple times, but that costs money on our end to wire multiple times.”
There’s also the tangle of laws about accepting certain payments from numbered registered companies, she said, which get almost draconian in certain APAC nations. “A lot of our transfers also get rejected, and we have to send it from a company that has a name in the business.”
With a client list of its own that includes LVMH, Nordstrom and Macy’s, Citcon is well-versed in these issues, dealing with “ticket sizes sometimes over $100,000. You probably want to find a global payment provider who can help you set up your payment platform back end,” Jiang said.
See also: Citcon Integrates With Bold to Enable 150 Payment Methods
The Localization Fix
Payments localization and platform orchestration is how more sellers are getting this done.
Using South Korea as an example, Jiang said, “Visa and MasterCard are not mainstream. The penetration rate in South Korea is around 20%. There are over 25 different payment methods.”
“Just looking at mobile wallets, you have the KakaoPay in Korea, you have PayCo in Korea, you have the Naver in Korea,” he said. “They have already four to five different payment methods. All these things in APAC are a pain point because it’s very fragmented, it’s not consistent. So, in those cases, you want to find a platform” that’s got the API integrations to match.
Phan embedded an Alipay-like payment capability into her site. “If eCommerce sites don’t have that, then I think they’re losing a lot of money, definitely from the Asian clientele that’s trying to get their money out,” she said. “It’s not easy. Something that helps with conversions was having those other payment options integrated on our website.”
Platform localization goes that one better by transacting in the native currencies of buyers and sellers, with the role of platforms being managing FX and a mix of regulations to close the sale.
“Let’s say I’m from Korea and I see the KakaoPay listed. Or if I’m from, say, Thailand, I see True Money is listed. It says the merchant knows me and wants to do business with me,” Jiang said.
“We do find that after merchants enable local payment methods, the conversion rate can be improved by almost 40% to 50%,” he said, adding that in a tough economy “people don’t want to over-invest in their IT platform. So, a flexible and scalable platform becomes important for an eCommerce merchant to grow and expand globally.”
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