Cross-border payments: opportunity, challenge and change

Stijn Gasthuys, Head of Digital Commerce at Worldline Merchant Services, details the current cross-border commerce landscape and the power of digitalisation.

Could you provide an overview of the modern cross-border commerce landscape?

The cross-border commerce landscape is booming. The uptake has been rapid as consumers become increasingly comfortable making cross-border purchases. The global cross-border B2C e-commerce market is expected to grow at a CAGR of 12% from 2021 to 2025, according to Ernst & Young. "Interestingly, we see most of the growth fuelled by the Asia Pacific or Latin America markets," says Stijn  . "In these regions, we have seen unprecedented e-commerce growth rates of around 30% (compared to 6-7% in mature markets). This has occurred in tandem with a rapid expansion of internet access and smartphone penetration."

Thanks to digital technologies such as smartphones and internet-connected products, web shops that purely operate online can quickly scale globally to reach a wide range of target customers. "Platform businesses have grown internationally in recent years, while, as a result of the COVID-19 pandemic, supply chains became more regional and local," says Stijn. "Development in digital elements such as international e-commerce platforms, internet connectivity and logistics services, and infrastructure development, such as warehousing and transport, are making cross-border shipping and commerce much more accessible for vendors and consumers."

How have emerging payment methods affected cross-border commerce? 

With demand for online payments growing worldwide, the number and variety of digital payment methods continue to increase. More than 450 local payment methods are used worldwide. Merchants have quickly realised that simply offering debit or credit card payment options at checkout is no longer enough to satisfy customers. These emerging payment methods provide greater choice and convenience to consumers, which means online shopping and cross-border commerce are showing no signs of slowing down.

As Stijn outlines, the shift in global and local payment preferences pushes merchants to offer specific and specialised payment options for local markets. "For example, in China, we see a preference for digital wallets such as Alipay and WeChat Pay, while RuPay is becoming a dominant force in India. In Brazil, PIX is a rapidly growing instant bank transfer, addressing a large percentage of the unbanked population who don't possess payment cards. While we see e-commerce becoming increasingly globalised, payments, by comparison, are getting increasingly localised and specialised to meet consumer demand."

Emerging forms of payments are a driving force for more financial inclusion. In countries like Brazil and India, young, tech-savvy populations are driving the next wave of innovation and economic growth. We’re also seeing older demographics turning to digital methods, partly because of the necessity and recognition of convenience. 

What are the current challenges and opportunities in cross-border commerce?

When expanding into a new market, online businesses face multiple challenges. These include an increasing number of payment methods, a variety of currencies and regulatory requirements. Additionally, they must consider more complex supply chain management, including local customs, logistics and warehousing. Aspects such as hassle-free returns and refunds are also a consideration.

"These challenges are also, in fact, opportunities," suggests Stijn. "With suitable operating models, businesses can develop innovative solutions, strengthening their unique selling proposition and extending their reach to a new target customer base."

Smartphone applications and other online channels have created widespread consumer expectations about payment availability, speed, and efficiency. Regarding payments, there are three key areas online businesses need to consider:

• Offering a local payment experience (local currency and preferred payment methods)
• Complying with local regulations
• Optimising monetary flow

This demands a deep understanding of the local financial system and banking ecosystem in these specific markets. Payment Service Providers like Worldline Digital Commerce can provide the right advice and guidance on expanding online businesses internationally. As Stijn states, these challenges present a wealth of opportunity if addressed in the correct way.

 "The pandemic accelerated change in consumer behaviour. E-commerce has seen immense growth over the past few years; just look at companies like Netflix, Amazon or Airbnb. In a relatively short time, they have successfully managed to operate in multiple geographies and become household names. In the highly competitive space of e-commerce, adopting the right payment strategy is a real game-changer in driving success both now and in the future."

How do you see the future of cross-border commerce?

Technological advances open commerce opportunities for everyone, anytime, anywhere and via any device. Recent data shows that 57% of eCommerce shoppers made at least one online purchase from another country in the past 12 months, and 22% considered doing so. 43% of shoppers affirmed that their shift to online shopping during the pandemic encouraged them to be more open to cross-border purchases. affirmed that their shift to online shopping during the pandemic encouraged them to be more open to cross-border purchases. This number will only increase as payment types become better supported and international physical and digital infrastructure continues to develop.

"We can see that opportunity and competition are increasing in cross-border e-commerce," says Stijn. "The shift towards online shopping takes away from physical and local retail stores as consumers embrace digital technologies. There is still room to grow in online retail share, estimated by eMarketer to be 20% in 2022 vs 80% still spent in-store."

Moving forward, merchants need to be aware of trends and innovation in mature markets, from voice commerce and social commerce to new delivery and payment methods. Being proactive rather than reactive is key.

The rise of technologies such as Artificial Intelligence & Machine Learning, data analytics, embedded payments and block-chain based currencies are revolutionising commerce. Such innovation has led to new payment methods, such as Buy Now Pay Later (BNPL) and crypto-based payments. With consumers increasingly connected on social media, there has been and will continue to be a rise in social commerce through platforms such as Facebook and Instagram.

Such innovation has triggered the interest of regulators to protect both consumers and businesses. It is expected that more regulations will emerge going forward; for example, in the US, South Korea and the EU, regulations have been proposed to open app stores of Google and Apple to allow also 3rd party payments. In addition, new rules, such as the EU Digital Market Acts, expected to come into effect this year, will provide greater freedom of choice to developers and consumers and bring some exciting transformations in the digital payments space.

What benefits does digitising offer cross-border commerce? 

"Due to robust technology stacks, we already see digitisation opening new avenues for digital products and services for cross-border commerce. For example, the acceleration of web 3.0 with reading, writing and interact capabilities built on blockchain technology. In my opinion, this is what the future of the internet will look like; web 3.0 will bring payment integrations to the next level. Ultimately, digitisation is accelerating cross-border commerce and is not slowing down."

Digitisation has already led to the development of global platforms and virtual stores in the metaverse, an exciting concept currently being investigated by many global businesses and providers. The market has also seen the positive impact of digitisation on consumers, businesses, and regulators. Such innovation is gradually blurring boundaries and promoting business without borders.

The future of cross-border commerce is bright, with opportunity and challenge on the horizon. As Stijn reinforces, the continuing interconnected world that global society is building presents the ideal ecosystem for the services and technology that cross-border commerce thrives on to develop further.