Orchestrating local payment methods by the book: exclusive interview with Spreedly

Friday 16 September 2022 09:57 CET | Editor: Andra Constantinovici | Interview

Alastair Fletcher, Senior Product Manager at Spreedly, tackles the differences between alternative and local payment methods, along with the importance of orchestration in a merchants’ payments strategy.

What is the difference between alternative payment methods and local payment methods?

The term alternative payment methods has been around a little longer than local payment methods in terms of massive visibility. It was being used as a catch-all for a multitude of payment methods from digital wallets, Buy Now Pay Later, or crypto. Apple Pay and Google Pay also fall inside this larger bracket, but more recently, a lot of these payment methods have begun to be much more accurately termed as local payment methods.

Local payment methods refer more to a common or preferred method of payment in a given region or country. By calling it a local payment method, rather than an alternative payment method, one removes the cultural bias on what is normal and what is an alternative, all while referring more to the most used method of payment in a region or country. As, for example, in the US, this would mean paying by credit card. The local payment method brings together that feeling of understanding that every region has a different sense of what is the expected and normal way to pay.

Alastair Fletcher, Senior Product Manager at Spreedly, tackles the differences between alternative and local payment methods, along with the importance of orchestration in a merchants’ payments strategy.


Can you give us some examples of what kind of impact the right or wrong mix may have on an organisation’s success?

It's not always that the local payment methods are in the minority. Quite often the local payment method is actually the preferred method of payment in a region. If a customer doesn't see that expected way to pay on your checkout experience, there's a high likelihood that they will abandon the cart and go and try and find that same product or service somewhere where they can pay the way that they're used to. 

You really want to make sure that you provide your merchants and your customers with the options that their customers in each region are going to expect. I like to use the example of iDEAL in the Netherlands. It's an online banking solution that essentially generates a SEPA credit transfer in the background, and it accounts for somewhere around 70% of these ecommerce transactions within the Netherlands. Clearly not an “alternative” way to pay. This is very much the standard. As a merchant, you don't want to be in ecommerce in the Netherlands without iDEAL, you will  lose a lot of revenue that way.

Brazil is a really interesting market right now. They had local payment methods based around cash vouchers called Boleto Bancario. They've now got a relatively new payments system called Pix, which is a fast bank transfer framework. It's quickly taking a large portion of the ecommerce market. In Brazil, there is a hesitancy to adding or putting credit card details into ecommerce sites.

Pix by its very nature feels a lot more secure and far less like fraud and an open door to mishandling of data. You need to understand how a customer expects to pay and how things are moving within a country. Boleto Bancario was 'the big one', until Pix started to take the new torch on local payment methods in Brazil. This is why you really need to make sure that you understand what your customer expects – and be prepared to pivot your payments stack quickly. Otherwise you're going to end up with a lost customer.

What role does payments orchestration play in the merchant's payment stack to help them offer local payment methods?

One of the things that I think is really interesting about payments orchestration is its end-goal, ultimately, which is to increase revenue for digital merchants and to help give a great customer experience to the end consumer. Some of the things that we've talked about in the past include orchestrating payment gateways, for instance, which allows a merchant or merchant platform to quickly get into a new market, as they are now able to offer and accept payments in Brazil, Europe, in North America and beyond. Moreover, this can happen with a higher level of acceptance. Higher authorization rates is one main benefit that creates a better customer experience.

Orchestration can also be used related to fraud solutions – getting the right fraud tool for a given market so that you can avoid false declines and improve authorization rates. And, in this same theme, adding LPMs to the payments orchestration story is just a natural evolution. It's just simply adding yet another way to increase authorization rates and imporve customer experience, because now there are more options added for the end consumer. 

Payments orchestration ensures organizations can offer the right mix of payment services with less of a development lift.  Time-to-market is faster for an organization using orchestration and changes in customer preferences can be incorporated easily. It truly creates a win/win for all parties. 

With our LPMs strategy – which includes our newly announced partnership with PPRO – we're opening up the possibility for hundreds of LPMs, whilst merchants can also continue to use Spreedly’s orchestration to transact with the gateways they're comfortable with. There's an expanding range of LPMs coming, whether it be Venmo, BNPL options like Klarna. The merchant will find themselves able to focus on their own strategy and their customers while using Spreedly to access the right mix of providers and payment options they need without having to  sort through hundreds of individual connections and integrations.

What is it that an organisation should be taking into account related to local payment methods, above and beyond selecting the right mix?

I think it's really important to understand the capabilities of different LPMs, as not all LPMs are targeted at the same customer segment or the same payment options. Recurring subscriptions are an interesting use case. For a subscription business for example, there are some LPMs that support the business model more holistically. SEPA, which is a European-wide initiative, is an example of an LPM that does support subscription-based payments. As a retailer who works by a subscription model, you need to be aware of what else is there, in terms of payment methods, so things like the LPMs don't come as a surprise. 

One of the additional advantages of LPMs is the reduced level of chargeback risk. The Spreedly system Is built in a way that helps reduce the possibility of fraud, of incorrect payments, or chargebacks. As new LPMs appear and scale, as Open Banking grows as well, merchants are going to want to know how they can best use this to serve their customers. They'll want to know about 'when' should they use a given LPM, not just 'where' they should use it.

How can merchants future-proof to meet changing customer preferences as it relates to payments?

Really allowing merchants the opportunity to focus on their customers and their infrastructure, instead of having to build all these connections  is one of the key ways in which merchants can meet consumer needs. By leaning on Spreedly, the merchant gets the support they need from a pre-established set of built and supported integrations.

As an example, super apps are dominating the Asia-Pacific market. The idea of this one app to rule them all, where people actually find themselves getting paid into it, paying their bills, paying everything through the super apps is fascinating. And this concept is most likely not going to stay limited to the Asia-Pacific market. This approach is already on the rise in other regions of the globe. So as a merchant, understanding these trends and partnering with providers who can help with the necessary guidance and expertise is going be an important part of staying on top.

Merchants and merchant aggregators want to focus on what they do best, delivering great customer experience, and delivering their products and services to the market. If development teams have a giant backlog of integrations with different gateways around the world, different fraud tools, and different LPMs, then they can't focus those developers on building out more value within their ecommerce platform. In the end, it is a similar story for more organizations – the winners will be able to allocate resources towards the things that are of more strategic importance for the business and their customers.

About Alastair Fletcher

Alastair Fletcher is a Senior Product Manager at Spreedly, driving the vision and roadmap for local and alternative payments. Graduating from University of Bath with an MSc in Computer Science, he has had product roles across finance and technology. Originally from the UK, he now lives and works in Texas.

About Spreedly

We orchestrate payments for the world’s most innovative businesses. Global enterprises and hyper-growth companies grow their digital business faster by relying on our payments platform. Hundreds of customers worldwide secure card data in our PCI-compliant vault and use tokenized card data to enable and optimize nearly USD 20 billion of annual transaction volumes with any payment service.

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Keywords: payments orchestration, ecommerce, payment processing, local payment method
Categories: Payments & Commerce
Countries: World
This article is part of category

Payments & Commerce