1. What 3 words would you use to sum up 2016?
Challenging, Encouraging, Rewarding.
2. What do you think have been the most exciting industry trends this year – and what impact have they had?
e-Wallets have been exciting in the US this year – and especially the Apple Pay/Samsung Pay/Android Pay craze. While these were great in concept, they fell a bit short of industry expectations when it came to user adoption. Consumers showed early signs of mass adoption in 2015; however, the utilization trends seem to be growing at a slower pace than expected. Consumers are resisting parting ways with their credit cards, or card-supporting mobile wallets, like PayPal. US consumers tend to be creatures of habit, using tried-and-true methods of payment that they know. Mobile wallets will be something to watch in 2017 as an increasing number of wallet upstarts and the sheer amount of marketing firepower used by Apple, Samsung and Google, to sell their respective mobile wallets, should shift the utilization trend upward.
Another exciting industry trend is the focus on LATAM market expansion. We are seeing more merchants focusing on the region in their mobile expansion planning and strategy. Brazil, Mexico and Argentina appear to be particularly high on merchant lists.
The merchant focus on payment optimisation is another key trend we experienced in 2016. Merchants have become far savvier in the way they view payment conversation rates vs new market expansion. They are attempting to squeeze more out of the current services provided while continuing to look for ways to remove friction in the payment process.
3. Which market in your region do you think offered the greatest opportunities in 2016? Do you think businesses took full advantage of these?
LATAM and Asia are widely considered to be the hotbed of activity in 2016 for US headquartered merchants. We have seen a marked increase in demand for localized solutions in both regions with heavy emphasis on Brazil and Mexico. Merchants looks to Worldpay for our market leading solutions and expertise in challenging, developing markets and our thought leadership in these areas have secured a number of new opportunities for us this year.
We worked closely with a large online travel agency (OTA) this year who looked to Worldpay to help them capitalize on a local market in Mexico where their local operation and their previously chosen payment provider could not seem to produce a formula for success. In partnership with our counterparts in the Worldpay Brazil office we were able to deliver a localized payment solution in Mexico that included instalment payments. This solved a major obstacle for the merchant in question and it further proved that the market for card not present expansion in Mexico is full of opportunity for companies looking to capitalize on an ever increasing number of customers.
4. What were the biggest challenges for businesses in your region this year? Do you see these continuing in 2017?
Medium to large US businesses selling via Card Not Present (CNP) sales channels have matured at an accelerated rate in 2016. They continue to expand their borders seeking new revenue generating opportunities in markets where they deem opportunity to exist. One of the biggest challenges faced by US merchants in 2016 is the opportunity cost of ignoring international markets, while shoring up sales efforts in “comfort” markets. We have observed a major trend of international market expansion in 2016 with a focused merchant view on market entry with methods of payment that could potentially provide access to 80%+ of the local customer base.
Another major challenge experienced by US merchants this year is the complexity of international market expansion, while navigating the changing scheme regulations governing domicity requirements relative to selling to a local client base in regions. The schemes have taken a much more active role in 2016 to protect the income of their local issuers, as well as the regional scheme brands themselves, which has caused heartburn for some of the larger multi-national companies who have been forced to rethink their tax payment entity and operational structures moving forward.
A third, ever present challenge faced by merchants in the US region is the need to offer payment redundancy in most/all primary markets in which they serve. This has given rise to a major 2017 trend which is the use of authorization/cost optimization routing across two or more payment entities. We expect this trend to continue as merchants become more payment savvy and cost conscious in advance of what is predicted to be an economic performance contraction in the next 12 – 18 months. International market expansion, as well as optimized payment acceptance, are the two prime defences merchants have to combat weakening demand for products in their home markets.
5. Who’s doing interesting things in the online space? Who should we watch in 2017?
Coinbase continues to lead the charge in the marketplace driven acceptance of crypto-currencies. Uncertainty around global economic markets are driving a resurgence in the investment tied to crypto-currencies (Bitcoin for example). Coinbase is poised to capitalize on this trend offering a transactions marketplace for a variety of international markets.
Airbnb is one to watch in 2017 as they expand their operation to include full OTA capability on top of the host/tenant model they have used to build Airbnb into one of the most successful online marketplaces for people to list, book and discover unique accommodations around the world. They have permanently altered the way travellers look at the accommodation space and have disrupted the travel industry in ways that will become much more evident in 2017 and beyond.
On the vendor front we are seeing the application of machine learning to real time fraud prevention that includes the use of real time website navigation considerations, geolocation, historical trend data, device ID and rules based science to provide immediate risk assessment of the likelihood that a given transaction (or person/entity behind the transaction) is fraudulent. This will be a space to watch in 2017 as the increasing rate of EMV adoption will continue to drive more fraud into CNP channels.
What opportunities do developing markets present? If you were a global business, where would you be focusing your attention in 2017?
That’s a difficult question and it depends greatly on the products being sold, the competitive landscape and company’s ability to establish regional offices in core markets. The obvious market to focus on is China given the sheer number of potential customers that comprise the “purchasing class”, as well as the number of Chinese expats living across the globe. I would argue that the considerations around vertical are very important here as a medium sized retailer is likely not going to go head to head with an AliExpress or equivalent selling to a mainstream Chinese consumer base.
India is a rapidly expanding CNP market offering a tremendous opportunity for those businesses who are willing to establish local tax payment entities in India. The use of card and cash based payments are become more prevalent and the sheer number of potential customers is very high. Recent market research suggests that India could overtake the US in terms of online consumer spend in the next 10 years. Given the size of the potential consumer base and the improving sophistication of the payment solution landscape in India we will likely see that trend accelerate.
LATAM will continue to be a hotbed of activity as consumers and business in Brazil, Argentina and Mexico (not to mention several additional markets) continue to lead the charge on an ever expanding market opportunity. The complexities of these markets and the need for a partner who understands how to navigate the central bank functions, local scheme laws, tax considerations, etc. Worldpay is well positioned to help our clients to capitalize on these markets.
To find out more from Casey about eCommerce in North America in 2017, keep an eye out for Part 2 of our blog - coming later this week...