Crossing borders the evolution of online payment methods and impact on international trade

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1 Crossing borders the evolution of online payment methods and impact on international trade Insights into the attitudes and adoption of online payment options in UK businesses TrifonenkoIvan,Orsk/Shutterstock.com

2 Insights into the attitudes and adoption of online payment options in UK businesses 02 The propensity to purchase online is now commonplace among consumers and businesses alike, with an estimated 8.5 million online transactions made on Black Friday in 2014 alone 1. The potential rewards for those businesses that trade online are limitless, with the internet knowing no boundaries when it comes to doing business around the globe. But many could be unwittingly putting barriers in the way, by failing to consider the checkout preferences of an international audience, focussing instead on facilitating UK trade via familiar payment methods. With six out of ten small and medium businesses in the UK expecting to be trading internationally by 2016, and over one quarter (28 per cent) expecting revenues from international sales to increase during the same period 2, ensuring you can close sales with an overseas audience as well as a domestic one is vital. Our latest research uncovers the payment methods favoured by UK merchants and their attitudes towards international transactions, as well as their thoughts on future payment trends and the impact they will have on their business. In this paper, we highlight key findings from the research and offer insight into the reality and evolution of online payments as UK merchants look to keep customers happy, both at home and overseas Methodology The research was commissioned by The PPRO Group and carried out by Coleman Parkes Research in November people who are either responsible for, lead the implementation of or make decisions on online payment solutions within UK businesses were questioned via an online survey. The following industry sectors were included within the research: clothing, automotive, appliances, books/music/videos, computers/ electronics, food/grocery, housewares, health/beauty, toys/hobbies/sport, jewellery, pharmaceutical, and stationary/office supplies.

Retailers preferred payment options 03 Credit and debit card transactions top the payment offerings from UK merchants Which of the following payment options do you offer?

3 Retailers preferred payment options 03 Credit and debit card transactions top the payment offerings from UK merchants Which of the following payment options do you offer? Offer: % Credit card 85 % Debit card % e-wallet SfioCracho/shutterstock.com Credit card (85 per cent) and debit card (85 per cent) transactions share the top spot when it comes to payment options offered by UK-based online retailers. The use of e-wallets (such as PayPal) is however gathering pace behind these more traditional methods, with three quarters (75 per cent) offering it as an option, indicating that shoppers are more likely to trust this form of payment alongside their more established card-based alternatives.

Customer payment preferences 04 Customers opt for E-Wallets over credit cards Please rank your payment options in order of customer preference, from the most popular to the least popular 31 %

4 Customer payment preferences 04 Customers opt for E-Wallets over credit cards Please rank your payment options in order of customer preference, from the most popular to the least popular 31 % E-wallet 31 % Debit card 27 % Credit card 15 % Cash on delivery 13 % Direct debit AnitaPonne/shutterstock.com When it comes to customer preference, e-wallets and debit cards are the most popular payment methods, according to just under a third of UK merchants (31 per cent), with credit cards cited as the most popular method by over a quarter (27 per cent), suggesting that e-wallets now hold a position of trust for today s online shoppers. Direct debit is the most favoured method by customers for 13 per cent of respondents, with 15 per cent stating that their customers prefer to pay cash on delivery.

Facilitating international payments 05 UK retailers smooth the way for international payments but concerns stall mainstream adoption Do you adapt/offer different payment options for overseas

5 Facilitating international payments 05 UK retailers smooth the way for international payments but concerns stall mainstream adoption Do you adapt/offer different payment options for overseas customers? What do you see as a key barrier for international payments? Yes! 55 % adapt their payment options for overseas customers Pikcha/shutterstock.com The two main barriers Shipping costs 45% fraud 44% Tkemot/shutterstock.com UK retailers are open to offering different payment options in order to attract international trade, with over half (55 per cent) citing that they adapt their payment options for overseas customers. However, when it comes to facilitating these international payments, retailers cite shipping costs and fraud as the two main barriers according to 45 per cent and 44 per cent of respondents, respectively. Chargeback and website functionality are not considered a major concern, but still affect around one in ten retailer s decisions to not service international customers.

Allocating market spend 06 Up to a fifth of all marketing spend is allocated to targeting international customers Roughly, how much of your total revenues is apportioned to marketing costs?

6 Allocating market spend 06 Up to a fifth of all marketing spend is allocated to targeting international customers Roughly, how much of your total revenues is apportioned to marketing costs? % 30 18% spend up to of total revenues to marketing costs for domestic customers % 20 50% spend up to of total revenues to marketing costs for international customers BereziukOleksandr/shutterstock.com On average, UK retailers apportion 16 per cent of their total revenues to marketing costs with around one in five (18 per cent) spending between 21 and 30 per cent of their budget in this area. When it comes to attracting international customers, the majority of businesses spend up to a fifth on targeting this potentially lucrative audience.

Attracting international trade 07 Overseas customers overlooked in favour of home grown advocates How interested is your organisation in attracting international customers and domestic customers?

