Unlocking the Next Billion Customers: Processing Ecommerce Payments in Emerging Markets

The digital payments landscape has evolved rapidly over the last decade, driven by technological advancements, changing consumer behaviors, and the proliferation of smartphones. But one of the most compelling areas of growth remains the emerging markets, where a vast majority of the next billion customers are poised to come online. The potential for ecommerce in these regions is immense, but capturing that opportunity requires a strategic approach to processing payments. This article explores ecommerce payment opportunities in emerging markets, analyzes key customer behaviors, and looks at how businesses can expand their payment processing capabilities to unlock new growth.

Ecommerce opportunity sizing in emerging markets

Emerging markets represent the frontier for ecommerce expansion, with populations in regions such as Southeast Asia, Latin America, the Middle East, and Africa experiencing rapid digital adoption. Retail ecommerce is projected to record sales growth of $1.4 trillion USD from 2022 to 2027; over 64% of this opportunity is expected to come from emerging markets (source). The population in these markets, many of whom are young and tech-savvy, is expected to comprise over 40% of global internet users by 2027 (PwC, 2023).

Several factors make emerging markets highly attractive for ecommerce growth:

• Expanding middle class: The rise of the middle class in markets like India, Brazil, and Nigeria is increasing disposable income and driving demand for online goods and services.
• Mobile penetration: Over 3.5 billion mobile internet users are expected in emerging markets by 2025 (McKinsey), and mobile commerce is growing exponentially in regions where smartphones are the primary point of access to the internet.
• Digital transformations: Government initiatives and investments in digital infrastructure are also fueling ecommerce growth, thus creating an ecosystem where digital payments can thrive.

However, capturing the next billion customers means adapting to local nuances and understanding the diverse needs of consumers in these regions.

The competitive landscape in ecommerce payment processing

As ecommerce continues to grow in emerging markets, so does the competition in payment processing. Several key players are at the forefront, each aiming to provide seamless, secure, and efficient payment solutions for businesses operating in these regions.

Key players and payment solutions:

• Global payment providers: Companies like Stripe, Adyen, and PayPal have expanded their footprints into emerging markets by partnering with local banks and payment processors to offer a diverse set of payment options. They often cater to large international merchants looking to expand their reach in regions such as Southeast Asia and Latin America.
• Local payment gateways: As ecommerce in emerging markets is increasingly driven by local customer preferences, regional payment gateways such as dLocal (focused on Latin America), and Thunes (focused on cross-border payments for the Middle East and Africa) are helping global businesses tap into these markets by offering integrated payment processing solutions suited to local needs.
• Mobile payments: In emerging markets, mobile payments are becoming a dominant force. Apps like Alipay, WeChat Pay, and M-Pesa in Africa and Asia have reshaped the payment landscape. Local fintech startups are offering innovative solutions tailored to regional preferences, which is further intensifying competition.
• Alternative payment methods: The rising use of alternative payment methods (APMs) such as mobile wallets, QR codes, and buy-now-pay-later services presents both challenges and opportunities. As many consumers in emerging markets are unbanked or underbanked, APMs offer an alternative to traditional credit cards and open up a larger market for ecommerce platforms.

Despite this fierce competition, the fragmented regulatory and financial systems implementation in emerging markets can create challenges. Each country has its own set of rules around digital payments, making it difficult for global ecommerce platforms to enter these markets without considerable investment in compliance and operational overhead.

Customer behaviors and preferences in emerging markets

Understanding customer behaviors and preferences is crucial for any ecommerce platform looking to expand into emerging markets. The dynamics of consumer behavior in these regions are markedly different from those in established markets. Let’s focus more on the solutions mentioned above:

Alternative payment methods:

Consumers in emerging markets often prefer APMs over traditional credit cards. According to a report by Glenbrook Partners, nearly 70% of consumers in Southeast Asia rely on mobile wallets and other APMs for their digital payments (Glenbrook). This is primarily due to the high number of unbanked consumers who have access to mobile phones but not necessarily to traditional banking services. Mobile wallets, such as Paytm in India, GCash in the Philippines, and MercadoPago in Latin America, are becoming standard ways for consumers to make payments.

