Value of Local Expertise Underestimated in Expanding Cross-Border Commerce

With merchants and brands battling falling sales, cross-border expansion into high-growth markets is a strategy for steadying the ship, but it’s tough going if you don’t know the local payment preferences and have the relationships to make those expansions worth it.

Speaking with PYMNTS, Guillaume Tournand, vice president of growth, digital commerce at payment services provider Worldline, said more merchants are coming forward post-COVID with visions of expanding into promising regions, from Latin America to Asia-Pacific.

Direct-to-consumer (D2C) selling is both a driver and an enabler in developing a cross-border business in high-growth markets, Tournand said, and several market forces are fueling the trend.

“Keep in mind that at Worldline Digital Commerce we are dealing with very large eCommerce-first global merchants,” he said. “They want to do that to get a better feel and texture of their consumer demographics, better understand where the appetite lies and be more in control of the consumer journey.”

Expansion-minded firms are watching how people shop in high-growth markets and want to put those tools to work, too. Brands and merchants also want to capitalize on popular trends: Live shopping influencer’s video streams has grown especially popular in China and South Korea, for instance. And much of hesitation they may have had about buying something from another country seems to have dissipated during the pandemic.

“We’ve seen the consumer way more inclined to do cross-border shopping,” Tournand said. “Where they might [have been] shy in the past, now they tend to compare more and more of the products, and if they find a good deal cross border, they don’t hesitate.”

See also: The Global Commerce Tracker®

Learning the Language

Along the way, the bar has been raised. With consumers now comfortable comparing products between Amazon and Alibaba, for example, their expectations of experience and service remain high regardless of geography.

“Our consumers today expect to visit a website that speaks their own language, presents price in their own currency, and enables them to shop in their local preferred payment methods,” he said.

And the allure of high-growth markets is impossible to ignore. Tournand said Worldline defines high-growth markets as “markets where we observe a significantly higher growth rate in CAGR to what we could observe in the EU or the U.S., where we have about 7% to 12% growth rate. In some of the markets that we call high growth markets we have 20%, 25%, 30% CAGR.”

It’s attractive, but merchants have numerous considerations when setting up shop in new geographies. Having a guide fluent in local payments and regulations is critical. Some try to go it alone, but that’s a very heavy lift which can be greatly lightened by the right partners.

See also: South Korea Is an eCommerce Eden for Those Fluent in Local Payments

Minimizing Risk

While merchants are increasingly eager to access high-growth markets in other countries, they face payments challenges that can only be easily solved by tapping into preexisting market presence and local expertise. Some don’t get that at first, he said.

“In those markets we realized a very interesting trend, a merchant conundrum, where at one end they want to keep all their global payments fully centralized. They want to pilot that in a single dashboard, having a single bank account with a single currency that is being remitted to. [But] a very centralized approach … means that all the payments are cross border.”

He called that choice “highly inefficient compared to a situation where they would have a much more localized approach where payments are made domestically.”

On the top line, these transactions don’t convert as well as domestic ones. Issuers tend to view cross-border transactions as inherently risky, “so the authorization rate is a bit lower.” At the bottom line “there’s a higher cost structure. In today’s economics where we have merchants that want to not just hit scale but also have a good profit in today’s high interest rate era, they do want to salvage that.”

Worldline takes care of this with a suite of processing solutions that operate locally while allowing merchants to maintain their single global view of operations and cash flow.

With Worldline’s European roots, Tournand said cross-border payments optimization is part of the firm’s corporate DNA. And in place of DIY solutions, he said, “We package it under a single contract, a single integration. We hedge them against any FX rate they will have by guaranteeing them FX on the day of the transaction. That is really our solution: to enable our merchants to unlock these key pieces of the world, these high growth markets, by the flip of a switch.”