7 Attracting international trade 07 Overseas customers overlooked in favour of home grown advocates How interested is your organisation in attracting international customers and domestic customers? What percentage of your total number of transactions come from international customers? 19 % of all transactions are made by international customers. But: 90 % are more interested in domestic customers! EKS/shutterstock.com Despite on average one in every five transactions (19 per cent) being made by international customers, nine out of ten (90 per cent) retailers are more interested in attracting domestic customers than those from overseas. Merchants could be missing out on an important audience, with nearly one in ten (8 per cent) admitting that between 31 and 51 per cent of all transactions come from international customers.

Keeping up to date with options and competitors 08 Retailers keen to innovate and keep up with their counterparts How interested is your organisation in keeping up to date with payment methods and

8 Keeping up to date with options and competitors 08 Retailers keen to innovate and keep up with their counterparts How interested is your organisation in keeping up to date with payment methods and those of your competitors? 77 % Keeping up to date with online payment methods available 81 % Keeping up to date with payment systems of their competitors Bikeriderlondon/shutterstock.com Retailers seem engaged in modernising their online payment methods with over three quarters (77 per cent) interested in keeping up to date with the range of online payment methods available. Four out of five (81 per cent) are more interested in keeping up to date with the payment systems of their competitors, in a bid to steal custom and market share.

International basket abandonment 09 International consumers put off by postage costs and payment methods What percentage of your international customers, abandoned their basket at the point of

Up to 10 % of international customers abandon their basket at the point of payment Because of: 61 % Shipping costs 42 % Payment page Alphaspirit/shutterstock.

9 International basket abandonment 09 International consumers put off by postage costs and payment methods What percentage of your international customers, abandoned their basket at the point of payment? Where do international shoppers tend to drop out of the process of a full transaction? Up to 10 % of international customers abandon their basket at the point of payment Because of: 61 % Shipping costs 42 % Payment page Alphaspirit/shutterstock.com Up to ten per cent of international customers are abandoning their basket at the point of payment, according to almost half of those surveyed (43 per cent). When it comes to finding out exactly where this drop out occurs, one third (31 per cent) of retailers don t track it. Of those who do, shipping costs payable by the international consumer (61 per cent) and the payment page (42 per cent) are the key reasons why they fail to complete the transaction. By tracking the issues and addressing the barriers to sale, future revenues could be enhanced.

Familiarity with international payment methods 10 Overseas payment methods start to become a familiar sight on UK sites How familiar are you with the following international payment options?

10 Familiarity with international payment methods 10 Overseas payment methods start to become a familiar sight on UK sites How familiar are you with the following international payment options? Which of the following international payment options do you offer? Familiar Offering 79 % cash alternatives 70 % giropay 62 % SEPA direct debit 57 % cash alternatives 50 % giropay 48 % MasterPass 46 % SOFORTbanking SypaProductions/shutterstock.com International payment options are starting to resonate with UK retailers with cash alternatives (79 per cent), giropay (70 per cent) and SEPA direct debit (62 per cent) now recognisable among UK retailers. This awareness seems to be driving the adoption of these additional options, with half of all retailers who were familiar with them offering European favourites, including giropay (50 per cent) and cash alternatives (57 per cent), and just under half offering MasterPass (48 per cent) and SOFORTbanking (46 per cent).

Barriers to international payment options 11 Red tape and charges can put pay to additional options What stops you from offering additional payment options to international shoppers?

11 Barriers to international payment options 11 Red tape and charges can put pay to additional options What stops you from offering additional payment options to international shoppers? NO ADDITIONAL PAYMENT OPTIONS TO INT. SHOPPERS! 73 % In-country regulations 77 % High charges 69 % Too costly to process 67 % Tax and legal aspects too complex 54 % Not sure which options to add Xtock/shutterstock.com Three quarters of businesses cite in-country regulations (73 per cent) and high charges (77 per cent) as the main barriers to offering additional payment options to international shoppers. The cost of processing transactions and not having the necessary resource or bandwidth to set them up also causes a stumbling block for 69 per cent and 53 per cent of retailers, respectively. Over one third of respondents (38 per cent) simply don t see the need to offer additional options, meaning they could be missing out on a large slice of online overseas footfall.

Retailers online shopping priorities 12 Retailers risk revenue losses by focussing on security instead of securing sales How much consideration does your organisation place in the following areas?

12 Retailers online shopping priorities 12 Retailers risk revenue losses by focussing on security instead of securing sales How much consideration does your organisation place in the following areas? 85 % Cost of customer transaction fees 85 % Customer security 54 % Abandonment of shopping carts 70 % Complexity of transaction Ismagilov/shutterstock.com When it comes to online shopping priorities, retailers put more emphasis on security than the loss of revenue caused by shopping cart abandonment. 85 per cent of retailers consider customer security to be a high priority, compared to abandonment of shopping carts which tops the list for just over half (54 per cent) of the respondents.

