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Global ways to pay

The internet is opening doors for fashion retailers in more international markets.

Those setting up a special relationship with customers in Asia, Europe and the US have to do more than ensure they are speaking the right language. Shoppers outside the UK don’t just expect to pay in their own currency but also via their favourite medium, whether that’s Visa, PayPal or the exotic bank transfer systems preferred by many Germans.

Getting the range of payment options wrong can put a big dampener on sales and be the difference between a successful new venture and an expensive overseas trip-up.

A study by the European Commission found that 60% of all online cross border transactions are not completed because the payment methods offered are inadequate.

Visa, Mastercard and PayPal do have worldwide appeal, but these brands can pale into insignificance next to some local operators.

If you launch a site in The Netherlands, for example, without offering shoppers the chance to use the iDEAL system, which allows payment via direct transfer from customers’ bank accounts, you could be losing between 50% and 70% of online sales.

Sean McKee, head of ecommerce at footwear retailer Schuh, says: “Preferred payment methods have informed our decision on which territories to target.”

Schuh opted to launch its first country-specific international site in France partly because of its similarity to the UK in terms of the way customers like to pay. While local debit card brand Carte Bleue is important, 90% of those cards operate under the Visa system and shoppers are happy to use credit and debit cards just as they do in the UK.

Although it is Europe’s biggest market, Germany is less attractive to many online retailers because the preferred payment options there are quite complicated and very different to those prevalent in the UK. German consumers, who have grown up within a strong catalogue shopping culture, are much more used to paying cash on delivery or via the ELV direct debit system than by credit card.

Although card payments are increasing, ELV accounts for between 40% and 50% of all online transactions in Germany, so is highly important to any retailer wishing to operate there, even at the upper end of the market.

Morgan Hay, finance director at premium etailer My-Wardrobe, which has a dedicated German site, says it plans to introduce ELV as an option in the near future. “This will form part of our on-going improvement in the site experience to assist our overseas visitors, while creating a much more local shopping experience,” says Hay.

However, Julian Wallis at payment services company Ogone, which is advising Schuh and shirt retailer Charles Tyrwhitt on their payment systems for international markets, says retailers should be aware that a high number of ELV transactions are cancelled.

Generally Germans prefer to examine their goods before they pay for them, potentially some weeks or months later, and there are a number of other bank transfer systems including Sofortüberweisung and Giropay as well as the open invoice system operated by the likes of Klarna that allow them to do just that. The preference for cash on delivery is shared by shoppers in Eastern Europe, Italy and Spain – one reason why the ecommerce market is still tiny in southern Europe.

The culture in another huge international market, the US, is quite different. There, credit cards rule with Visa, American Express and Mastercard the dominant players. Another independent brand Discover is also important and its role online could increase after the company signed a partnership with PayPal.

For now the deal means that PayPal cards will be accepted at any high street outlet where Discover operates, but Michael Archer, partner, in consultancy Kurt Salmon’s financial services practice, suggests the relationship could develop in future. He sees PayPal as part of a general rise in the popularity of e-wallet and pre-pay services in the US.

Pre-pay cards, which can be loaded up with cash to be spent later, are growing at a yearly rate of 15% to 20% over the Atlantic as cash-strapped shoppers deliberately avoid credit and cards linked to their savings account or are excluded from banking or credit because of financial difficulties. Pre-pay cards are also popular with young people who aren’t yet able to access a credit card and have rising appeal in Europe for the same basic reasons as in the US.

E-wallets like PayPal are also becoming increasingly important, according to Wallis at Ogone, as a range of different players step up activity, including Google Wallet and Checkout by Amazon, which allow other retailers to enable shoppers to pay using details stored on their Amazon account. Those shopping online via their smartphone can find it easier and safer to pay using one of these e-wallet systems so it’s not hard to imagine the two growing at a similar pace.

PayPal operates in 190 markets and says it has 113.2 million active registered accounts. Its revenues outside the US rose 33% in the second quarter of this year. John Lewis, which began using PayPal in February, says it adopted the system to help drive international sales.

Sean O’Connor, head of online delivery and customer experience at John Lewis, says: “The addition of PayPal provides our customers with a wider choice of convenient payment methods. It makes it simpler for our overseas customers to pay for goods online, and is also a good option for our mobile customers.”

In the UK, Forrester research found half of online shoppers had used PayPal to buy products but it is thought to have only about a 5% share of online payments here, according to some analysts and even less in other European markets. Hay says: “We find that, as well as the standard Visa and Mastercard options, American Express is a much more valuable payment method than PayPal for our international customers.”

Another emerging payment method is the China Union Pay card. Today 30% of all credit cards globally are China Union Pay cards, according to Siobhan Gehin at Kurt Salmon. She says: “With increasing business in store from Chinese tourists, especially at the luxury end, and with Chinese ecommerce growing rapidly, this is certainly one to watch.” For those considering or hoping for online sales in China, it is surely a must-have option.

With such a wide choice of different options to consider, retailers have to weigh customer service against the cost of dealing with a plethora of financial companies. Some service providers, such as Ogone, offer a service under which they will handle agreements with a mix of payment systems tailored to suit the markets retailers are operating in.

Although fees may be higher, that’s balanced against the potential requirement to set up local entities to handle payments or the need to juggle several complex contracts.

Gehin says: “Retailers should take expert advice in this area rather than assume they can offer the same payment options as in their domestic market.”

Smaller retailers may choose to stick to markets that can be accessed via the credit and debit card services they are familiar with.

But Hay says etailers should not be put off entering markets that are right for them because of unfamiliar payment preferences.

He says: “Yes, payment methods are important but they are not a key driver in our focus for international sales.” Getting the product and the service right will always come first.


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