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As Even Small Merchants Sell Globally, Payments Industry Faces Bigger Demands


Accordingly, some payments providers are finding success by focusing on one or two international markets for eCommerce, while others are targeting more niche markets around the globe.

dLocal, for example, focuses on emerging markets. The company, whose biggest market is Brazil, is continually broadening its global reach. In mid-August, dLocal announced the expansion of its payments platform to the Middle East and North Africa, starting with Egypt and Morocco. These areas are both considered high growth opportunities based on factors such as regulatory reform, technology advancements and demographics. In Egypt, for example, a population of mostly young shoppers (50 percent under age 30) is driving the transition to online shopping and payments, according to dLocal.

“These nascent markets offer incredible growth opportunities for innovative, trail-blazing companies,” said Sebastian Kanovich, the company’s chief executive, in a press release announcing its expansion.

“While there are market barriers, many cross-border e-commerce opportunities are emerging in both Egypt and Morocco where governments are making efforts to improve financial inclusion through digital banking supported by payments solutions,” he said.

Certainly, payments providers need to acutely understand how customers want to pay in the various markets they are in.

According to 2Checkout’s first quarter 2018 benchmark report on digital commerce trends, Visa and Mastercard continue to dominate among payment methods, accounting for 68 percent of global online sales; followed by PayPal at 19 percent and American Express at 7 percent.

But certain countries show stronger preferences for local payment methods. For example, as a merchant, you can’t operate in the Netherlands and not accept iDEAL, said Jochen Kaempfer, a principal at A.T. Kearney who focuses on banking and payments. To sell in Mexico, you need to accept payments through OXX;, whereas in China, the big payment method is Alipay and in Brazil, people tend to use local credit cards.

For payments companies that are very focused on the U.S., it can be a shock to realize that cards aren’t the primary method of payment in many countries, Kaempfer said.

What about crypto?

One challenge for payments providers is the proliferation of new payment methods. If you want to maximize sales, you have to support those payment methods across the world and you need to support lots of different currencies, said Litch of 2Checkout.

One area to watch is how payments companies will deal with the world of cryptocurrencies for international e-commerce, said Brandon Spear, president of TreviPay, a global B2B payment and credit solutions provider that specializes in commercial transaction management. There are some online merchants who accept cryptocurrencies currently, but there hasn’t yet been widespread adoption. “There’s still a little uncertainty about how this is all going to play out,” he says.

For example, it’s still unclear how respective governments will regulate cryptocurrency, whether the underlying technology can keep up with large number of payments and whether there will be enough liquidity to make them a viable payment option for international e-commerce transactions, he said. Even so, Spear predicts cryptocurrency will eventually become a viable option for international e-commerce transactions.

“It’s just a question of time before it ends up happening,” Spear predicts.

The importance of scale

It can be very difficult for start-up payment companies to simply jump into the global e-commerce market.

A lot of companies don’t realize how much scale it takes to work globally, said Michael Ting, senior vice president of global markets at Hyperwallet, a facilitator of cross-border payments and payouts for sellers on online marketplaces. (PayPal recently inked a deal to buy the company; the transaction is expected to close in the fourth quarter.)

Consider, for instance, the prospect of different tax laws in every region. This could make it even more challenging for new and existing processors to do business in multiple countries, said Christensen of Digital River. Companies may need to hire local experts in each of the jurisdictions, or outsource to a third party. Either option has to be built into a payment company’s economics.

Other opportunities for payments providers and ISOs

Another trend that is changing the landscape for payments companies is the proliferation of online marketplace

The growth of these marketplaces—and the desire for sellers to peddle their wares internationally—also means multiple opportunities for payments companies on both sides of the business—payments collection and the disbursement of mass payments.

Payouts used handled solely by banks, when it was individual buyers and sellers working together directly, but that’s changed as the marketplace business model has evolved, said Hyperwallet’s Ting.

“The fact that there are all these people who are earning really small amounts of money and need to be paid is a new phenomenon. It didn’t exist 20 years ago,” he said. With thousands and thousands of individuals buying and selling, modern marketplace payments require technology and scale, he said. A lot of the banks are now providing more of the infrastructure to move the money, but leaving the details to innovators to handle the user experience, he said.

There are even opportunities for ISOs to win business in the burgeoning space of international e-commerce.

Many startup merchants can bypass ISOs by working with a global payments company that deals with cross-border e-commerce. But there are also brick and mortar merchants that want to sell their wares online to people in other countries. ISOs have an opportunity to forge partnerships to help their merchants do this—and maintain and enhance that merchant relationship in the process, said Conal Cunningham, general manager at Inovio Payments, a global payment gateway provider whose parent company is North American Bancard.

While many merchants are interested in selling their wares online globally, a typical ISO won’t have the connections to allow them to do that. His company partners with several acquirers and ISOs to allow their merchants to sell their good internationally online.

“ISOs don’t have to be out of this race. They can compete, but they have to get out of their comfort zone and find some partners to help them deliver what the marketplace is demanding,” Cunningham said.

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