To be attributed to: Nikhita Hyett, EU MD of BlueSnap

Prepared for: Global Banking & Finance Review

Over the last two years, we have seen the pandemic motivate an increase in consumers shopping online. Consumers have now grown accustomed to the efficiency, simplicity and convenience of having the worldwide marketplace available on their mobile devices.

As we look forward to the year ahead, we can expect to see eCommerce, especially international shopping, build on the strong market growth experienced in 2021.

This year, three key industry trends will emerge. More eCommerce retailers will localise payments to save their businesses money, retailers will learn how to better optimise Buy Now Pay Later (BNPL), and retailers will increasingly adopt mobile market places.

Businesses will save money by localising payments

The pandemic has brought the world closer than ever before but selling internationally will remain complicated in 2022. With a rise in interchange fees looming in the US this April, and a hike in fees for transactions between the UK and European Economic Areas post-Brexit kicking in last fall, merchants around the world are facing an unenviable choice. Absorb these increased costs or pass them on to customers in the price of products or services – a move that could deter future sales. With cross border sales predicted to account for 20% of global eCommerce in this year, the impact of higher fees will be felt across the business community in the form of decreased authorisation rates and increased costs.

There’s a misconception with fees that ‘it is what it is’ and there’s nothing merchants can do to increase cross-border conversions. But there is another way. By partnering with paytech providers, sellers can avoid cross-border fees altogether this year, and most importantly save money. That is, merchants can leverage a network of local banks through these payment processors to route transactions via banks in the same region as the cardholder. By localising transactions in this way, merchants not only reduce cross-border fees from card issuers but increase payment authorisation, since banks are more likely to approve purchases that are made locally.

To increase authorisation rates, we will see more merchants take advantage of local currencies and payment methods. Failing to do so would be an unnecessary barrier to increased revenue as those using local currencies are reporting a 12% increase in sales. The same goes for payment methods. Local payment methods such as the EU’s SEPA or Boleto in Brazil makes consumers more confident in their payments. Hence its growing importance to merchants who are looking to streamline the payment experience.

Effectively localising global payments is now a must for international sellers looking to capitalise on the explosion of e-commerce post pandemic.

Retailers will better optimise BNPL

As the pandemic continues to put pressure on consumer spending power, Buy Now Pay Later will continue to boom this year. But what does this trend mean for merchants?

Retailers are attracted to the promise of higher conversions and average order sizes. And while BNPL helps customers to spread their cost, it’s important to note that not all customers are eligible to use this payment method because of a “soft credit check”. This is an instant credit check taking place at the time of purchase unlike credit cards, where all checks occur prior to any purchases. This soft check examines any previous shopping history and a few other pieces of information.

However, if part of the information the retailer needs is not available, and there is no history of the customer on their records, they may fail the checks and the payment may not be successful. What this ultimately means is that higher conversions are not a given. In fact, authorisation rates with BNPL can sometimes be significantly lower than your Visa and Mastercard authorisation rates.

Failed checks could drive some customers to shop elsewhere. As a business, BNPL is a great payment method to offer your customers, especially when you work with a provider that can fund you the full amount upfront – meaning the installment payments don’t impact you at all. But retailers must go into it with their eyes wide open, and be aware of the risk of lower authorisation rates and failed transactions. This could result in some loyal customers getting frustrated by the failed checks.

Retailers will embrace digital marketplaces

Mobile commerce grew significantly in 2021. Estimated to have reached $3.56 trillion globally by the end of last year, m-commerce now makes up more than 70% of total e-commerce sales. In an increasingly competitive market, online retailers must be ready to meet their customers whenever and wherever they choose to shop next year — including on their mobile devices. Now more than ever, retailers should be stress testing their digital marketplaces to ensure a user-friendly experience, regardless of the device a customer uses to access their site.

Mobile sites must be easy and convenient to use, as well as have a simple checkout process. Simple fixes like integrating your website with social media channels can turn casual scrolling into casual shopping, as consumers look for goods on channels such as Instagram and Pinterest. These channels also offer a great way to reach customers at the start of their purchase journey and a well-timed ad campaign or personalised offer can make all the difference in getting customers to hit the buy button.

Optimising payments will be key to maximising revenue

Last year, around 57% of online shoppers made purchases from international businesses. And international cross-border payments are expected to exceed £250trn by 2027. Hence, getting international payments right is key to maximising authorisation rates, reducing costs, and capturing the opportunity this global customer base presents.