In our previous post, we provided an introduction to key terms in the banking industry. This time, we will focus on basic types of payments that you may encounter in your business.

PAYMENT TERMS:

B2B

B2B, which stands for Business-to-Business, refers to commerce between two enterprises as opposed to transactions between a business and an individual customer. The size of most B2B transactions is larger than B2C (Business to Consumer) transactions because generally an enterprise will be seeking to buy a large inventory of items to sell to end users. B2B purchasing may also involve raw materials used to manufacture finished products or services. B2B deals may be subject to bidding processes and negotiations, so payments are rarely immediate. 

B2C 

The term Business-to-Consumer (B2C) refers to the process when a company sells products and services directly to consumers who are their end-users. Most enterprises that sell to consumers can be referred to as B2C companies. B2C payments can take various forms: many B2C transactions take place on websites, where consumers buy products directly from online retailers. Today, many B2C purchases are conducted on mobile apps. When dealing with cross-border payments, businesses should offer familiar payment methods at each location and generate personal relationships with customers.

C2B 

C2B, which stands for Consumer-to-Business, is a system in which an end user or consumer provides a product or service to an enterprise, which then uses it to complete a business process. Another C2B model is when a consumer allows a business to market a service or product on their website or blog in exchange for a fee. A different form of C2B is when an end user announces a need and businesses compete to meet it.

C2C 

The C2C (Consumer-to-Consumer) business model involves transactions between two consumers. This type of commerce is typical of intermediary auction websites such as eBay, Etsy and Craigslist, but the site does not take responsibility for the quality of the products. In C2C transactions, prices are negotiable and the purchasing process is simple. These websites usually provide convenient payment methods such as PayPal, credit cards, debit cards and mobile apps.

As a rule, it is worthwhile to keep your eye on developing payment trends and new models. The ability to facilitate payments for both enterprises and individual buyers is key to your commercial success.

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Singles Day (November 11), which was first started by Chinese college students in the 1990s, is the antithesis of Valentine’s Day. It is a day dedicated to the celebration of singledom.

Some singles have developed various rituals to mark the day including gifting friends with 1 figure-shaped items, from toothpicks to half of a deep fried double dough stick. Other singles, who aren’t into celebrating their status, will go on a blind date on the day so that they don’t have to be alone.

One of the most outstanding customs is self-gifting: This is a day for self indulgence and rewards for hard work all year round.

The world’s greatest shopping extravaganza

Singles Day is hands down the world’s biggest online shopping event. On Singles Day last year marketplace giant Alibaba recorded $30.3 billion in sales in a 24-hour period, more than Black Friday and Cyber Monday combined.

China is the world’s largest e-commerce market, with annual sales approaching $1.53 trillion. So there’s room for everyone – Alibaba is not the only corporation that can profit from the holiday, global retailers can capitalize on this day as well.

The Chinese favor foreign labels so this shopping day represents a unique opportunity for global brands. According to Alibaba, over 40% of Singles Day shoppers purchased international brands, including Apple, Dyson, Gap, Estée Lauder, L’Oréal, Kindle, Nestle, Nike, and Adidas.Over 240 international brands recorded at least $14.4 million in sales.

4 Tips for global online retailers

• Offer popular items

Last year buyers favored health supplements, followed by milk powder and diapers. Makeup products, including emulsions, facial masks, face wash and toner, were also high on the national shopping list. However, as a large number  of shoppers are savvy millennials, many sought out electronics, smartphones and gadgets. Due to the fact that a significant percentage of the shoppers are women, apparel and home goods also sold very well.

• Spread your wings

Singles Day has spread beyond China to Southeast Asia and other locations. In countries like Singapore, Indonesia, Thailand and Vietnam, local residents eagerly await the day’s special sales.Last year, prior to Singles Day, China’s largest retailer, JD.com, rolled out a two-week campaign called  “11.11 Crazy Hot Sale,” in which it targeted Thai shoppers. Even US retailers are starting to adopt Singles Day, as a time when Americans can express well-deserved self-love.

• Provide familiar mobile app payments

Chinese online consumers use WeChat for every aspect of their lives, from scheduling doctors’ appointments and shopping to messaging friends and payments. Shopping by smartphone in China is quick and easy, thanks to convenient payment methods, particularly Alipay, Union Pay and WeChat Pay. If you want to make a hit on Singles Day, integrate these familiar payment platforms on your Chinese website.

• Reach out through social media

The Chinese are very connected to social media. While WeChat is the most effective way to reach potential customers, Weibo (similar to Twitter) and Youku Tudou (similar to YouTube) are also widespread. Post videos, interactive content, and special coupons to attract followers.

Singles Day offers online retailers huge potential both in China and abroad, but it is very important to study your target audience’s culture, shopping preferences and spending habits before taking the plunge.  

