Payment habits are strongly national. They have developed over time and have been shaped by various cultural, political, economic and technological factors.
In its most recent white paper RS2 examines the overlap between digital and local payment methods, both in the face-to-face world and online.
The rise and rise of debit
The world is paying increasingly digitally. Debit cards are the fastest growing payment instrument, according to the 2016 World Payments Report from CapGemini and BNP Paribas. They accounted for the highest share of non-cash transactions in 2014 (45%) for two main reasons.
People entering the financial system in developing markets typically get a debit card attached to their current or checking account. Meanwhile in developed markets, debit cards are increasingly being used for everyday, low- and lower-value purchases at point of sale. The roll-out of contactless payment technology on both the card and terminal side is helping this.
The internet conflates both distance and time, making the global local and the local global. However, this electronic ‘global village’ is not one unified community. This is particularly the case with how people choose to pay and be paid online.
The US and UK love credit and debit cards in the bricks-and-mortar world and happily use them online, too. Outside of these card-loving countries, the payments landscape is more mixed, more alternative. The growth of e-commerce is driving take-up of local alternative payment methods (APMs) not running on international card scheme rails.
There are currently more than 300 APMs worldwide. They range from real-time bank transfer, e-wallets and mobile wallets to direct debit, cash-on-delivery and e-invoices. According to a Worldpay report, APMs overtook card payments in 2015, claiming 51% of global e-commerce turnover.
The more digital, the more local
Whether you are trading face-to-face in stores, online or both, payment is becoming more digital and more local. The rise of debit cards and online APMs is evidence of this. Banks, PSPs and merchants must accept that unless they can localise payment, they will miss out on sales.
However acting local is not as simple as it sounds. There are country-specific configurations, domestic protocols and standards that are so heavily modified that they become almost ‘non-standard’ standards.
Any business looking to expand outside their home market should assess the local and global credentials of prospective partners. Payments is an important part of the mix. A long-term partner should have a fit-for-purpose global platform to match your growth ambitions. Their approach should be modular and hardware agnostic, preserving choice and customisation on the front-end, while cutting speed- and cost-to market on the back-end.
To find out more about RS2 and our approach, please see our White Paper