Cross-Border Payments and Commerce Report 2019–2020
Insights into Global Commerce and Marketplaces
With the new Cross-Border Payments and Commerce Report 2019–2020, we have decided to upgrade our content production and release outstanding insights into major trends that drive growth in cross-border payments, cross-border commerce, and marketplaces.
The report is dedicated to international retailers, global shipping companies, payments, commerce, and marketplaces solution providers, as well as other players in this space interested in scaling their business across borders.
The market overview
Forrester predicts that cross-border shopping will make up 20% of ecommerce in 2022, with sales reaching USD 627 billion. Moreover, an Accenture study shows that the overall value of cross-border payments is expected to rise by 5.6% annually, with the C2B segment experiencing the highest growth rates (at around 25% a year) as a result of high growth of the cross-border ecommerce trade.
From a consumer perspective, as per a 2018 report from the European Commission, on average, the proportion of consumers who shop online in the European Union is 72.0%, with 63.0% having purchased goods or services online domestically, and 28.3% cross border from EU-based online retailers or service providers. In the US, 34% of ecommerce users have shopped abroad, their preferred markets being China, Canada, and the UK, in this exact order. However, in this market, there are a lot of domestic marketplaces which makes the cross-border sales to make up for around 12% of total ecommerce. In China, consumers are more and more interested in upmarket products that are somehow difficult to find in their country. For this reason, Chinese consumers have significantly lifted the levels of cross-border spending – 42% of online shoppers have bought items from abroad, and cross-border sales take a 58% share of the overall Chinese ecommerce market.
All things considered, cross-border commerce has a lot of potential, which indicates that we expect to see more trends emerging, and most certainly, new developments in terms of payment technology, in order to create a seamless environment thereon, for both merchants and consumers.
The 2019 trends will shape the 2020 developments
The rise of marketplaces
Marketplaces bring a significant contribution to the global economy – USD 1.7 trillion annually – and iBE predicts sales driven from marketplaces are likely to exceed USD 7 trillion in the next five years. Marketplaces have become extremely popular among consumers due to their large number of products available at affordable prices.
The leaders in this space are located in China (Taobao, Alibaba, JD.com) and the US (Amazon, eBay), but other marketplaces have started to gain ground, such as Allegro (Poland), bol.com (The Netherlands), Coolshop (Denmark), eMag (Romania, Hungary, and Bulgaria), or Otto Group (Germany). Perhaps the reason they’re becoming of high interest among consumers also lies in the fact they have no fees.
We expect to see evolution in marketplace platforms, in both horizontal markets and verticals, in terms of optimised payments, pricing, and the overall customer experience.
Selling cross-border – challenges and opportunities
There is less consistency when it comes to global commerce, as each country has custom rules in terms of regulations, FX fees, currencies, and the customer behaviours also differ from region to region. Merchants need to adapt to all these aspects and consider offering local payment methods, which is one of the most important needs for a buyer. Building an infrastructure might also be a row to hoe, for those to decide to open up their products to a foreign market.
In a political context, it is also important to watch the current trade war between the US and China, which affects online sales between these countries.
As we previously mentioned the infrastructure, established merchants will improve their logistics, thus powering up their purchases across borders. New market entrants will most likely open new partnerships with logistics service providers who specialise both cross-border commerce and delivery. Apart from that, based on our analysis, the cross-border commerce will be driven by the following factors that merchants and payment solutions providers should consider: online marketplaces with affordable prices and no fees; expanding footprints via M&As; mobile payments solutions, which are and will be a key driver in countries with low financial inclusion.
Localising the payments experience
This topic is, to some extent, subsidiary to the previous one. The customer must feel like home, even in the online space. Accepting payments in local currencies is not only convenient for customers, but it can mitigate the risk of chargebacks as well. Besides accepting payments in customers’ country currency, merchants should also consider local payment methods. In order to offer these, a merchant would need to establish a local entity, however, for a merchant looking to expand in multiple countries/regions, this is a cumbersome and costly movement. For this reason, we are likely to witness more cross-border alliances with modern payment providers and more merchants starting to sell across borders, since according to a Visa study, 66% of businesses that do not sell cross-border plan to do so in the near future.
The complexity of payment operations
All of the above have led to a complex payment ecosystem, yet the industry players are working to simplify it. Cross-border merchants will further consolidate their collaboration with their PSPs and with other payment providers that can offer a payment orchestration layer. As a term, payment orchestration is relatively new, but the industry is familiar with the elements involving it.
Merchants need a platform that helps to manage the financial and operational aspects of payments acceptance, by offering services such as PCI compliance vaulting, transaction routing, integration options, and reconciliation. As an element of disruption, this is what a payment orchestration layer does, and more payment providers will consider offering this, to keep the pace with a competitive environment.
The report’s structure
In this report, we have divided the contributions into three chapters, each representing a main frame of the cross-border picture: cross-border commerce, cross-border payments, and marketplaces.
The cross-border ecommerce space shows tremendous growth potential, and it is estimated that it will reach USD 1 trillion in 2020. Currency, infrastructure, language, internet penetration, and the diminishing complexity for consumers and merchants are some of the key enablers of growth. Alternatively, mobile enhancement, offering local payment methods, and establishing trust are key aspects that merchants should not disregard when selling across borders. As Ecommerce Foundation displays in this chapter, trust can also be extended to different aspects of the customer’s journey, while Ecommerce Europe provides insights into the legal framework European policymakers are attempting to build in order to reconcile the interest of businesses, platforms, consumers, and citizens.
Furthermore, according to McKinsey, international payments revenues sum up to USD 200 billion globally. And, in order to support the growth registered in the cross-border payments space, solution providers have started to create more and more complex capabilities. In this chapter, we feature valuable insights from companies such as PPRO, which elaborates on the rise of e-wallets in Asia as well as on how e-wallets have caught up in Europe. What`s more, as Rapyd shows, the future of payments is integrating fintech, stressing on more effective local experiences. We conclude the chapter with our own intake over the cross-border payments space, by sharing with our readership a thorough research in the form of an infographic, which features the payment methods used by major retailers and travel merchants from different countries across the world.
Subsequently, the spotlight is on marketplaces, which will account for no less than 67% of the global ecommerce sales, according to Forrester. And this does not come as a stupendous surprise, considering that the world’s largest marketplaces sold EUR 1.49 trillion worth of goods in 2018. This shows that marketplaces are expected to establish trust and increase average order values, while retailers aim to broaden both their selection of products and their reach.
In this section of the report, we feature insights from major players, starting with eBay, touching upon the key challenges that marketplaces need to address in order to enable cross-border payments on a global scale. Furthermore, Mercado Libre displays the main challenges and opportunities when it comes to selling cross-border in LATAM, whereas Jumia points out which are the particularities of the African ecommerce ecosystem, while also elaborating on the impact online marketplaces have on the African economy overall.
Finally, yet very importantly, for providing a complete overview, all while considering the diversity of this ecosystem, in this report we included an infographic of marketplaces. We focused on categories such as consumer goods and services, hospitality and travel, crowdfunding, mobility-on-demand and sharing economy, education, logistics, and gig market, so that our readers form better understanding of the diverse players from all over the globe.
We invite you to download your complimentary copy and explore our Cross-Border Payments and Commerce Report 2019–2020, a must-read piece that aims to provide a complete understanding of the ever-changing payments and commerce landscape.