PSD2 (Revised Payment Service Directive) is a directive issued by the European Commission in order to fortify customer rights, facilitate competition in banking, and increase Internet payment safety via SCA (Strong Customer Authentication). The original European payment services directive came into force in 2007. The PSD2 directive expands considerably on the original version of PSD.

PSD2 in practical terms

The aim of the PSD2 regulation is to create open banking in EEA, while ensuring online payment security based on defined rules. For the first time ever, this directive authorizes bank customers to use the services of third-party providers through open APIs. Rather than rely completely on traditional banking services, PSD2 enables both customers and businesses to manage finances more conveniently and affordably via a wider choice of third-party providers.

Customers will be able to use various fintech services to analyze their spending, pay bills, take loans or make transfers, while their money is deposited in their bank accounts. European banks are obligated to create a system of open APIs that provide access to customer accounts. Third-party providers are authorized to provide financial services while using bank data.

PSD2 deadlines

The deadline for all EU member states to enact PSD2 into national law was  January 2018. Following the initial stage, two deadlines were stipulated:

• March 14, 2019

By March 14, 2019, all Account Servicing Payment Service Providers (ASPSPs) – which refers to any institution that provides and manages payments accounts – were supposed to have set up a testing or sandbox environment including APIs, support and documentation. The comcept was to provide a six-month period to test authorising payment services before the final date of implementation.

If a financial institution is incapable of setting up secure APIs independently, it can partner with a technological network with readymade API portals.

• September 14, 2019

The final compliance deadline is mid-September of this year. At this stage, SCA will be required as well as access to accounts (XS2A). SCA is a crucial element, which obligates customers to authenticate themselves by combining two out of the three following options:

• Something you have – using a device only available to the customer (such as a cell phone)
• Something you know – unique information (such as a PIN) only available to the customer
• Something you are – physical evidence unique to yourself such as facial or voice recognition
  

Optimizing the purchasing process

While robust security is vital, it is no less important for the merchant to ensure a frictionless user experience. To facilitate the process, some operators are adopting behavioral biometrics, which uses machine learning to analyze a user’s unique typing cadence, finger pressure or other personal parameters in order to ensure continuous authentication behind the scenes.

Other ways for merchants to ensure smooth purchasing processes include the use of e-wallet payment methods (which already include two-factor authentication), integration with payment platforms that optimize payment processing, and developing user-friendly mobile apps for seamless shopping experiences.

Stablecoins are pegged to major international currencies, thereby preventing the extreme fluctuations associated with cryptocurrencies. This means that the value of the coin  would remain steady regardless of demand levels. According to recent reports, Facebook is planning to launch a full payments network across its messaging apps, and is currently talking to Visa and Mastercard to bring them on board. It is also in the process of raising $1 billion from major banks in order to fortify the coin against currency fluctuations.

In-app payments for a readymade audience

With a built-in audience of 2.5 billion, Facebook will be able to revert its revenue model from ad-based to payment-based and transaction-based. The company recently announced plans to launch its first stablecoin project in India, where WhatsApp has 200 million users.

India is the perfect location to initiate the project because a large part of the population already prefers to use mobile payments. In addition, many Indians are unbanked, making an in-app remittance payment method ideal.

Frictionless payments through a global mobile commerce system

While India is a good starting point, the concept of frictionless payments through a mobile commerce system anywhere in the world is hypothetically a winning formula. This type of system has already proved itself for P2P payments, but a built-in e-wallet could significantly facilitate payments for online merchants and their buyers, and adopt a model similar to China’s WeChat.

Will it work?

While in theory all this sounds feasible, there is no guarantee that the attempt will succeed. For one thing, cryptocurrency is based on decentralization and has no controlling owners. Facebook’s new stablecoin would be controlled, by Facebook, of course. There are also crypto-related regulations that cannot be ignored.

In addition, several global competitors like New Telegram are hot on the heels of Facebook. Not to mention that TikTak and Toutiao are currently eroding Facebook’s global app grip.

Is this a crypto revolution or just a blip? Time will tell.     

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The expected boom is mainly due to greater Internet connectivity, upgraded broadband infrastructure and the ubiquity of smartphone use. As it stands today, two out of three Latin Americans have Internet. Last year, 27.5% of all online purchases were done with a mobile phone.

Worldline’s research states that the average age in LATAM is a bit under 30. This means that e-commerce retailers should target a younger audience that uses social media, and particularly Facebook and Instagram, as a matter of course. Just for example, in Brazil these two social media channels together feature a penetration level of almost 70% among internet users.

The key issue of payments

The Latin American purchaser has very clear opinions regarding preferred payment methods and online security. Due to the fact that there is a large unbanked population in the region, many locals prefer cash payments or local debit cards. LATAM purchasers want to see prices displayed in their local currencies and feel secure that their personal data is not being breached when they pay online or via a mobile app.

