Payments industry perspective

How can online merchants cater for non-card customers?


Online merchants throughout the world are increasingly using payment gateways to process and collect online payments rather than the traditional banking sector’s merchant accounts. The advantages of using a payment gateway over the traditional bank merchant’s accounts is the ease of implementation, reduced cost and smooth user experience that prevents purchase drop off at checkout.

Whilst there are a plethora of payment gateway API’s and plugins available around the world, the needs and requirements of merchants can vary enormously between different markets.

Most payment gateways offer credit and debit card payment on their payment gateway platform, but what about customers who have no credit/debit card? In mature markets such as the USA, Europe and certain Asia Pacific countries (Japan, South Korea, HK, Singapore and Australasia) this is less of an issue. However, for countries with a developing infrastructure, and a less wealthy geographically dispersed population alternative payment methods need to be offered.

Alternative Payment Methods

If a payment gateway can integrate non-card payments (Bank transfer, Virtual Bank Accounts, or other e-wallet schemes) they can increase the size of their merchant’s potential customer base. This is because in large markets like Indonesia or the Philippines, for example the bulk of the credit/debit card using population are centered around the urban conurbations (Jakarta and Manila). The size of the rural population can be large and dispersed, however the penetration of mobile and therefore the potential for online shopping via mobile cannot be ignored. For example, although Indonesia has a banked population of about 36% most banks do not issue an ATM/debit card, and credit card penetration is a paltry 1.6% (World Global Findex). So, how do merchants sell goods and services to these rural populations without exposing themselves to risk and fraud as experienced by numerous Cash on Delivery (COD) systems?

Some payment gateways offer a multitude of options for the user allowing them to select alternative methods of payment if they cannot pay by credit or debit card. For example, offering an Internet Banking option (bank transfer) allowing the user to pay online for goods by making payments straight from their bank account. A good payment gateway will enable this experience without the need for additional verification, re-direction to other webpages or the completion of vast amounts of data. This process can be simplified whilst still maintaining a higher level of security for the user and merchant.

Throughout Asia the use of e-wallet type payments are popular mainly thanks to their ease of use with smartphones. Each e-wallet can be different and may have varying requirements, but a good payment gateway will enable the merchant to choose from a selection of common alternative payment methods. Indeed, with large volumes of Chinese tourists visiting other Asian counties it is becoming increasingly important for online merchants based in any Asian country to be able to accept payments from popular Chinese e-wallets like Alipay and WeChat Pay.

The rise of the Virtual Bank Account

A Virtual Bank Account option can also be desirable. When a user selects this option to purchase goods, the process generates a unique code which they can then use to pay for the goods with cash at approved outlets. Further, the merchant banks the payment and the goods are then dispatched. This is a perfect way to counter fraud and risk as goods can be dispatched only once the payment has been completed. Virtual Accounts

What about the future of the e-payments sector in Asia?

Recent market reports from the likes of Capgemini indicate that in developing Southeast Asian countries the percentage of banked population will increase along with credit card penetration. However, this growth will likely be centered in the major conurbations leaving the dispersed rural population at a disadvantage (for example Indonesia's population spread over 6,000 inhabited islands). This does not mean that this rural and dispersed population do not want to purchase goods and services online. Far from it, with smartphone penetration on the increase and an improving mobile network infrastructure, this rural dispersed population is rapidly becoming an area of growth for online purchase. Indonesia for example has 132M online users, representing 56% of the population. It is therefore clear that the opportunity for merchants and enterprises selling goods and services online cannot be ignored. If they use a payment gateway that facilitates access to the non-card holding customer, they will surely maximise their sales revenue from this ever-growing market.