In today’s globalized economy, businesses significantly focus on expanding their reach to a new global customer base. However, several challenges can arise when accepting payments from varying customers across different countries.
One of the most significant decisions businesses make is accepting local payment methods or sticking to traditional credit and debit cards. In this article, we’ll explore the benefits of local payment methods and why they can be a valuable option for merchants.
Local Payment Methods vs. Cards
Local payment methods are specific to a particular country or region. They include options such as bank transfers, direct carrier billing, e-wallets, and cash payments. Conversely, credit and debit cards are used worldwide. However, unlike in the US or Europe, there are many countries where the use of these payment methods is less rampant. In these regions, offering local payment methods can be a game-changer for businesses looking to expand their customer base.
Notably, local payment methods can be particularly beneficial for businesses operating on a global scale, with customers across different countries and regions. Offering local payment methods can help these businesses overcome some of the unique challenges of operating in such a diverse and dynamic market.
Benefits of Local Payment Methods for Merchants
1. Increases Conversion Rates
Local payment methods help businesses increase their conversion rates. Customers are more inclined to complete their purchase when they are presented with payment options they trust and are familiar with. For example, in many parts of Asia, e-wallets are the preferred payment method for online transactions. By accepting these payment methods, businesses can tap into a vast market of potential customers who may have been hesitant to purchase using a credit card.
Recent research conducted by Statista shows that by 2023, online retail sales will reach $6.51 trillion (£5.2 trillion), while also highlighting the importance of market diversification for businesses and the need for customer base expansion. So, alternative methods of payment are essential to expand the customer base.
2. Increases Customer Retention and Loyalty
One significant benefit of local payment methods for SaaS businesses is that they help to increase customer loyalty and retention. According to Esteban Kolsky, a seasoned customer experience adviser, 67% of customers refer to bad experiences as their reason for churn and 72% of customers will share a good experience with at least six or more people. Offering various local payment methods helps to create a personalized experience for each client thereby boosting customer retention and loyalty. Doing this will help to reduce churn rates and improve customer satisfaction.
SaaS businesses often rely on repeat customers and positive feedback to grow their business. By offering payment options familiar and trusted by customers in different regions, these businesses can build stronger relationships with their customers and improve their chances of success.
3. Reduces Payment Processing Costs
Credit card processing fees are high, especially for businesses processing transactions in multiple currencies. However, by offering local payment methods, companies can avoid some of these fees and retain more revenue. Also, many businesses operate on thin margins, and every dollar counts. By accepting local payment methods with lower processing fees than credit and debit cards, businesses can save costs.
4. Builds Trust
When customers see that a business is willing to accept the payment methods they are familiar with, they are more likely to trust such a business and feel confident making a purchase. Building trust is crucial for businesses operating in regions where online fraud is a concern. By offering secure, trusted payment options, businesses can help to alleviate some of these concerns and build long-term relationships with their customers.
Meanwhile, offering local payment methods also helps to attract more leads for businesses. It also helps them to stay competitive in their specific industries so they don’t lose clients to their competitors.
Local payment methods can be a valuable tool for SAAS, travel, ride-sharing, food delivery, and other subscription services businesses that operate on a global scale. By offering payment options that are familiar and trusted by customers in different regions, these businesses can improve their success rate, reduce payment processing costs, and build robust, long-term relationships with their customers.