25 MAR 2021

Why do merchants need to view payment channels as user acquisition partners?

POSTED UNDER Bundling Digital Goods Digital Wallets Direct Carrier Billing Mobile Marketing Payments Physical Goods
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Mattias Liivak

Head of Marketing & PR, Fortumo

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2020 was a great year for e-commerce and digital content merchants. Lockdowns meant people spending more time at home, buying household goods and entertainment through digital channels. As life returns to normal, some of this growth will fade off. How to keep up the pace?

The single biggest growth opportunity for any company doing business in digital channels is Asia. 88% of the next billion entrants into the global middle class will be in the region. But this opportunity involves three major challenges:

  1. Payment access: credit cards and PayPal have single-digit adoption across most of the region
  2. Local competition: incumbent local competitors have a strong grasp on the market
  3. Fragmented markets: each country is unique, requiring an individual, one-to-one approach

The challenge of payment access can be overcome by adopting local payment methods. Mobile wallets for e-commerce and carrier billing for digital content already account for 60% of all transactions in the region. What about the other two: local competition and fragmented markets?

Unlike credit cards, local payment methods do not act only as payment enablers. Mobile wallets provide consumers with a range of services: messaging, food delivery, hotel bookings, insurance, utility bill payments, international remittances etc. The same is true for telcos: devices, mobile data, calls, home internet and TV services. 

Wallets and telcos have a deeper relationship with the consumers than credit card providers. This means these local payment partners are also capable of supporting merchants in service discovery and catching up with the local competition.

The three primary ways for merchants to utilize local payment methods for user acquisition are:

  1. Cashbacks. The traditional model used by credit card providers has also been adopted by mobile payment providers; spend $50 and get $20 back. Due to their transactional nature, mobile wallets are always on the lookout for new offers to keep their user base engaged
  2. Mini-programs: Dedicated app-within-app solutions that merchants can develop and promote inside of mobile wallets. In new markets, this can work efficiently for gaining initial traction, as a lot of local consumer screentime goes to the wallet apps (see the list of additional services consumed via wallets above) 
  3. Bundling: Merchant content or goods are bundled together with eligible users of the local payment method. Most bundles today are run by telcos for digital content. But product bundling has been commonplace in retail for a while; in digital, any merchant with a recurring business model will also be able to bundle with mobile wallets

Local payment methods have a deep relationship with their user base, which means these kind of offers can be highly personalized. Only users above a certain spending threshold can be targeted; bundles can be offered only to users who match the merchant’s core demographic. This leads to increased uptake, engagement and revenue.

By adding local payment methods to checkout, merchants are able to offer users with a payment option that they use frequently in their everyday life. It also opens up new opportunities for user acquisition in markets that are difficult to enter.

This often provides the fastest way to validate and gain foothold in new regions and countries. If the validation proves to be a success, merchants can invest their resources into building the direct relationship with local consumers, so as not to become overly reliant on the local payment channels.

Finally, there is the challenge of fragmented markets. Local payment methods work best because they are local. But that also means they are fragmented. Connecting them one-by-one for market validation is not feasible.

That’s where Fortumo helps. By standardizing these fragmented connections, creating one universal channel to access hundreds of different local payment methods, it opens up simple access to new payments revenue, user acquisition or both.

Interested in learning more about the local payment methods we support? Get in touch.

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