Take-up of payment trends 13 Retailers embrace innovative payment methods Which of the following payment trends/innovations

81 % 68 % likely to adopt Google Wallet interested in Google Wallet 41 % Google Wallet adopted 50 % e-wallet adopted

com Adopted Heard of Interested in Likely to adopt E-wallet providers, other than PayPal 50% 74% 71% 85% SEPA direct debit 31%

and awareness of new payment innovations is high.

13 Take-up of payment trends 13 Retailers embrace innovative payment methods Which of the following payment trends/innovations have you adopted / heard of / are you interested in? 81 % 68 % likely to adopt Google Wallet interested in Google Wallet 41 % Google Wallet adopted 50 % e-wallet adopted Milestudio/shutterstock.com Adopted Heard of Interested in Likely to adopt E-wallet providers, other than PayPal 50% 74% 71% 85% SEPA direct debit 31% 51% 41% 74% Google Wallet 41% 81% 68% 81% Apple Pay 13% 52% 45% 78% Buy-Buttons with social networks 16% 44% 37% 80% Engagement and awareness of new payment innovations is high. E-wallets (not including PayPal) lead the way with half (50 per cent) of all of those surveyed currently offering the method to customers. Google Wallet is another exciting trend that is starting to make up ground in the market with 41 per cent of retailers having already adopted it and over two thirds (68 per cent) interested in it and four out of five of those likely to adopt it (81 per cent).

Business impact of key trends 14 The impact of fraud and regulations could stifle future adoption and innovation How concerned are you about the potential impact the following trends may have on your

14 Business impact of key trends 14 The impact of fraud and regulations could stifle future adoption and innovation How concerned are you about the potential impact the following trends may have on your online business? 95 % Fraud 86 % Increase of costs 87 % Regulations 83 % Complexity PathDoc/shutterstock.com Nearly all of those businesses surveyed (95 per cent) admitted that fraud is still a concern when it comes to online transactions. The impact of regulations were cited as the next highest concern for nearly nine out of ten businesses (87 per cent), followed by an increase in costs (86 per cent) and complexity of offering payment methods (83 per cent). It is clear that despite a willingness to adopt additional payment methods, businesses are still wary of the wider and associated risks of doing so.

15 Conclusion 15 Conclusion: With online shopping now the norm among consumers and businesses, online retailers have had to step up their game in recent years when it comes to converting browsers into buyers. With shoppers now much more open to buying from overseas websites, retailers have needed to adapt and embrace new options familiar to those outside of the UK in order to appeal to a much broader reach and global clientele. Our research has shown that retailers are open to adopting these additional payment methods to secure overseas custom, which for some now makes up a significant proportion of their business. However, barriers still exist to stop them becoming mainstream, alongside the more familiar, trusted methods of credit card and e-wallet payments in the UK. Regulations, associated charges and set-up costs seem to be the main sticking points, with many feeling it is simply not worth the hassle. When it comes to embracing future trends, retailers are open to innovations on the horizon with the majority keeping a watchful eye on how things are developing, with plans to take the plunge when fears over fraud, regulations and complexity subside. Securing sales is no longer just about the look and feel of a website or indeed the product itself. Making the payment process as familiar and recognisable as possible no matter where the customer is based will be key to future revenue growth and breaking down barriers to international sales.

About The PPRO Group 16 PPRO NO BORDERS IN E-PAYMENT The PPRO Group is an integrated solutions provider enabling international electronic payment processes.

16 About The PPRO Group 16 PPRO NO BORDERS IN E-PAYMENT The PPRO Group is an integrated solutions provider enabling international electronic payment processes. Positioned as The Payment Professionals, the company was founded by Philipp Nieland and Tobias Schreyer in 2006 and is headquartered in London. Covering the entire value chain from acquiring, through issuing to processing, PPRO makes life easy for its customers with its one-stop, end-to-end offering. Complementing conventional credit card services, The PPRO Group offers payment service providers and partners a fully integrated interactive platform supporting a multitude of national and international alternative payment schemes across more than 100 countries. For ease of service, the company delivers these schemes under umbrella agreements covering all the technical, regulatory and legal requirements of acquiring, issuing and processing. A PCI DSS-certified principal member of MasterCard and Visa, The PPRO Group offers the full range of issuing services for debit and prepaid cards. Under its own brand name VIABUY, The PPRO Group provides Visa and MasterCard prepaid cards for consumers and companies. The PPRO Group also offers comprehensive programmes enabling B2B prepaid cards either under its CROSSCARD brand or as cobranded solutions. These cards can be issued both physically and as virtual cards (e.g. vouchers) or NFC devices (e.g. stickers). As part of its e-fulfilment offering, PPRO distributes software, mobile phone top-up cards and online vouchers through its own online platforms. Here customers benefit from secure deliveries, reliable payment processing and transaction support.

17 Contact PPRO Group: PPRO Financial Ltd 20 Hanover Square London W1S 1JY United Kingdom Tel:

Crossing borders the evolution of online payment methods and the impact on international trade for German merchants

Crossing borders the evolution of online payment methods and the impact on international trade for German merchants Insights into the attitudes and adoption of online payment options in German businesses