'Integrating with local payment methods is crucial for serious market entry into every region of the world. But it is a long, hard, and complicated process.'
James Booth is VP and Head of Partnerships, EMEA, at PPRO. He’s responsible for building all-important relationships with PPRO´s PSP partners and helping build their digital payment method roadmaps. We caught up with James to find out why local payments have never been more important than they are now.
Credit and debit cards are only the most popular payment methods in a few Western markets. In the rest of the world, consumers use e-wallets, bank transfer apps, cash payments, Buy Now, Pay Later (BNPL) services, and many other types of payment methods instead.
Worldwide, consumers use these local payment methods (LPMs) in 77% of all online purchases1. If merchants don’t accept LPMs, they miss out on this massive volume of commerce.
Adding these payment methods to online checkout options can be as costly and complex as setting up new corporate operations, each in a different country.
Europe, Latin America, and APAC each have hundreds of major local payment methods that are unique to their region. These are competing systems, each with their own transactional infrastructure and each with their own user base. If a merchant wants to increase sales by offering a local payment method, they need to identify which ones are most used by their prospective consumers.
If the merchant is committed to performing the integration on their own, they need to ensure that the LPMs they’re considering can be supported by their financial platform. This requires a technical discovery project. If they don't have suitable in-house resources, they need to retain a consultancy.
Assuming the merchant has a platform that works, they may need to set up a local presence for legal and operational purposes. This involves all the registrations and licenses one would expect for any business. But, because the merchant is integrating with a payments system, there will likely be additional financial regulations they will need to navigate.
Merchants should start by engaging a consultant who operates in the country to help them set up the entity, as well as a local attorney to execute the necessary paperwork and avoid legal missteps. Once the merchant has the right to integrate with the local payment methods, they can begin the actual integration itself.
This will get very technical, very quickly. As this is a portion that is almost always outsourced, it will require a liaison from the merchant to assure the project is being executed completely, while also remaining in-scope and on-budget. If they're doing this on their own, they should allow a year or more to be completely connected.
The cost varies from one payment method to another. But the bottom line is, it’s going to be expensive. Establishing a local presence will include licensing fees and may require cash reserves, as well as whatever reserves are required for transacting in the LPM.
A custom integration project is always going to be costly. And, like any software platform, it will require ongoing updates and administration. Also, the merchant should budget for the initial discovery that may or may not result in an actual integration project, which will significantly raise the overall costs of integrating LPMs into their online payment systems.
The merchant is also expected to retain consultants and lawyers throughout the process, in addition to budgeting whatever staff time is required for the project. This includes in-house counterparts for the many external resources required. They will also need to budget for ongoing support and maintenance.
A great deal of the budgeting is required for each LPM. Each local payment method is different, with its own entities to contract, its own technical requirements, and often its own financial requirements.
Unless you already employ world-class payment experts — and given how scarce and in-demand they are, that’s unlikely — you absolutely should not try to make it a solo ride. LPMs, like any payment system, come with ongoing administrative requirements like settlements, compliance, risk and fraud mitigation, chargebacks, and unallocated funds processes.
To manage their own implementation, a merchant will need to have administrators who monitor changes in the regulations and tend to these requirements. Because some LPMs involve an offline element such as exchanging vouchers at a physical retail location, there can be regulatory compliance issues beyond ordinary financial regulations that must be monitored and managed.
Of course, a merchant will also want to be able to capture and analyse their own financial performance data to inform ongoing business operations and strategy. This can either be a part of the original integration or done afterwards, but it is the only way to assure a business receives the full value of its investment.
Integrating with local payment methods is crucial for serious market entry into every region of the world. But it is a long, hard, and complicated process. It involves financial risks, and the process is never really done. The payments industry is changing constantly and requires ongoing maintenance, with LPMs being launched or modified regularly.
This is why there are speciality companies that strictly focus on platforms to simplify the integration with LPMs and enable rapid, cost-effective market access. This is also the main reason why even the best-known global payments processors choose to partner or outsource the set-up and management of local payment methods, so they can focus on their core business.
Yes, you can do it all by yourself. But you better be feeling adventurous… and rich.
Find out how local payment methods drive e-commerce growth
1. According to data from Edgar, Dunn & Company
This interview was first published in Payment Methods Report 2022, the most updated overview of trends and developments in the payment methods space and the innovative technologies that these methods work upon, emerging consumers habits, and strategies on how to win at conversion and retention.
James Booth has over ten years of experience in the financial sector, eight of those in fintech. In his current role as VP, Head of Partnerships for EMEA, he leads the new business and partner development teams in managing PPRO’s new and existing strategic partnerships. In addition to helping PPRO partners grow their business, he acts as PPRO’s internal advocate for aligning the company’s product roadmap with the needs of its customers. James has been actively involved in various projects during his tenure at PPRO, including establishing PPRO’s presence in North America and managing the development of the PPRO Partner Portal.
PPRO is a fintech company that globalises payment platforms for businesses, allowing them to offer more choice at the checkout and boost cross-border sales. Payment service providers, enterprises, and banks that run on PPRO's infrastructure are able to launch payment methods faster, optimise checkout conversions, and reduce the complexities of managing multiple fund flows.
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