An introduction to local payment methods

It’s not just your marketing that needs to be adapted when you start expanding into international markets. As well as paying attention to language and cultural norms, you also need to identify the most popular local payment methods for the countries you’re targeting.

Sure, card payments still sway in many of the world’s regions, but alternative payment methods (APMs) are gaining traction and even outpacing cards in some areas. Consumers are increasingly realizing the benefits of methods like digital wallets and buy now, pay later (BNPL), and if you fail to pay attention to these changing trends, you risk losing out on sales.

However, the popularity of different local payment methods varies wildly depending on where you are in the world (hence the name), so it’s vital you take the time to fully understand what they are, how they work, and where they have the biggest fans.

What are local payment methods?

Local payment methods are geographically restricted payment options that are specific to a particular region or country. These payment methods often cater to the unique needs of customers in that region and may differ from the standard payment methods that are commonly used in other parts of the world.

For example, while credit cards are a nearly universally accepted payment method, Bizum - a secure instant payment service - is used only in Spain. Other local payment methods include digital wallets, bank transfers, local networks, and BNPL.

Types of local payment methods

Here are some of the most popular types of local payment methods:

Digital wallets

A digital wallet is an app - usually downloaded onto a smartphone or other device - that allows users to store and manage their payment information, such as credit card details or bank account information, to use for online or in-app purchases, removing the need to carry around an actual wallet with physical cash or cards. Digital wallets use encryption to store payment info securely and protect it from unauthorized access.

A survey of consumers in Europe and the US (conducted by Checkout.com in 2022) found that 51% of respondents had used a digital wallet, such as AliPay, Apple Pay or Google Pay, in the last 12 months, making it by far one of the most popular local payment methods.

Bank transfers

A bank transfer is simply the transfer of funds from the customer’s bank account to the merchant's bank account. The sender just needs the recipient's bank details, including their account number and, for the US, bank routing number. Bank transfers are a fairly accessible payment method, making them a popular option worldwide.

For example if you operate in the Netherlands, you should think about offering iDeal, a company that facilitates safe payments between participating bank accounts and is used by more than 60% of Dutch consumers.

BNPL

BNPL allows customers to split the cost of an expensive purchase into several more affordable payments or to defer payment for a set period of time. This increases customer spending power, helps merchants attract more customers, and boosts sales. Merchants can offer BNPL by working with a third-party provider, such as Klarna, who charges a fee of around 5%.

Cash on delivery

Cash on delivery is essentially a transaction where a customer pays for goods or services when they’re received. Because there’s no risk of the payment failing, cash on delivery is a common local payment method in countries where a lack of financial infrastructure can make other payment types difficult or even impossible.

Pay on delivery payment methods are not just for countries with a developing financial infrastructure though, and are growing in popularity in all over the world as they enable goods to be checked by customers before the payment is made. An example is the service Splitit recently enabled for AliExpress customers in partnership with Checkout.com, that will initially launch in Germany, Spain and France.

Invoice

Someone buys a product or service, and the merchant sends an invoice requesting payment within a particular time frame, often between 14 and 30 days. Invoices are commonly used for business-to-business payments (B2B) or by service providers.  

Which businesses should offer local payment methods?

Offering local payment methods can help you to stand out in a competitive market, increase conversions and grow your customer base, but which businesses should offer them?

Online Marketplaces

Third-party sales through online marketplaces already account for the largest share of ecommerce globally and are set to grow to 59% by 2027. That gives third-party sellers access to an enormous potential customer base, but in order to fully take advantage of those consumers, they need to offer as many local payment methods as possible.

B2B Businesses

If you trade with businesses in different regions, offering local payment methods is the best way to ensure a quick and easy transaction process between client and supplier, by avoiding the sticking points that plague cross-border payments. Not only does this mean everyone gets paid sooner, which helps to improve your cash flow, but it also maintains long-lasting business relationships.

Ecommerce

According to an analysis of 48 different studies by the Baymard Institute, the average cart abandonment rate is a staggering 70%, with limited payment options frequently cited as one of the top reasons for an abandoned purchase. This statistic alone shows the benefits of offering local payment methods, allowing you to cut down on abandoned carts and boost regional sales.  

Remittance solutions

As discussed above, if your business facilitates cross-border payments and you want to avoid the delays, inconsistencies, and fees that they can entail, you can do so with local payment methods, which maximize the ways funds can be transferred from one region to another.

Learn more: Safe payment methods

Local Payment Methods in different regions

With the above in mind, it’s worth identifying which payment methods are the most popular in the regions in which you operate so you know which you should offer.

Europe

Home to around 44 nations and at least three of the world’s largest ecommerce countries (Germany, the UK, and France), Europe is one of the world’s most active markets for online sales, with a projected value of $730bn in 2023.

