Local Payment Methods: A Step-by-Step Guide for Merchants

Increase your customer base by offering local payment options - let people pay how they want to!

One of the best things about running an ecommerce business is that when people make online purchases, it doesn’t actually matter where they are located relative to where your business is located. If you create a strong reputation, everyone from California to Caracas will want to buy your product regardless of any physical borders

In order to offer these customers easy access to your products, you will need to make sure you accept their preferred local payment methods, which are not the same in all areas of the world. By letting customers pay using the local payment options they are used to in their home country, they will feel more comfortable purchasing from you and you will be able to increase your customer base and outpace the competition. 

Consumers all over the world are impacted by their cultural norms and the technology available to them when it comes to choosing who to purchase from and how to pay. As an ecommerce seller, it is relatively easy for you to offer a huge range of payment methods - capturing new markets and gaining new customers - just by learning about the local payment options that your customers would like to be able to use. 

Remember that not everyone has a visa or mastercard or has even heard of PayPal or ApplePay. If you want cross border customers from a wider variety of places, read on and discover the top local payment methods from around the world and what you need to do to accept them and give your customers the checkout experience they are looking for. 

What are Local Payment Methods? 

Let’s start with a simple explanation of what exactly a local payment method is. Much as it sounds, it is the preferred payment option in a particular geographic region. In some cases and places, there are payment methods that are only available in a specific region. When we talk about local payment methods, we are referring both to ones that are only available in certain places as well as payment methods that, although offered in many places, may be more popular in some locations. 

For example, people all over the world use credit cards, and it is one of the most popular payment methods in Spain. There is also a service called Bizum which is only available in Spain. So, both Bizum and credit cards are examples of local payment methods to Spain - Bizum due to its availability and credit cards due to their popularity. 

Types of Local Payment Methods Available Worldwide

It is very important to look at the geographic regions where your customers or target audience are located and gain an understanding of the popular payment methods in each area. Some people like to use different options for domestic purchases versus cross border sales, and there may also be certain limitations for international purchases especially when it comes to direct debits, for example. 

You will want to find the balance between offering your customers a seamless checkout experience using the local payment method of their choice, while also managing risk and making sure that all transactions are safe and secure. In this way,  you will be sure to build your customer base, gain customer loyalty and watch your profits grow. 

The main categories of local payment methods include the following:

Cash

Of course if you are in the ecommerce market, cash is less relevant to you. But for those with brick and mortar businesses, especially those in high-tourist areas, you may want to consider whether you will accept cash only in the local currency or also in other currencies.

Digital Wallets & Peer-to-peer (P2P) Mobile Payment Apps

Mobile payments and digital wallets are types of alternative payment methods that are growing in popularity with the likes of apps like Apple Pay, Google Pay, Click to Pay and Paylib to name just a few. Whether a digital wallet or a P2P mobile payment app, customers can save their payment information securely in the app and then use it to make payments quickly and efficiently. 

Credit & Debit Cards

Credit and debit cards tend to be popular in many parts of the world with brand names including Visa, Mastercard, and American Express. There are also some country-specific credit card companies like Carte Blueu and CartaSi. Some of these cards are only able to be used for domestic transactions, in which case an ecommerce merchant must have the ability to process these cards via a local entity. 

Bank Transfers

Bank transfers occur when money is moved from one person’s bank account to another anywhere in the world. This method is preferred by people who may not have a credit card or do not wish to use it for a certain transaction. There are often fees involved in bank transfers which can make them less popular. 

Direct Debit (including ACH & E-Checks)

Some customers like to set up a direct debit situation in which their account will automatically be charged a certain amount on a scheduled day. This type of payment method is typically used for subscription models to ensure that payments are made on time. 

Buy Now, Pay Later (BNPL)

The BNPL scheme is growing in popularity, allowing customers to pay for a purchase in installment payments charged over time. Some providers charge the merchant a commission and/or fee for each transaction so it is important to do the math and determine whether it is worth offering this payment option. If it is something that a lot of your customers will expect to have access to, then it might be worth it despite any fees in order to grow your sales and foster customer loyalty. 

Local Payment Methods in Different Regions

As mentioned above, each country or region has its own popular local payment methods based on any number of factors including cultural and socio-economic ones. There really is no one-size-fits-all approach to choosing the payment methods that you will offer - it comes down to understanding your target market and offering the payment methods that they want to use. 

