Learn more about how innovative cross-border payments can support the international expansion strategy for your e-services business.
The e-services industry experienced a boom during the pandemic and is experiencing rapid consolidation and expansion into new markets. In a recent survey, 88% of merchants said that international sales are essential to their long-term success. At the same time, only 35% of e-commerce leaders felt fully prepared to handle international transactions. This is likely true for any e-commerce business, including the e-services sector. To reach new markets, e-services companies need to include localization as part of their international expansion strategies – and that includes providing cross-border customers and partners the ability to pay and be paid using local payment methods.
The e-services market is defined by the sale of online services and digital goods via the internet. The definition includes event tickets, dating services, as well as online food delivery.
No business wants to miss out on sales from shoppers in other countries, but accepting payments from international customers has historically been challenging. First, there is the potentially high foreign exchange (FX) fee to consider. Then there’s the question of transparency, speed, and access. There is an important emergence of innovative global payment solutions. Alternative payment service providers are meeting the new customer demands by offering solutions that feel much closer to a domestic transaction.
Read this article to learn more about how innovative cross-border payments can support the international expansion strategy for your e-services business.
Table of contents:
State of the e-services industry 2023
Why are cross-border payments important to business growth?
Challenges of cross-border payments to e-services companies
How to expand your business with cross-border payments
Summary: Streamline your global expansion with modern cross-border payment solutions
Before we get into international payments, let’s take a look at the current state of the e-services market and its potential for international expansion.
Market size
The future of the e-services market looks bright. It’s projected to generate revenue reaching $246 billion in 2023. Between 2023 and 2027, the e-services revenue will grow at a CAGR of 7.6%. By the end of this period, the market will be worth a smashing $329 billion.
Market segmentation
The largest segment in the e-services market is Online Food Delivery, which is expected to show a revenue growth of 14.2% in 2023. Its market volume reached $323.30 billion in 2022.
In 2022, this segment had a user penetration rate of 23.7% 2022, and its number of users is expected to reach 2,613.2 million users by 2027.
In a global comparison, the largest slice of the revenue will be generated in China – amounting to $213,800.00 million in 2022.
Another significant e-services segment is Online Education, which rose to prominence during the pandemic. The average revenue per user (ARPU) in this segment amounted to $196.80 in 2022.
Many businesses are expanding their reach internationally by selling goods, services, capital, and people across borders. As it becomes easier to move these goods, services, and people around the world and as consumers demand more efficient payment options for cross-border transactions, more businesses will be drawn to global e-commerce markets.
Cross-border payments are occurring more frequently, and the increasing demand for such payments has been a catalyst for an expansion of the cross-border payments market. On top of that, consumers are less willing to pay high fees for banking services, and they expect international payments to be fast, secure, and intuitive.
Credit cards and e-wallets provide customers with international payment methods, but for businesses to reach the majority of global consumers, they need to offer locally preferred payment methods in every country where they do business.
A merchant in Europe or the US that is used to accepting credit cards may not realize the diversity of payment methods preferred globally. From country-specific e-wallets to locally issued cards and instant payments, traditional bank wire transfers can cost up to 10 times more than a domestic payment. This difference could mean the difference between doing business in a particular country or not.
What are the most pressing challenges of cross-border payments?
High cost
The cost of cross-border payments can be as much as ten times what it costs to send a domestic payment, making some businesses and consumers less likely to transact abroad. However, payment service providers (PSPs) are finding ways to reduce these costs and make cross-border payments affordable.
Suboptimal speed and frequent delays
Due to the complexity of financial transactions and the fragmented data formats used by each intermediary, automated processes are difficult to set up. PSPs and back-end networks are developing solutions for reducing that burden by taking on the processing of compliance checks and ensuring that merchants and their customers don’t face these challenges.
Lacking transparency
There are many obstacles to transparency in cross-border payments, including old technologies, varying compliance standards, long transaction chains, and so on. These challenges make it difficult to know what’s happening at every stage of a process, which might lead to something important getting overlooked.
Risk of payment fraud
For merchants, it’s essential to have confidence in international payment systems. However, banks cannot guarantee that stolen funds will be recovered if cybercriminals can steal money from a cross-border payment pathway. That’s why cross-border payments are frequently targeted by hackers.
Every country abides by its own regulations, so the cross-border payment system may be compromised whenever funds enter a country with relatively soft security and access policies. Naturally, cybercriminals are far more likely to target systems that aren’t reliably regulated and don’t have adequate security measures in place.
Improve customer experience by offering multiple payment options
Localizing payments for cross-border transactions is a smart move for every e-services company looking to expand globally. Offering more payment types to your customers will improve the chances of conversion and lower cart abandonment. By providing local consumers with payment options they know and trust, you can compete against local merchants more effectively. Offering local payment methods also lead to improved consumer adoption, loyalty, and trust – all of which are essential for e-services businesses starting operations in a new market.
Gain a competitive advantage
Another benefit of investing in a modern cross-border payment solution is removing the burden of FX fees from your customers. If this aspect is managed well, merchants can save money for their businesses and customers. For example, using a multi-currency account will give you the ability to make conversions when FX rates are optimal, which should result in better overall conversions for all involved parties. Taking advantage of modern solutions that allow for instant currency conversion removes the risk of currency exchange fluctuations affecting the transaction.
Improve payments security
If a security glitch gets discovered in your payment processing services or a cybercriminal intercepts sensitive payment data, the reputation of your e-services business is at risk. That’s why merchants need to pick payment service providers and solutions with built-in PCI DSS Level 1 compliance, mechanisms like 3D Secure, and antifraud solutions to keep cross-border payments safe for customers and the company.
For a long time, e commerce merchants have relied on banks to handle their cross border transactions, equally as funding to expand their business, secure inventory, etc.
Nevertheless, this has not given the best results. According to CB Insights, Q1 of 2022 saw the lowest quarterly total of funding to ecommerce companies since 2020. Also, the World Bank found that globally, Small to Medium Enterprises (SMEs) have unmet finance needs of approximately $5.2 trillion a year which is almost 1.5 times the current lending market for this segment of businesses.
PayU is one of the payment providers that are uniquely positioned to fill the gap and help ecommerce merchants to get access and set up digital processes that allow them to successfully trade internationally. Becoming faster, more secure and cost-efficient to expand and grow across the globe.
Nearly 66% of e-commerce businesses sell products internationally, and cross-border sales account for almost a third of those businesses’ revenue. Today, more than half of online shoppers globally make cross-border purchases, and payments are critical to successfully growing online sales internationally. Merchant acquirers struggle to manage multiple payment method integrations, foreign exchange, and compliance issues across multiple markets. But, international payment service providers such as PayU offer a solution that delivers the appropriate and most popular payment methods for each market.
