A new white paper from local payment specialist, Boku adds to an emerging consensus that, across the world, consumers are beginning to turn their backs on card-based payments and card-linked wallets.
Instead, more and more payment volume is migrating to local payment methods (LPMs).
According to analysis from Boku and Juniper Research, by 2028, card-based payment, including card-linked wallets, is set to account for just 41% of global ecommerce payment value – down from 50% in 2022. [1]
But, for digital merchants, accepting LPMs is not just a matter of consumer preference, Boku argues.
As the paper puts it, “there is also a golden opportunity for digital merchants to reduce their exposure to the limitations, the frustrations, the costs, and the inefficiencies of card-based payments… many of the LPMs are simply a more fit-for-purpose way of processing digital payments.”
In fact, Boku reckons that today’s LPMs are capable of out-competing cards across five dimensions:
- Efficiency – often, the operating model of LPMs is simpler and more elegant. While the card-based model was first designed for analogue payments in the 1950s, LPMs were designed for digital payments in the 21st century.
- Security – most LPMs are specifically built to take full advantage of the security capabilities that are inherent in today’s mobile devices, including the biometrics, and the device fingerprinting.
- Cost – typically, LPMs are unencumbered by the need for multi-lateral interchange fees and, as a result, they are often more cost-efficient to accept.
- Innovation – because they were designed specifically for modern-day digital payments, LPMs enable merchants to explore related innovations, including new opportunities for improved customer service, such as instant refunds.
- Compliance – with a simpler model, and no need to accommodate +50 years of legacy requirements, LPMs tend to have a simpler compliance regime.
But the issue is, all LPMs are not equal. So digital merchants need to think carefully about which ones to accept.
“As an example, consider the situation in Japan,” says the paper. “A digital merchant aiming to establish operations in the country will be confronted by more than 60 payment methods spanning 12 broad categories. Which ones are the best fit for its business, its target customers, and its growth plans today? And will the picture remain the same a year or two into the future?”
The scene is set for a more collaborative and strategic business relationship between digital merchants and payment service providers says the paper.
To find out more, download Choosing the right Local Payment Methods – How to select and onboard the Local Payment Methods that will make the biggest difference to your online sales.
[1] Boku, 2024 Global Ecommerce Report, The Changing World of Payments, 2024
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