It is generally agreed in the payments world that Europe is one of the world’s biggest e-commerce markets. However, growth in cross-border e-shopping has not followed the general growth in online retail. Indeed, in 2013, only 11% of Europeans shopped cross-border ie: from retailers based in another European country, according to ECC-NET.
New research from PayPal shows that cross-border trade is a driving force behind global commerce, with cross-border shoppers spending approximately two times as much as consumers who only shop domestically. It also highlighted payment and security concerns as the biggest barriers to more cross border e-commerce sales.
What is holding up European cross-border e-commerce? In this post, we are going to identify the major issues for PSPs in cross-border B2C e-commerce payments, as well as the success factors for cross-border e-commerce business in Europe.
Key Challenges for PSPs
Among the key challenges for PSPs is meeting customer expectations in cross-border e-commerce. The delayed growth of cross-border e-commerce is mostly due to consumer habits, which, once they’ve been established, are hard to break. What follows are the major factors inhibiting a consumer from making cross-border purchases:
- Local brand loyalty
- Lengthy delivery times
- Uneven product quality (you don’t always get what you see in the picture)
- Difficulty making returns
- Payment security
- Payment method availability and acceptance (a payment method usable in one country is not always acceptable in another)
One can divide the challenges into three main inhibitors:
- Client habit/loyalty inhibitors
- Supply chain inhibitors
- Payment inhibitors
On the other hand, some of the major cross-border e-commerce drivers are:
- Low pricing
- Unique product – not found in local markets
As you can see, the inhibitors to cross-border traffic are larger than the drivers. Certain products (like content, gaming, services and downloads) have less inhibitors than others (physical goods) and therefore are expected to grow more rapidly and have a larger portion of the cross-border e-commerce market.
Removing the Inhibitors
The major challenge to PSPs dealing with cross-border e-commerce is to help their merchants remove the business inhibitors for cross-border traffic. This includes raising the level of payment security, adding payment method availability, helping merchants shorten the delivery time, product and return reliability and even offering marketing assistance. By providing this kind of support, cross-border PSPs can boost cross-border e-commerce traffic.
More and more supply chain companies are entering the payment space to give a total global solution to cross-border merchants – both by improving supply chain challenges and by enhancing payment acceptance capability and security for their merchants. NFC-based mobile payments have had a boost in recent months, after the launch of Apple Pay.
By working together and with the help of cutting-edge technology, we can boost cross-border e-commerce. It’s a matter of creating the right conditions so consumers can shop with confidence, whether at home or abroad.
This post was an excerpt from MPE’s Rich Merchant Services 3.0 Brief. Click here to learn how to download the whole document.
Alon Bigler contributed to this article.