Following is a brief run-down of the most popular payment methods in various regions of the world: 

Payments in North America

North Americans, which includes Canada and the United States, are heavy credit card users, especially Visa and Mastercard. They also favor the use of debit cards, followed by cash and only then digital or mobile wallets. The use of digital and mobile wallets is, however, expected to grow significantly in the coming years as this technology becomes more popular and catches on across the world.

Most popular payment methods in North America:

  • Credit/Debit Cards
  • Cash
  • PayPal
  • Apple Pay

Payments in Greater China and Asia Pacific

With India and China in this region of the world, there is a huge ecommerce market driven in part by the sheer size of the population. In some countries like South Korea there is a big emphasis on Buy Now Pay Later, while other countries like Thailand prefer e-wallets and bank transfers. 

Most popular payment methods in Greater China and Asia Pacific:

  • Credit Cards
  • Cash
  • WeChat Pay
  • MobiKwik
  • Bank Transfers

Most Popular Local Payment Methods in Europe

Because there are huge cultural differences in different European countries, the local payment practices and preferences are vastly different from country to country. For example, Western Europeans tend to favor debit and credit cards, while those from Eastern Europe prefer credit cards or cash. In the UK, for example, people like to use Revolut while in Germany PayPal and Klarna are more popular. Spaniards love to use cash and even ecommerce merchants will accept cash-on-delivery.

Most popular payment methods in Europe:

  • Digital Wallets
  • Credit Cards
  • Debit Cards
  • Bank Transfer

Payments in Latin America

There is not yet a huge ecommerce market in Latin America, but with the increase in the availability of smartphones that is beginning to change. A lack of trust in the security of mobile payment systems in many countries has kept the use of digital wallets to a minimum, but that too is beginning to take off especially in Brazil with other countries poised to follow suit. While credit cards are very popular, many are only able to be used for domestic purchases.

Most popular payment methods in Latin America:

  • Credit Cards
  • Cash
  • Digital Wallets

Local Payment Methods in Africa

As a continent made up of many third world countries, some without even basic banking infrastructure, Africa is showing impressive growth in the world of mobile commerce. Most Africans tend to use mobile transfers as they are considered the most secure. Credit cards are not accessible to most people and many do not trust their security. 

Most popular payment methods in Africa:

  • Apple Pay
  • Transferwise
  • UnionPay
  • M-Pesa

Benefits of Accepting Local Payment Methods

The biggest overall benefit of accepting a large variety of local payment methods is the added ability to reach a wider target market and build a strong, loyal customer base. Here is a more in-depth look at some of the top benefits:

Fewer Abandoned Carts

More carts are abandoned pre-purchase than not. While many of those abandoned carts may be due to people just window shopping with no intention to purchase, there are definitely a good number of purchases that are not completed simply because the payment method of choice was not available.

Luckily, this is an easy fix and if you offer the local payment options that customers are used to using, you just may see an uptick in completed purchases and lots of new happy customers. 

A Better Checkout Experience

No one likes a complicated or difficult checkout process. Making sure you include local payment options will ensure a seamless and flexible checkout experience for your customers. They will trust you because they can use their tried and true payment methods to purchase from your site and you will see a rise in your conversion rate.

Don’t forget you may have a lot of customers coming from an unexpected place - always check your analytics and see where the high-traffic locations are and make sure you include local payment options for those places. 

Attract More Customers

The more types of local payment methods you accept, the more customers you can attract. Remember that people from different regions have very different preferences and practices so don’t assume that you can just accept Visa and Mastercard and you will be set. Pay careful attention to the preferred payment methods used in your biggest target markets and make sure you offer those. 

If you notice a drop off in customers from a particular region it might be because there is a particular local payment method in use there that you do not offer, so do your research and capture that wider audience.

Encourage Brand Loyalty and Trust

People like being able to make purchases using the payment methods they are used to and feel comfortable with. If you are an international ecommerce merchant offering customers to pay using their regular local methods, that will build their trust in your brand because they can think of you like a local business. People trust what they are familiar with and it will help your business in the long run for your brand to be associated with comfort and familiarity. 

Once customers can trust you and start purchasing, if you offer them a smooth and seamless checkout experience using their local payment method they are more likely to become loyal returning customers. 

Stay Ahead of the Competition

The ecommerce market is crowded and there can be fierce competition for all of the people looking to shop using online transactions. Keep up with your competitors or even stay a step ahead of them by offering as many different local payment options as you can. Aligning your offerings with your customer’s expectations - or even better, going above and beyond, - is what will make your business stand out and flourish even in a tough market.  

