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While most of the world can’t travel across borders just yet, we can certainly shop across them. Data shows that almost 24% of e-commerce purchases in Europe are international. As we all begin to emerge from worldwide lockdowns and social distancing, the upward trend in e-commerce growth shows no sign of recoiling to pre-pandemic levels, or even slowing down. In fact, it is predicted that the global e-commerce market will reach US$6.07 trillion in 2024, growing at a compound annual growth rate (CAGR) of 11.34%.
With e-commerce records being shattered, new markets emerging, and established markets reaching new milestones, the big questions are: What markets do companies need to be planning to enter or expand? How has the proliferation of local payment methods facilitated cross-border e-commerce, enabling brands to succeed in new markets?
1. The United Kingdom
No other country in or around Europe has embraced online shopping more fully than the UK. Despite the recent withdrawal from the European Union (EU), the UK’s e-commerce market, currently the third-largest in the world, is predicted to be worth £264 billion by 2024, a 37% increase on 2020.
Global consumers now expect convenient and connected, omnichannel experiences. In the UK, Buy Now, Pay Later (BNPL) schemes were the fastest-growing online payment method last year, according to a Worldpay report. Whilst it was originally considered a niche payment method, it is now a mainstream payment option with widespread adoption. In fact, such schemes are predicted to account for 10% of UK online spending by 2024. For example, the established UK favourite chain of department stores, John Lewis, recently announced that it was launching its first-ever BNPL offer online to help satisfy a surge in demand for interest-free credit.
Another trend we’re seeing emerge is that bank transfer payments are becoming increasingly popular. In the UK – typically a card-centric payments market – bank transfers have doubled in popularity over the previous three years. To anyone who knows the UK payments market, this isn’t surprising. Bank transfer payment methods offer transparency; allowing the consumer to see their balance in real-time, before they press the “buy” button.
With a population of 82 million, Germany is the fifth-largest e-commerce market in the world and the second-largest in Europe, behind the UK. According to PostNord’s latest ‘E-commerce in Europe 2020’ report, 92% of Germans in the survey state that they have shopped online and the market’s largest segment is Electronics and Media. Since the beginning of the pandemic, Germany has experienced an uptick in online sales with as many as 29% of consumers stating that they shop online more often as a result of the pandemic.
It is once again the bank transfer payment that is driving e-commerce transactions in Germany. Payment methods such as Giropay and Klarna Pay Now (Sofortüberweisung) have become firmly established for online shopping in the region, providing innovative and secure payment and verification solutions based on online banking. According to statistics, GiroPay covers over 85% of the German market with over 1,500 banks providing access to approximately 17 million customers.
France is the third-largest e-commerce market in Europe, and as many as 89% of French people in PostNord’s latest report state that they have shopped online. However, according to the “France 2020: e-commerce country report” from RetailX, privacy and data security are particularly important to French consumers. These may be a significant factor in how they choose to buy online, and in deciding whether they choose new market entrants over established French brands and retailers.
In France, cards are the dominant payment method, accounting for 55% of transactions. Many online customers use ‘Carte-Bleue’ to pay for transactions online. This is a debit card which can also function as a credit card. Other popular credit cards are MasterCard and American Express.
Despite recovering from a recession, Spain remains one of the leading e-commerce markets in Southern Europe. It is also considered the fourth largest B2C e-commerce market in Europe behind Germany, the UK and France. Cards remain the most common way to pay online in Spain, accounting for 49% of transactions.
Yet, other methods of payments such as the use of digital wallets (Bizum, for example) are becoming increasingly popular. Spain’s enthusiastic adoption of digital wallets indicates that this method of payment may well rival the use of cards as the primary way to pay online.
Last, but by no means least, in the top five is Italy. The growing demand for local payment solutions combined with rapid e-commerce growth led to digitalisation in the region. And now, Italian consumers are increasingly embracing digital services. In fact, in Italy, nearly one-third of all Italian e-commerce purchases are made with an e-wallet, frequently funded via a bank account.
Italy already has a thriving cross-border shopping culture, with China (35%), the UK (19%), and Germany (19%) all categorised as the most popular overseas markets for Italians seeking increased variety and choice. A borderless e-commerce future is being shaped by payment methods like Satispay, a popular European mobile payment method which not only meets specific, local consumer demands, but also creates a seamless payments experience for customers.
The global opportunity for merchants
In addition to these marketing, fast-growing e-commerce regions across the globe include countries in Asia Pacific, Latin America, the Middle East, and Africa.
In APAC specifically, increased mobile internet usage and smartphone penetration have been key e-commerce drivers. Governments and businesses have also been heavily involved in helping SMEs to digitalise and adopt e-commerce to overcome the impact of COVID-19. And this has been heavily reliant on the integration of new local payment methods.
To be able to take full advantage of the lucrative markets on offer, understanding a country’s preference for local means of payment is critical to accessing new markets and customers.
For merchants with their eyes firmly set on growth in the year ahead, implementing the right local payment methods at checkout – supported by the necessary infrastructure – will be key to unlocking the opportunities cross-border trade has to offer.
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