The future of payments is local: how the rise of local payment methods is giving consumers more ways to pay

In an era marked by economic uncertainties and complex geopolitical concerns, global merchants are scouting for strategies to sustain and propel growth. One avenue that is providing a welcome boost is the integration of alternative (i.e., non-card) payment methods – commonly known as local payment methods (LPMs). This is because, in many markets globally, cards are the alternative in terms of usage, and LPMs such as Alipay, UPI, Pix, and others are the dominant forms of payment.

By tapping into region-specific payment preferences, companies can offer a more diverse, innovative, and fair ecosystem of local and alternative payment methods that finally allow people to make payments their way. Widening local choice, in turn, is helping global merchants gain subscribers and grow transactions in their less saturated markets.

Before we delve into how LPMs drive international growth, it’s important to first understand what these methods are and what they encompass. The concept of alternative payments refers to any payment methods other than cash, debit cards, or the major international credit card brands. With the rise of fintech, alternative payment methods have quickly gained popularity and can include mobile wallets, Buy Now, Pay Later (BNPL) methods, account-to-account (real-time bank payments), and direct carrier billing.

LPMs describe alternative payment instruments that arise out of the specific cultural, economic, and tech landscape of a particular country or region – and are the preferred payment choice for consumers. In China, for example, the predominant method of paying is through the mobile wallets of the country’s ‘super apps’ – WeChat Pay or Alipay –, while in East Africa, consumers are choosing to pay with local methods like M-PESA, the mobile payments service. In India, the Unified Payments Interface (UPI) dominates, and in Brazil, Pix has rapidly emerged as the prevailing choice for online payments. In Europe and the US, credit and debit cards remain popular, yet a growing number of consumers are also turning to new, mobile-centric, non-card payment methods: Bizum in Spain, Twint in Switzerland, BLIK in Poland, Satispay in Italy – to name just a few –, while younger Americans are turning to Venmo or Zelle. 

Offering LPMs has a number of advantages for merchants. First and foremost, there’s the trust factor. By allowing consumers to pay through methods that are commonly used in their area, global merchants can present a local, familiar transaction choice that shows their commitment to customers’ preferences. In parts of the world that may be sceptical of credit cards or have limited access to them, options such as instant bank transfers (real-time payments) or the use of mobile wallets can make a world of difference in calming security concerns or facilitating the inclusion of new users. Indeed, not every potential client has access to a credit card, especially when it comes to younger demographics in emerging economies. By integrating local methods, merchants can address a larger, more diverse customer base, whose affinity to plastic cards is non-existent.

In addition, in a sluggish global economy, diversifying payment options is akin to diversifying investment. By not putting all their eggs in one basket, businesses ensure a continuous flow of transactions even if one payment method slows.

Growing transactions 

The impact of LPMs isn’t just theoretical. Several businesses have reaped tangible benefits from this approach, as the user experience plays a pivotal role in the consumer’s decision to complete a transaction. By offering a frictionless, localised payment experience, merchants significantly reduce cart abandonment rates. Moreover, extending these capabilities can allow customers to easily pay for subscription services. This streamlined path typically leads to higher transaction volumes and higher revenues. 

In 2022, Boku worked to integrate a fully tokenized connection to Alipay CN/HK for a global interactive entertainment company, providing consumers located in China and Hong Kong with an easy, frictionless way to use their Alipay wallets to make transactions and pay for subscriptions. This vital product had been untapped until then, creating a new, recurring revenue stream for the company – and delivering a 35% uplift in transaction volume within six months of its launch. 

Other global merchants are quickly beginning to understand how vital it is to offer regional consumers their choice of local payments. Take the example of a global streaming service that has recently made a push to expand beyond America and Europe and into Asia and other emerging markets: Netflix. A Bloomberg News article revealed that in a region where credit card use is not common, the streaming giant has turned to the integration of local payments to reach more potential clients. As an outcome of this strategy, the company increased revenues threefold and is now rolling out LPMs in other emerging markets. 

Managing LPMs 

In today’s challenging economic landscape, merchants cannot afford to overlook any strategies that enable growth or deliver a truly global reach. LPMs, with their ability to offer the widest possible reach of paying customers, give any global brand the opportunity to gain users in areas with less access to conventional card payments. LPMs are critical to reaching new markets and boosting client growth, hence their adoption by many tech giants. 

LPMs now roughly represent two-thirds of all global online payments – a significant rise from 2010, when they accounted for 25%. 

LPMs show no sign of slowing down. Wallets such as Alipay, GoPay, and NaverPay or real-time payment schemes such as Pix and UPI are now the leading payment methods in their markets, and LPMs’ share of global online payments will continue to grow worldwide. But managing the rising number of LPMs is no small feat. They must be vetted, have diverse APIs integrated, include the ability to analyse data, and have the capacity to adjust their availability on a per-country basis. That’s why, rather than attempt to work directly with hundreds of LPMs, the world’s biggest merchants choose to integrate and manage their LPM integrations using Boku’s dynamic platform. 

By recognising and respecting regional payment preferences, companies are not just ensuring transaction growth, but also forging lasting relationships with their consumer base – a win-win in an otherwise challenging market.

This editorial piece was first published in The Paypers' Cross-Border Payments and Ecommerce Report 2023–2024, which taps into the fast-growing cross-border market and provides a comprehensive overview of trends and developments that are pivotal in this space, being the ultimate source of information for ecommerce businesses interested in expanding globally.  

About Stuart Neal

Stuart is a C-level executive with a track record for leading fintech and mobile technology businesses – from VC-backed startups to enterprises. He was CFO at Boku at the time the company IPO’d on AIM and led Boku’s Identity division and its sale to Twilio. Since 2020, he has been a Youth Mentor at Urban Synergy Mentoring Pool and is Chair of Artificial Intelligence (AI) company Loopin.

About Boku

Boku is a global provider of mobile payment solutions. Boku’s mobile-first payments network, including mobile wallets, direct carrier billing, and account-to-account/real-time payments schemes, reaches over 7.5 billion mobile payment accounts through a single integration.