Founder and CEO of G2A Capital Group, the world’s largest marketplace for digital entertainment.
Have you heard of Blik? Unless you live in Poland, you may not have—but this mobile payment company powered 70% of e-commerce transactions in Poland last year.
Blik is one of many homegrown payment service providers (PSPs) that have become integral to commerce in the countries they were launched. As local PSPs become more popular, relying strictly on global PSPs is no longer enough for businesses expanding to new geographies. They must address payment localization to build trust with customers and avoid losing sales.
Adopting local PSPs isn’t just a strategy for increasing conversions. These systems provide security and authentication features that make it safer to accept cross-border payments.
As Founder of G2A.COM, I’ve seen the power of adopting local PSPs firsthand. With users in 180 countries, we are constantly working on making our marketplace more accessible and secure for consumers—and local PSPs play a key role in our strategy. Partnering with local payment service providers can help businesses reach more customers while preventing fraud.
What are local payment service providers?
Local PSPs are companies that enable payments between customers and businesses in specific regions. Poland’s Blik is one prominent example. Others include Sofort (popular in Germany), Bizum (Spain) and Venmo (the US).
You can learn which local PSPs are a good fit for your target market by studying the available payment methods and user preferences. For example, some payment methods are more popular among specific demographics: in the US; 57% of people ages 18-29 use Venmo, while only 15% of people over 65 do.
Local PSPs typically work with banks in the region to facilitate direct transfers from a customer’s bank account to a business’s bank account (or peer-to-peer transfers). They may offer other services, such as ATM withdrawals or buy-now-pay-later (BNPL) transactions. In countries where cash remains popular, such as India, companies may need to consider non-digital payment options such as cash on delivery.
In contrast with local PSPs, global PSPs, such as PayPal or Stripe, support payments in a wide variety of geographies and currencies. Local PSPs can grow into global PSPs: for example, leading BNPL provider Klarna, which operates in 45 countries, started as a local provider in its native Sweden.
Why is it important to go local?
When a company launches in a new region, it has to tailor many aspects of its business to the new geography, from finding local suppliers to creating culturally appropriate marketing. Many companies assume they can rely on popular global payment methods, such as PayPal, so they don’t have to worry about another localization hurdle.
Global PSPs are an important component of international expansion, especially when it comes to the rising popularity of digital wallets. Allowing payments through globally popular methods will facilitate rapid expansion, but partnering with local PSPs positions you to build greater affinity with customers and improve conversion rates. Stripe reports that 93% of consumers say it’s important for a business to provide their country’s common payment methods—and 85% of consumers will abandon a checkout that doesn’t offer their preferred payment method.
To understand why customers feel so strongly accustomed to certain payment methods, consider their perspective: to purchase from you, they may need to sign up for an account from a new service and connect it to their bank, and they may be wary of giving their banking details to an unfamiliar service. By partnering with local PSPs, you can give customers a more seamless checkout experience and increase trust in your brand. When you launch in a new region, as you research cultural preferences and purchasing habits, don’t forget to identify the most popular payment methods.
How do local payment service providers make cross-border payments safer?
In addition to improving the customer experience, local PSPs can also help businesses reduce risks associated with cross-border payments.
The rise of global commerce has unfortunately been accompanied by a rise in global fraud. The United States Federal Trade Commission reports the share of cross border fraud complaints rose from less than 1% in 1992 to more than 11% in 2022.
The global payment landscape is fragmented and regulators often struggle to enforce rules across borders. This complexity makes it easier for bad actors to use stolen credit card numbers, launder money or run phishing campaigns.
Local PSPs often offer more robust security features than global providers. For example, the 3D Secure (3DS) payment protocol helps prevent a type of fraud known as card-not-present (CNP), where a fraudster uses stolen credit card information to make an unauthorized card payment. While 3DS is not yet required globally, some local PSPs offer this powerful defense against a common form of fraud.
At the same time, customer satisfaction is not always the top priority for local PSPs. If you decide to partner with local PSPs, you must consider how much time and effort it will take to ensure that they contribute to a positive user experience.
Realize the benefits of local payments.
Many e-commerce companies are aware that offering more payment options can drive business growth. Storyblok found that 52% of businesses’ top goal for improving their e-commerce websites was accepting more payment methods.
However, every new payment method is a drain on resources, and keeping up with rapidly changing consumer demand is challenging. If your company wants to adopt local payment methods but is struggling with limited resources, a good option is to sell through a marketplace. Marketplaces shoulder the burden of developing integrations with local PSPs, ensuring the security of such integrations, and that the local payment methods are well-integrated into the checkout process.
Whether you choose to partner with local PSPs on your own or sell through a marketplace, localizing your approach to payments is critical to the success of your global expansion. It’s also an effective way to increase consumer trust in your brand and reduce cybersecurity and fraud risks. So if you’re thinking about going global, when it comes to payments, don’t forget to go local.
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