This is especially important if you are new to a particular geographic market and want to make a big splash there. As soon as the locals realize what you can offer them, they will come to you over your competitors. 

What Types of Businesses Should Offer Local Payment Methods?

As more and more people move to online shopping and using digital payment methods, many different types of businesses need to consider offering local payment methods in order to attract a wider audience and increase sales. Following is an explanation of how offering local payment options will benefit different types of businesses:

Online (E-commerce) Marketplaces

Online marketplaces are a platform where a number of different ecommerce providers can sell their wares in one place. They are usually operated by one person or company who takes care of all the payment processing so it is a good option for smaller sellers who may not have the payment infrastructure set up yet. If you operate an online marketplace or are considering joining one as a seller, it is definitely a good idea to make sure that a large variety of local payment options are offered. People may check out the online marketplace from so many places around the world and it will be beneficial to offer the relevant local payment methods that they will want to use. 

B2C

Online companies that sell directly to consumers have a vested interest in offering local payment options, especially if looking to scale up and expand to new markets abroad. It will make it much easier for customers when they see that their local payment methods that they are used to using are available. 

B2B

Companies that offer services to other businesses can also benefit from offering local payment solutions. It can be complicated to figure out cross-border payments when one company is purchasing a product or service from a company in another country. In some cases it may even be a non-starter, killing a potential deal before it even gets off the ground. If the seller is able to offer local payment methods, the entire process can be expedited making it much easier to deal with international customers. 

Banks 

With the rise of Fintechs and new types of banks, customers are in the market for online banking environments that offer innovative features and a fully digital experience. Banks and financial services companies that are able to offer easy access to cross-border transfers and transactions and cash using local payment methods will do well especially among the Gen Z’ers who are fast becoming a huge percentage of the consumer population. 

Others

The list above is not exhaustive and there are many other types of businesses that could and should consider offering local payment methods, including:

  • Money Lenders - there is a big market of people looking to borrow money for various reasons. Lenders will open themselves up to a bigger market if they allow the loans to be repaid using local payment options. 
  • Payment Providers - sometimes companies hire payment providers to facilitate making payments to employees or vendors located in other countries. This can be a complicated process with restrictions on the types of payments that can be used. Payment providers that focus on expanding their portfolio to include many different local payment options will be able to increase their market share and offer a better service to their customers. 

What Do You Need to Start Accepting Local Payment Methods?

In order to start accepting local payments you first need to decide which ones you want to offer. This will be dependent on who your cross-border customers are and where they  are located. Market research will help you determine what these customers are looking for and the payment methods they are used to using. 

Next, you will need to ensure that the payment gateway that you use to process payments can handle all of the different payment options that you want to offer. Don’t get stuck only being able to offer credit cards and Paypal! Remember that there are hundreds of other local electronic payment options that your customers are just itching to use and you can be that seller that offers them all (or at least many of them!). 

Keep in mind that if your target market is third world countries or others with a low socioeconomic level, you may be looking at customers who don’t have a bank account or access to a credit card and they may be more interested in pre-paid payment options. In other countries, people might be used to paying in installments for most items so it’s also important to make sure your payment infrastructure supports recurring billing and payments. 

Once you select the payment gateway (essentially a software system that integrates with your ecommerce site and processes payments) that you wish to use, you can work with them directly to integrate the local payment options that you wish to offer.

Types of Fees in Local Payment Methods

The fees for offering local payment methods will vary. Your payment gateway and/or merchant service provider will charge you their fees, which will either be a standard amount or a per transaction charge (or some combination). You will want to compare different providers to determine the one with the pricing plan that works best for you considering the payment options you want to offer and the volume of transactions you expect to process.

In addition to the fees charged by your service providers, there may be additional fees per transaction charged by the companies offering the local payment method themselves. These fees can vary widely by provider as well as by country. For example a PayPal or Klarna transaction in the USA may have different fees than a similar transaction in a European country. 

The best thing to do is create a list of all the possible payment options you want to offer and then add up the fees - it may take some trial and error before you figure out the perfect mix that works for your business. It’s worth paying higher fees for payment options that will get a lot of use, but if you are paying high fees for a solution that hardly anyone uses you might want to remove that option. 

Why are Local Payment Methods Important?

Many customers will simply abandon their cart and look for another option if they get to the checkout screen only to discover that the payment method they like to use is not available.

