October 24th, 2010 | 4 MIN READ

Global Payments: One Size Doesn’t Fit All

Written by Peter Sheldon

Currently an analyst with Forrester Research, Peter Sheldon is an ecommerce expert and former Product Manager at Elastic Path Software. Peter began his career in ecommerce developing transactional new and used car online stores for Ford of Europe between 1999 - 2002. Prior to joining Elastic Path in 2005 Peter was a senior business analyst for JP Morgan Chase, working with their asset management online services.

Did you know that China, the largest online market in the world with 420 million internet users, still has a relatively low credit card penetration rate? In the large cities including Beijing, Shanghai, Shenzhen, Xian and Nanjing, online credit card usage is growing fast. But high interest rates and a lack of credit history makes it hard for many Chinese consumers to obtain a credit card. Consequently, most goods ordered online in China are paid for in cash on delivery.

However, the lack of credit card adoption has not slowed the growth of ecommerce adoption in China. As in other countries around the world, popular alternatives to credit cards have arisen online. These alternative payment types can create a drastically different checkout process from what we are used to in North America.

One such example is from the Alibaba Group, founders of Taobao (China's answer to eBay) who back in 2004 created Alipay, a popular online payment platform similar to PayPal. In China, over 300 million consumers have an Alipay account and use Alipay to pay for goods purchased from popular online shopping sites including Taobao.com and Amazon.cn. Alipay allows consumers to pay for goods either immediately after purchase or on delivery.

Conversely, German consumers don't have any issues obtaining credit cards, rather they are just uncomfortable using them. Germans don't like to carry a balance on their credit cards, and thus avoid using their credit cards for high-value purchases. Instead, they prefer to use bank credit transfers. Online stores in Germany need to allow consumers to pay via direct bank transfer as well as credit cards. Mytoys.de, like most German retailers, presents bank transfers as the primary payment method.

In Brazil, credit cards are commonly used online, however, most online retailers allow consumers to pay in installments. Netshoes, Brazil's largest online shoe retailer, allows its customers to pay with a variety of credit cards, including the local Brazilian Hipercard, and spread the cost of the purchase over a period of up to 12 months, interest free.

Offering credit card payment via installments is also popular in Japan. Apple offers a range of payment installment options on its Japanese store ranging from 3 to 24 months.

Interestingly, Netshoes also allows customers to split the cost of purchases across 2 different cards, empowering consumers with a low remaining credit balance on one of their cards to still make purchases.

In Japan, many consumers pay for online goods in local convenience stores like 7-Eleven. Japan is primarily a cash-based society where credit card penetration is lower than North America and Europe and carries a stigma of insecurity for online usage. When selling to Japanese buyers, retailers must offer convenience store (konbini) payments, which have become one of the most popular payment methods for online payments in Japan. Consumers order goods in a conventional way, but select "convenience store" as the payment method during the checkout process. After the order is submitted the item(s) are reserved and the consumer is sent a pay ID via E-mail. The consumer usually has up to 6 days to pay for the order at one of Japan's 40,000 convenience stores. Once payment is received, the items are shipped.

In fact, Amazon also allows Japanese consumers to pick up their orders from the convenience store, similar to Walmart's Site-to-Store feature in the US.

Finally, although almost unheard of in North America and the UK, cash on delivery is still a popular payment method in some European countries and across Asia. In many countries where private courier firms are used for delivery and credit card adoption is low, this option makes perfect sense.?

So before you roll out your next store in a new market, make sure you carefully study consumers' payment preferences. Credit cards should always be accepted, but in some markets, you may need to ensure you offer alternative payment options. Otherwise, your cart abandonment may be very high on the last step of your checkout process. Work closely with your payment gateway provider to find out what localized payment types they can support and look at other online sites in these markets to see what payment types are being offered online.

We’ve covered a lot on international ecommerce this month in the run up to our next webinar with Zia Daniell Widger of Forrester Research, Tapping into the International Online Consumer: What Every Enterprise Needs to Know About Going Global. Reserve your spot today, it happens this Wednesday at 9am PST/12pm EST.

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