Payments veteran Caroline Hometh is the founder and managing partner at RPY Innovations, a global payment advisory group that specializes in establishing relationships that enable conversion of cash to electronic payments and fosters the growth of domestic and international acquiring.
Here, Hometh offers tips and strategies for U.S.-based payment facilitators and acquirers looking to expand abroad.
We know that card-based transactions are big in the U.S. but not so much in other areas of the world. What are some of the most interesting cultural preferences for payments you’ve come across in your work?
The rest of the world loves e-wallets. Why? Security, convenience, and speed at the time of purchase. Bank transfers are also very dominant because the banked populace is rising, and the processing is cheaper for merchants. But there is also a significant difference in payments used. For example, in Canada, a woman drives downtown to join a friend for lunch. She uses her Interac Flash debit card to pay for parking. While waiting, she uses her phone to shop online for shoes and uses her card on file for that transaction. She notices her favorite charity needs assistance, so with her phone she uses her credit card to set up a recurring payment. Her friend arrives and they split the lunch bill, with both putting down a credit card for payment. That same woman in Argentina would use a mobile application to pay for parking, cash for lunch, and an installment payment—Boleto Bancario—for the shoe purchase. In China, the woman would use AliPay to pay for parking but use WeChat Pay to pay for lunch and shoes. Soon we might see this scenario: The woman would expect to use her car to purchase the parking and preorder lunch using a mobile application and her card on file. She would use a different mobile wallet to sign up for a subscription service for the shoe purchase, a bank transfer for the charity, and Venmo to share the lunch bill with her friend. The payments industry uses many single-digit letters to describe how we pay: ecommerce, m-commerce, f-commerce [for Facebook], and now a-commerce [Alexa or Digital Assistance]—but we must remember that consumers globally do not perceive it this way. It is simply making a purchase. Our industry needs to allow consumers to shop in whatever currency they prefer, with whatever payment type they’re comfortable using.
Which areas show the most promise for U.S.-based payments players?
One of the reasons payment facilitators are so successful is their commitment to a unique vertical, [which] also allows them to research which markets match their vertical focus most effectively. Using the lunch scenario, how did the payments players enable the woman to pay? The payment facilitator that is focused on parking transactions will need to develop an acquiring relationship in each country/region where consumers are used to paying for parking but no longer prefer to use coins. The meters will need to accept the card types preferred by that country. EMV certification is required. The mobile application will need to consider multiple languages and colors that reflect the culture. It may choose to use partnerships to support the meters in a specific region. The global or regional restaurateur will need to consider how consumers value loyalty programs and payment methods. The e-wallet and P2P provider will need to accept bank transfers within each country of interest. The e-commerce shoe retailer may need to accept up to 22 currencies and 140 payment types and work through foreign exchange risks. The payment facilitator who is focused on charity transactions will need payment partnerships to set up local bank transfers, credit cards, recurring payments, and have access to card account updates.
What is the current regulatory and licensing environment like for U.S.- based players in those markets?
In most cases, requirements are more complex and stringent and thus will be time-consuming. For example, in Europe, due to Payment Service Directive II, all payment facilitators must first obtain a payment institution (PI) license from the country’s financial control authority (or equivalent). If obtained from an EU country, it can be passported to other EU countries, but if Brexit is completed, the United Kingdom will likely require a separate PI license.
Are there any downsides to global expansion?
It takes time and commitment to understand a new market and regional requirements, build a business, modify as needed, and begin a new path if initial plans do not work. Expansion into another country can be expensive. There are the different regulatory standards that must be met. Cultural differences require attention and may be difficult to incorporate. Often, branding and colors must be reconsidered to avoid misinterpretation and increase appeal. Businesses hope that payments will function the same way as they do domestically—and find it frustrating when that doesn’t happen. Remember that when entering a new market, local players view what’s done in the U.S. as unusual and not especially relevant.
What’s the best advice for a payments provider looking to expand abroad?
Preparation and diligence are vital. Do your homework. Understand how your business will be viewed by the merchants and consumers of that market or country. Buyers will want to sell/shop in their own currency and use the payment types they are comfortable with. Seek advice from those who have successfully entered the target market. TT
Republished from Transaction Trends Spring 2019 Edition Publication