Offering an assortment of local payment options is important just because it shows a level of caring that will foster trust and encourage them to continue shopping. You need to find the balance and the right amount of payment methods to offer

To make sure you are offering the right payment methods, consider:

  • Geography - what countries and areas of the world are your customers in? What types of payment methods are most common there?
  • Channel - do most of your customers come to you via smartphone or tablet or a desktop? Make sure the payment methods you offer are available via the relevant devices. 
  • Business Model - are most of your customers making one-time purchases or are selling subscriptions? Make sure you offer the payment options that fit the model. 

Importance to Customers

Customers may seek out sellers that offer local payment options because it is much easier and more comfortable for them to use the payment methods that they turn to for most of their purchases. Especially when buying from an international site, it is comforting to see a familiar logo and will make the customers more secure and confident that their purchase will go smoothly. 

Some customers may not have access to certain payment types so if you don’t offer their local payment method they would not be able to purchase from you at all. 

Importance to Merchants

Accepting local payment methods is of huge importance to merchants because it is a way to reach entirely new market segments and not miss out on growing opportunities. It also offers higher conversion rates and fewer abandoned carts, and can even minimize fees in certain cases. 

Why Do You Need to Integrate Local Payment Methods?

Rather than sending your customers on a wild goose chase to different websites in order to allow them to use their local payment method of choice, it is crucial that you integrate the options directly into your website using your payment services provider. This way, the entire process takes place on your site and the customer can be sure that the transaction will be processed securely. 

It will also be much easier for you if all of your payment options are managed in one central location as the rules and regulations in each country could change and it can be a full time job just keeping up with those changes and making sure you are in compliance. If you use an integrated solution that takes care of the entire backend for you, you will not have to worry about any of the details and can focus on growing your business. 

How to Choose the Best Payment Method?

Ok, so now you know why you need to offer local payment methods, but how are you going to choose which ones are the best to offer? Unfortunately, there is no right answer as it is highly dependent on the type of business you run and who your customers are. We can try to make it a bit easier for you with the table below, summarizing the main categories of payments, how secure they are, how fast you can get paid using them, and which regions they are most popular. This should help you get started and from here you can research the specific providers in each region relevant to your business.

Payment Method Security Speed of Payment Popular Regions
Cash Low Immediate Latin America Asia Pacific North America
Debit Cards Very High 1-2 Days Europe,North America
Credit Cards Very High 1-2 Days Latin America, Europe ,Asia Pacific ,North America
Bank Transfers High Within Hours Europe Asia Pacific
Mobile Payments Very High Within a Day (usually) Africa Latin America Asia Pacific Europe North America

Choose the Payment Methods you Want to Offer

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FAQs

Which payment app is best for merchants?

The number of people using mobile apps to make payments is growing. As a merchant, you should determine which payment apps your customers are most likely to want to use - whether it is Apple Pay or a provider local to a specific area, and offer those payment options.

What is a local payment gateway?

A payment gateway sits on your website and processes the payments when customers enter payment details to make a purchase. You will want to work with a payment gateway that can process the local payment options that you will be offering.

Does culture really impact online payments?

Yes! Local culture can have a huge impact on the preferences that people have for making online payments. For example, some countries, like Germany, rely a lot on invoices - customers would prefer to order and receive an item and only then get sent an invoice that they will pay. Other countries, like the USA, have millions of credit card users who are used to buying on credit and will worry about how to pay later. In some places, it is more culturally acceptable to transfer money directly from one person to another.

How to accept local payment methods?

The most efficient way to accept local payment methods is to work with a payment gateway provider that can integrate a range of payment options. You will want to make sure that you can offer the options that are most relevant to your target market.

What are 5 examples of different payment methods?

Different payment methods include: 1. Cash 2. Credit cards 3. Debit cards 4. Bank transfer 5. Mobile payment apps such as Apple Pay

How do I manage risk and fraud monitoring with international payments?

Fraud is a very serious and real concern for anyone dealing with payments, but especially when it comes to cross-border transactions. Many countries have their own rules and regulations in place to combat fraud and you’ll need to make sure you are compliant with all of them. The best way to manage risk and protect against fraud is to work with a payment services provider that offers built-in protection.

Which are the most popular local payment methods?

The most popular local payment methods vary from location to location. In some places, like North America, people are partial to credit cards. In places like China and India, people like to use cash and certain local mobile apps. The most important thing is to know your market and understand what your customers are using and then make sure you provide those payment options.

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