Here is an overview of three key online markets in LATAM that are showing rapid expansion:

Brazil

Brazil is the largest e-commerce market in LATAM, and it accounts for nearly 32.8% of all regional retail sales. The Brazilian e-commerce segment is expected to reach BRL 79.9 billion this year, which constitutes a 16% growth year on year.

Brazilians use domestic payment methods for 90% of their online shopping. They pay with local credit cards, usually by installments. Another popular payment option is Boleto Bancario. This push payment method enables consumers to pay online, in cash at banks and ATMs, or electronically through online banking. This option appeals to local purchasers because there is no risk of chargebacks. Debit cards are gaining popularity due to the elimination of chargebacks and immediate payment confirmation.

Argentina

As of 2018, there were 17.46 million e-commerce users in Argentina and 30 million have access to Internet. An estimated 22.5 million individuals use a smartphone and 16.8 million shop online. Google, Facebook and YouTube are the most popular social media channels. The online market has been growing steadily and it is predicted to reach $10 billion by 2021. Argentine e-shoppers mostly purchase clothing, shoes and personal lifestyle items, as well as home and garden products.

Over 40% of Argentinian e-commerce transactions are via cards. Visa and Mastercard are the most common cards, followed by American Express, Diners Club, and the local schemes Tarjeta Naranja and Cabal. Cash-based methods like RapiPago and PagoFacil make up 44% of online payments. Most prepaid cards are bought in kiosks for cash. To complete a purchase, the buyer prints out a receipt and pays at locations that accept this type of payment.

Colombia

Colombia is LATAM’s fifth largest e-commerce market, with 65% of Colombians connected to the Internet as of last year. In 2018, there were 34.3 million smartphone users in Colombia. Some 87.8 million online transactions were carried out last year, moving $17.8 million in electronic transactions. Easier access to the Internet, particularly via smartphones, and an expansion in online services, such as banking and online payment services, are the key factors driving growth in Colombian e-commerce. Nevertheless, 94% of Internet users still prefer computers to make purchases, while 49% use smartphones. The most popular products bought online are electronics and computer products, fashion, entertainment and travel.

Cash on delivery and bank account debit are very popular payment methods due to low credit card penetration rates in Colombia. COD accounts for 40% of purchases. The younger generation uses social media like Instagram to make purchases online.

Avoiding the pitfalls

While these three markets are set to boom, it is very important to understand your customers’ purchasing mentalities and payment preferences at each location before jumping in.

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South Korean payment preferences

China

Chinese payment preferences

India

Indian payment preferences

Photo courtesy of lifeforstock

What kind of solution should you be seeking when you need to accept online payments in different markets, multiple currencies and a wide range of payment methods?

The best online payment solutions enable the following activities:

• A wide range of local payment options

If your online business operates in various foreign markets, you need to be able to offer familiar payment methods at each location. Some countries use international credit cards, but in others the population prefers local credit cards. In certain areas, debit cards or payment on delivery are the first preferences. Your payment solution should be able to offer the most suitable payment methods at each site.

• Top-level security

You need to ensure that all of the credit card and personal data you store in your system is secure. In order to maintain the highest level of security, your online payment system should feature data encryption and tokenization, 3D Secure, PCI compliance, hosted payments and other protective measures. An advanced payment solution should include all of these options and more.

• Advanced fraud detection

The growing sophistication of hackers means that attacks are becoming more rampant and harmful. But a single fraud detection level does not suit all your markets. It is best to have an adjustable fraud monitor that uses machine learning to adapt fraud screening to the specific risk level in each market. That way you minimize false positives and effectively mitigate real fraud attempts.

• All-inclusive technology

When processing payments, you need to work with various parties including a payment gateway, payment processor, issuing banks, credit card companies and other third parties. Each of these entities collects a fee for its services. Rather than attempting to deal with each of these parties separately, it is easier to integrate with an end-to-end payment solution that handles all of these processes at a reasonable fee. Check out various platforms to see which offers the best rates for all of these services.

• Recurring payments

Many online merchants offer monthly services such as gyms, child care services, gaming, cell phone companies and other sectors. By offering automated recurring payments, you ensure that your customers needn’t worry about forgotten payments, and you will always be paid on time. If you offer subscription type services, this payment model is a must for your enterprise.

• Mobile payments

With the growing popularity of smartphone use, you must be able to offer secure and easy payments via mobile phones. Look for an online payment solution that enables you to build mobile friendly pages and process secure payments via mobile apps. Ensure that the system can process mobile wallets, money transfers, credit cards and other payment options.

As a global online merchant, your aim is to provide your customers with the easiest and most comfortable payment experiences, while cutting costs and increasing processing efficiency at every market. A sophisticated one-stop-shop payment platform enables you to meet all of these needs and many more.

Learn about the bm2Pay online payments platform.   

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