Mobile payments:

Mobile payments are arguably the most significant trend in emerging markets. The high penetration of smartphones and mobile internet access has made mobile wallets a primary method for purchasing goods and services. Consumers in these markets are more likely to use QR code-based payments, carrier billing, or peer-to-peer (P2P) transfer services rather than credit or debit cards.

Local payment preferences:

It is also essential to note the preference for local payment methods. A significant proportion of consumers in these markets prefer payment systems that they are already familiar with. Therefore, offering country-specific payment options, such as UPI (Unified Payments Interface) in India or Boleto Bancário in Brazil, is crucial to localizing the ecommerce experience and driving conversions.

Why ecommerce platforms should expand payment processing to emerging markets

Expanding payment processing capabilities to emerging markets is not just a business opportunity – it’s a necessity for ecommerce platforms looking to capture new, fast-growing customer bases. Here are some reasons why:

1. Tapping into an untapped market

Emerging markets represent a massive opportunity for ecommerce platforms. With a large, young, and digitally connected population, these markets are poised for exponential growth in the coming years. Investing in payment processing now enables businesses to get ahead of competitors and gain a foothold in rapidly developing regions.

2. Enhancing customer experience

By offering locally preferred payment methods, ecommerce platforms can cater to the preferences of customers in emerging markets. A smooth and localized payment experience is often a key factor in driving conversions and reducing cart abandonment. As consumers are more familiar with mobile wallets, QR codes, and alternative payment methods, providing these options improves user experience and builds customer trust.

3. Driving revenue growth

As ecommerce in emerging markets grows, so does the demand for payment processing solutions. Platforms that invest in region-specific payment solutions can increase their revenue streams by tapping into a larger audience. Additionally, optimizing payments processing for cross-border transactions can drive global sales, as businesses can expand into new international markets more efficiently.

Key considerations when expanding ecommerce payments to emerging markets

While the opportunity is clear, expanding ecommerce payment solutions into emerging markets is complex. Here are the key factors to consider when entering these regions:

1. Regulatory regime

Each emerging market has a unique regulatory environment that governs digital payments. Ensuring compliance with local laws and regulations is paramount. Platforms must stay updated on payment regulations, data protection laws (e.g., GDPR in some regions), and the licensing requirements for payment providers. For instance, Brazil has strict rules governing cross-border payments and data privacy, which require businesses to partner with local payment processors.

2. FX quotas and dynamics

Currency exchange is another critical consideration in emerging markets. Exchange rates fluctuate significantly, and some countries impose foreign exchange (FX) quotas or restrictions. Understanding local FX dynamics and having the right cross-border payment infrastructure in place can prevent delays, extra costs, or potential legal complications. Partnering with local banks or payment processors who can navigate these complexities is essential.

3. Local licensing and taxation

Ecommerce platforms must also ensure they meet local licensing requirements. Some countries require digital platforms to obtain specific licenses to operate, while others may have taxation laws that vary based on the volume of cross-border transactions. Additionally, VAT or sales tax rules may apply differently in these markets, requiring local expertise to maintain compliance.

4. Customer support

Customer support is crucial for a successful ecommerce operation, especially when dealing with international customers. Offering multi-lingual customer service and support that operates in local time zones will enhance customer experience and build brand loyalty.

5. Acquiring bank partnerships:

Building strong relationships with local acquiring banks is necessary to facilitate smooth transactions. These banks help process payments, handle chargebacks, and offer solutions tailored to a region’s needs. In some countries, ecommerce platforms may need to partner with multiple acquiring banks to ensure seamless payments processing.

Understanding local payment preferences is vital

Emerging markets offer vast opportunities for ecommerce growth, but to truly tap into this potential, businesses must focus on understanding local payment preferences, navigate regulatory complexities, and offer seamless, localized payment solutions. Investing in payment processing now will create significant opportunities for ecommerce platforms to serve the next billion customers in the most dynamic and fast-growing regions of the world.

By understanding the competitive landscape, customer behaviors, and key considerations for expanding payment systems, ecommerce platforms can position themselves as leaders in the digital payments revolution across emerging markets. If you are interested in implementing payment processing solutions or enhancing your ecommerce platform’s technology, use this contact form to get in touch with one of our experts.