How local payment methods can help lower operational costs – and drive revenue

Alternative payment methods are a boon to both customers and businesses. In particular, local payment methods are growing in popularity — they offer ways for businesses to lower operational costs, accelerate regional expansion, and drive revenue.

Here’s everything you need to know about local payment methods, including how they work and how they can be effectively integrated into your business model.

What are local payment methods?

Local payment methods are alternative payment methods only available in a specific country or region. In some cases, central banks offer country-specific payment options, with the bank’s strong brand attracting users. In other cases, private companies partner to customize solutions that match the payment preferences of local markets.

It's important to understand that local payment methods can take many forms, such as digital wallets like Venmo (United States) or AliPay (China), bank transfers like iDEAL (Netherlands) or Blik (Poland), or even vouchers like Boleto Bancário (Brazil). Some local payment methods can even cover an entire region, such as the single euro payments area (SEPA), which includes all European Union countries and others with strong EU ties, such as Norway and the United Kingdom.

How widespread are local payment methods?

The global e-commerce market is expected to reach $7.9 trillion by 2030, up from $785 billion in 2021 — a sign that the borders separating e-commerce regions are dissolving.¹

Naturally, alternative payment methods have helped accelerate this growth, given their ability to reduce friction and improve speed and ease of use during checkout. Indeed, the top features for customers surveyed while shopping online are transparency and flexibility in payment methods.²

While this rapidly expanding market offers considerable opportunities for enterprises, it also means that supporting every local payment method may be challenging. In one survey, 85% of ecommerce shoppers said that a seamless checkout process is one of the biggest drivers of trust — if businesses try to offer every local payment method in every market, customers can become confused and frustrated, especially when shopping on mobile devices.³

Instead, businesses should focus on accepting the local payment methods that customers most frequently choose, such as local digital wallets. This lets you capitalize on market opportunities without overwhelming your payment systems.

Why accept local payment methods?

Embracing local payment methods is essential for businesses aiming to expand globally while maintaining relevance in local markets. Here’s why:

• Tailored shopping experience. Providing local payment methods aligns with the financial behaviors and expectations of regional customers, ensuring a smoother and more familiar transaction process. This can boost customer satisfaction and loyalty.
• Access more markets. Integrating local payment options allows businesses to effectively engage with segments of the market that might otherwise be inaccessible. In many regions, certain local payment methods are not just preferred but are also predominantly used due to the limited availability of global payment methods.
• Distinct market presence. In regions where international payment methods may not be prevalent or preferred, providing local alternatives can position a company as a consumer-centric choice that respects and understands local consumer behavior.

How can local payment methods help drive revenue and reduce costs?

When businesses carefully and successfully determine which local payment methods are suitable for customers, they can benefit from:

• Greater conversions. 77% of consumers say they would abandon their cart if their preferred payment method was not offered.² Local payment methods, which are often the preferred and trusted way to pay, make it more likely they complete their purchases.

• Improved authorization rates. Transaction approval may be more likely when customers use local payment methods known to local banks.

• Lower cross-border fees. Local payments are usually processed in the local currency, eliminating currency conversion fees. For example, a customer in Brazil may want to use a preferred payment method, such as a local credit card at a US-based business. However, the business can’t process the transaction locally as it would probably need to be processed by a US bank connected to the business’s payment processor, and that bank might decline the overseas transaction — or accept it and charge the business fees for the cross-border transaction. When businesses offer local payment methods with connections to a local payment processor, this transaction can be processed locally at a lower cost to the business and with less friction for the customer.

• Faster settlement of funds. Local payment methods can speed up businesses’ access to revenue and improves cash flow management.

Challenges faced by enterprises when integrating multiple local payment methods

While the benefits of integrating local payments are clear, the process of doing so isn't always smooth sailing. Here are a few common payment integration challenges that enterprises may run into:

• Technical integration challenges. Each new payment method might require different software updates or hardware installations, making the integration process cumbersome and potentially disrupting existing operations.

• Legacy systems. Integrating new local payment methods into legacy systems adds another layer of complexity. These older systems were often not designed with the flexibility to adopt new technologies quickly or efficiently, requiring extensive customization or complete overhauls —both of which can be costly and time-consuming.

• Security standards and compliance. Each local payment method has its own security standards. Enterprises must ensure they meet regulatory compliance requirements to protect customer data and prevent fraudulent transactions. This may involve implementing new security protocols or updating existing ones, which can be technically demanding and require specialized knowledge.

To overcome these challenges, businesses can adopt a more modular, flexible IT infrastructure that allows for easier integration of new payment methods. Utilizing APIs that standardize the integration process across different payment platforms can also simplify the transition.

Additionally, partnering with fintech companies that specialize in payment processing, such as PayPal, can provide access to the necessary expertise and technology to help you get started with different local payment methods.

Integrate local payments to support global growth

Growing globally and accepting local payment methods don’t need to be complicated. With help from PayPal, businesses can easily integrate local payment methods that align with how customers want to pay — everything from debit and credit cards to digital wallets and bank transfers. The process can be hassle-free, helping businesses focus on profitable growth worldwide.

Ready to add alternative payment methods for your customers? Reach out to PayPal today.