Abid Murshed, Head of Sales, PayPal India
The vibrant tapestry of India's cultural heritage is filled with stories of innovation and resilience. From the bustling markets of Mumbai to the buzzing lanes of Pondicherry, the country's rich diversity is not just a source of pride but also a gateway to new horizons. As the world takes notice of India's innovative mindset and entrepreneurial spirit, the stage is set for Indian businesses, especially the Micro, Small, and Medium Enterprises (MSMEs), to embark on a journey of global expansion.
In today’s interconnected world, the dream of expanding your business beyond borders has become more attainable than ever before. With cross-border payments evolving into a robust and dynamic market, online businesses need to understand the complexities of navigating the system. According to the 2023 McKinsey Global Payments Report, the sector witnessed a 13 per cent rise, with cross-border payments reaching $150 trillion in 2022, primarily led by the growth in the APAC region.[1] However, it is important for an online business to understand the intricacies of cross-border payments; a ‘one-size fits all’ approach simply doesn’t cut it. Operating in the global marketplace also implies transacting and dealing with diverse markets and cultures, which necessitates agility and responsiveness to sustain in this dynamic landscape.
Optimizing pricing strategies for global markets
Understanding the cultural nuances of different regions plays a key role in strategizing the pricing method. Dynamic pricing offers businesses the advantage of segmenting their consumer base and customizing the pricing strategy for each segment, which will enable revenue optimization. Further, convenience is a crucial aspect when it comes to cross-border payments. Unlike domestic transactions, international payments come with a level of unfamiliarity for most consumers. In such cases, partnering with a trusted payment services provider in the region will help provide a convenient payment method for consumers, implying less risks and a sense of trust. Another aspect of choosing the right pricing approach is the presentment currency. International consumers prefer paying in their local currencies, and this plays a key role in further enhancing their trust and convenience. The ‘One currency for All’ approach is not ideal for consumers across diverse geographies, which makes it critical to present currencies customized to buyer countries.
The Global Payments Report by PwC reveals that 84% of global consumers prefer local payment methods.[2] This reiterates the importance of catering to consumer preferences to unlock new consumer segments abroad. Used by 72% of global smartphone users, PayPal enables businesses in India to receive payments from customers who have access to popular international payment options such as credit cards, debit cards, and e-wallets.[3] Real-time currency conversion rates and regional payment processing fees are leveraged to suggest optimal pricing models. This ensures businesses remain competitive while maximizing their profit margins, globally.
Building trust through transparency
Businesses need to realize that transparency is key for successful engagement with consumers. Disclosing all associated fees and exchange rates upfront ensures clarity and manages consumer expectations. Failing to do so could derail a business’ ability to provide an enhanced experience for consumers. For instance, 73% of global shoppers abandon their carts due to unexpected fees.[4]
Additionally, it is imperative for MSMEs to stay abreast with international regulatory requirements related to cross-border payments, including anti-money laundering (AML) and Know Your Customer (KYC) regulations. To this effect, PayPal helps merchants provide a seamless checkout experience to their consumers with clear pricing information, buyer and seller protection, KYC compliance, and transparent foreign exchange, thereby fostering trust with international consumers.
Balancing security & user experience
Nearly 70% of online shoppers abandon their carts before completing a purchase, and a significant portion of these abandonments can be attributed to a below average checkout experience.[5] The reason why businesses fail to simplify this crucial step in the buying process is due to the overly-complex security protocols. These abandonments translate into lost sales.
In today's digital world, businesses face a constant challenge, ensuring robust security measures without creating a cumbersome user experience. Perhaps that is the reason why 62% of businesses believe that reducing the amount of payment fraud is an urgent concern, more than any other issue.[6]
As India’s MSME ecosystem continues to grow and flourish, there is ample potential for businesses to embrace the opportunities that lie beyond our borders. With innovation, determination, and the right payment strategy in place, Indian MSMEs can set the blueprint for achieving global prosperity. PayPal continues to be the trusted partner for small businesses, empowering them with the tools and support required to expand into international markets.
If you are a small to mid-sized business looking to understand and navigate the cross-border payments landscape, click here for insights and tips.