Member Article

PayFuture - Unlocking potential in emerging markets for online businesses

From a surge in online shopping to an increase in ed-tech, owing to physical restrictions and school closures, Covid-19 has boosted the already burgeoning space of e-commerce.

As a result, merchants have had to analyse and adapt their payment offerings, notably their reach into emerging markets.

Defined as the economy of a country in the developing world that has potential for progression, emerging markets present untapped opportunities for foreign businesses. Indian Subcontinent, Africa, Southeast Asia and Latin America are just a few examples of emerging markets with significant potential.

Take India for example. Its internet user base is over 636 million and yet the penetration of e-commerce is a lot lower than US and European countries. Once characterized for its payment preference of cash on delivery, India is now in the midst of a massive digital boom. In fact, the cashless epidemic that emerged due to Covid-19 has seen cash on delivery decrease as many transition to online payments and the share of Indian adults with at least one digital financial account has more than doubled since 2011, standing at 80%. Another facet to this trend is the continued advancement of mobile payment technologies, which includes mobile wallets.

For merchants, this shift to cashless payments coupled with the favorable demographics in these countries makes emerging markets a prime target for business expansion. PWC’s report on emerging markets states that the payments business in these markets is not only vast but will continue to expand between now and 2030.

However, with this opportunity comes challenges. As recognized in PWC’s report, emerging markets can be complicated and unpredictable, which will open up challenges for those merchants seeking to engage with these rising consumer markets.

One challenge is that while merchants can identify an emerging market they want to target, and know they need to adapt their payment solutions accordingly, putting this into practice can be complex. Merchants can be at a loss as to where to even start.

Given the dynamism in the payment space, different emerging markets will require a bespoke approach. For example, consumer behaviors and regulatory landscapes in India versus China are likely to be different and therefore need tailored adaption of payment solutions.

For companies that don’t have (and even those that do have) the resources, expertise, or connections, offering local payment solutions in these hard-to-reach countries can seem near impossible as well as highly risky. What’s more, finding reliable local partners to work with requires an understanding of the local culture, political environment and company etiquette. As a result, many merchants are either deterred from accessing new markets leaving the potential unrealised or those that have tried have failed because they found it too difficult and challenging navigating the muddy waters.

We recognized the traditional payments space is crowded as everyone vies for the same already mature markets – especially given the digitalization boom the pandemic has provided. So instead we set our sights on emerging markets but quickly realised that If merchants want to access these markets, there needs to be a level of locality. PayFuture offers the bridge between merchants and emerging markets. To that end, we took the initiative to form strategic partnerships with local payment service providers that were more than a traditional supplier-customer model instead becoming deeply engaged with each other’s business model.

To further strengthen our commitment, we made the decision to take a stake in these businesses once the relationship matured to ensure that we had end to end control of the whole process. By taking this approach, we have the facilities and intelligence to guide our merchant clients securely into these emerging markets, enabling them to effectively tap into the potential of these emerging markets without the typical pain of doing so.

The pace of change in the payment industry has undoubtedly put emerging markets onto everyone’s map. Now the onus is on merchants to seek out the necessary resources, expertise, and analytics to unlock the true potential of these countries. For companies that don’t get on board, they face getting left behind in the dust.

This was posted in Bdaily's Members' News section by Lucie Hayes .