The payments industry is becoming a global powerhouse.
In a 2022 McKinsey report, it was revealed that the global payments industry is experiencing significant growth. By 2026, the industry is expected to reach an impressive $3 trillion in revenue.
As this growth continues to accelerate, e-commerce platforms must consider how they ensure payments can accommodate expansion into new regions. There is also the opportunity to increase sales in an existing market where a merchant may not be offering as many payment methods as they could.
To make the most of the payment industry’s recent success, e-commerce needs to activate local payment methods (alternative payments methods). Local payment methods are key to global expansion. They help e-commerce platforms attract more merchants, customers, and suppliers from around the globe.
Activating local payment methods requires a robust and high-performing payment system. In this article, we discuss what local payments are, how e-commerce platforms can activate them, and how payment orchestration can be the ideal solution for enabling local payment methods.
What is a Local Payment Method?
A local payment method (LPM) also referred to as an alternate payment method (APM), is the preferred method, or methods, of payment in a specific geographic region. (More about LPMs vs. APMs here.)
Local payment methods include many different types of payment options — think digital wallets like Apple Pay or Buy Now, Pay Later (BNPL) services like Klarna, or online banking services like open banking or PIX. They can also include payment methods that are only available in a certain geographic area.
In most industrialized economies, there are dozens of local payment methods — and merchants need to support the right mix of payment methods to increase buyer satisfaction and checkout conversions.
Here are a few popular categories of LPMs to consider:
- Digital Wallets: The popularity of digital wallets is on the rise, aided by the growing popularity of mobile wallets like Apple Pay and Google Pay. Digital wallets allow users to store payment methods such as credit cards, gift cards, loyalty cards, and even identification. They’re also capable of storing and transferring funds. To send or receive funds, the user must authorize a payment at a point of sale or have money sent to them by a vendor or peer.
- Direct Online Bank Transfers: Direct online bank transfers allow bank account holders to make transfers between each other without using a third-party to store or custody the funds. Online bank transfers using traditional or open banking rails bear different names in different regions, but the most common are Automated Clearing House (ACH), Single Euro Payments Area (SEPA), iDEAL, and PIX.
- Buy Now, Pay Later (BNPL): Though relatively new to the game, Buy Now Pay Later services have made a big impact in the consumer shopping space. BNPL companies offer users the option to pay for a product or service over a period of time by taking out a small loan and paying it back in interest-free installments. So long as the customer makes payments on time, they won’t pay interest. Klarna and Affirm are two of the largest BNPL players.
Activating Local Payment Methods
For merchants operating an e-commerce platform, offering popular payment methods for the region only increases the likelihood that prospective buyers will click the check out button and make a purchase. This is especially true for platforms with an international presence, where local payment methods may vary significantly from location to location.
You might wonder, “What makes a great checkout experience for customers?”
There are two big factors: a secure checkout experience (payment gateway) and options for payment that extend beyond the end customer’s 16 digits (payment integrations).
- Payment Gateways: A payment gateway is how an e-commerce platform can securely collect cardholder information, authorize the cardholder’s purchase, and process transactions in a secure way.
- Payment Integrations: Pairing payment gateways with software integrations is one easy way that platforms can add alternative payment methods like BNPL services, open banking and digital wallets to their e-commerce platform. These integrations are often how alternative payment methods are connected to the system and gateway.
Building and utilizing these gateways and integrations requires technical expertise and, oftentimes, a product team that can keep these elements above board. That’s one reason why many companies export these crucial tasks to a third-party service, which also generally provides a slew of other payments services. These services are generally referred to as Payments Orchestration.
Payments Orchestration is an end-to-end service wherein a singular, unified platform that leverages data and connections to multiple payment services in order to deliver the best possible payment experience to customers and the optimal revenue to the merchant.
With a Payments Orchestration platform serving as a crucial tech layer, an e-commerce platform can not only connect its ideal gateways and integrations but also manage fraud tools, reconciliations, and more from a central location.
By opting for orchestration, an e-commerce platform can achieve a cost-effective solution that provides an easy-to-use interface for managing payments. With this in mind, let’s examine some of the key benefits of employing payment orchestration services to enable local payment methods.
The Benefits of Payment Orchestration for Enabling Local Payment Methods
Accepting local payment methods comes with a plethora of benefits. One of the biggest benefits is the ability to offer customers a way to pay that they’re already spending on.
As for payments orchestration, this is easily one of the best approaches to creating a robust e-commerce payment system. Activating local payment methods via a Payments Orchestration platform comes with several key business benefits, including:
- Increased Merchant Attraction: For an e-commerce platform to be successful, it needs to attract third-party sellers. Payments orchestration can help to grab the attention of merchants all over the globe by providing a powerful payment system capable of activating a wide range of different payment methods, including geographic-specific methods.
- Maximized Revenue: With payments orchestration, e-commerce platforms can maximize revenue streaming in from their merchant networks by offering value-add services for merchants to use. For instance, account updater tools can be offered as a value-add service that ensures payment details are current.
- Outsourced Compliance: One of the biggest challenges when it comes to supporting an e-commerce payment system is ensuring that the system meets all regulatory requirements. A high-quality payment orchestration platform will already hold the necessary compliance certifications, such as PCI compliance, reducing the burden of regulatory compliance activities from the backs of the e-commerce platform’s team.
Final Thoughts: Accelerate Your Platform’s Growth with Spreedly
Spreedly’s specialized payment solutions help e-commerce platforms and businesses establish a robust payment system capable of fast merchant onboarding and greater revenue generation
With an ecosystem of more than 120 payment services, Spreedly offers e-commerce platforms the opportunity to access an established network of essential services and tools. Providing your merchants with access to more payment methods ultimately leads to customers having greater purchasing power on your platform and boosting revenue significantly in regions around the globe.
Spreedly has the expertise, resources, and support to provide e-commerce platforms and other merchant aggregators with optimized payment orchestration services.
To get started with Spreedly, contact the Spreedly team today.