• iDeal - a bank transfer service most popular in the Netherlands
• Sofort - a bank transfer method popular in Germany, Austria, Switzerland, and Belgium
• EPS - a bank transfer method that’s most popular in Austria
• Klarna - a BNPL service that’s popular in Sweden, Germany, Finland, Austria, and the Netherlands
• PostFinance - a bank transfer method that’s most popular in Switzerland
• Bancontact -  a card-based redirect style method that’s most popular in Belgium
• Przelewy 24 - a bank transfer method that’s most popular in Poland
• Multibanco - a bank transfer and cash voucher method that’s most popular in Portugal
• Alma - a BNPL service that’s most popular in France
• Trustly - a bank transfer method that started in Sweden and is becoming popular across Europe.

Gain an advantage in Europe by accepting SEPA, which facilitates more than 20 billion transactions across 36 countries.

North America

Home to the world’s second and 10th biggest ecommerce markets, as well as the world’s most visited online marketplace, Amazon, North America, is something of an ecommerce superpower, worth $1,115bn in 2023.

• ACH Network - a USA-based automated clearing house for electronic fund transfers that facilitated the transfer of an astonishing $72.62 trillion dollars in 2022
• Interac - a local debit network that’s most popular in Canada

Asia Pacific

When it comes to ecommerce sales, no country comes close to China, the biggest country in the Asia Pacific region, with $1,535bn in sales in 2022. The region is also home to Japan, the third biggest country in the world for ecommerce ($241bn).

• AliPay - a mobile and online payment platform most popular in China and Hong Kong, with more than one billion users
• WeChat Pay - a mobile payment and digital wallet service that’s most popular in China and Hong Kong (also has more than one billion users)
• Truemoney - a digital wallet that’s most popular in Thailand
• Dana - a digital wallet that’s most popular in Indonesia
• GCash - a digital wallet that’s most popular in the Philippines
• Touch ’n Go - a smart card that’s most popular in Malaysia
• Kakaopay - most popular in South Korea

MENAP

Ecommerce has seen less penetration into The Middle East, North African and Pakistan economic areas than it has other major regions, but there are still plenty of digital consumers and a number of regional payment methods to be aware of.

• Tamara - a BNPL service that’s most popular in the UAE, Saudi Arabia, and Kuwait
• Qpay - a digital wallet that’s most popular in Qatar
• BenefitPay - a digital wallet that’s most popular in Bahrain
• KNET - a digital wallet that’s most popular in Kuwait
• Stc Pay - a digital wallet that’s most popular in Saudi Arabia
• Fawry - a digital wallet that’s most popular in Egypt

Popularity of local payments

Now that we’ve discovered the most popular local payment methods in each region, let’s take a closer look at how consumers across the globe use these methods. The cited statistics comes from our guide: Switch on the right payment methods (which you can download at the link provided).

Europe

Traditional payment solutions like credit and debit cards, PayPal and bank transfers are still preferable to alternative payment methods (APMs) for most European consumers, but the latter is growing in popularity. Methods vary from country to country, so you should conduct a fine-grained analysis of methods in the countries you operate in. Here are some things to be aware of when trading in Europe.

• APMs are becoming popular - 25% of Swedish consumers prefer to use Klarna for online payments, while BNPL methods are also popular in Germany. Digital wallets are most popular in the UK and Spain but have also gained traction in France and Germany. 78% of European online retailers offer both Apple and Google Pay
• European businesses are not adapting fast enough - 68% of online retail merchants in Europe don’t offer local payment methods in every country they operate in, with just 31% offering BNPL. While many are expanding their range of payment options, there’s still plenty of room for savvy merchants to gain a competitive advantage by broadening their offering sooner rather than later
• Localize your strategy - some payment methods, such as Giropay in Germany, iDeal in the Netherlands, and Przelewy 24 in Poland, are almost exclusively used by consumers in those countries. With European shoppers preferring to use the method they’re most familiar with, it’s important to gain a deep understanding of hyper-local payment options so you can offer the right one

Asia Pacific

Digital wallets are by far the most popular type of payment method in the Asia Pacific region, with 64% of Mainland Chinese, 49% of Australians, and 39% of Thai consumers using them. And that’s not surprising; the concept of the digital wallet was born here. However, that’s not the full story:

• APAC is the world’s largest market for card transactions - VISA, Mastercard, JCB and UnionPay still beat digital wallets overall, with 78% of Japanese, 71% of New Zealanders, and 69% of Singaporeans preferring card payments. That’s compared to just 8%, 16% and 22% preferring digital wallets, respectively
• BNPL is growing - BNPL has seen widespread adoption of late, with APAC expected to be the world’s largest market for this payment method by 2027. 29% of Indonesians and 26% of Thai consumers between 18 and 30 said the option to use BNPL was the number one reason they shop online
• Mobile payments are gaining ground - anyone operating in APAC would do well to focus on mobile-enabled payments, with 63% saying they most commonly shop within a mobile app. This is especially true in Indonesia (88%), Thailand (80%), and China (73%)

MENAP

Traditional methods of payment like cards and even cash-on-delivery are still the most widely used in MENAP - especially in Egypt, Jordan, and Pakistan for the latter - but there are signs that APMs are becoming more widely adopted:

• More people are going cashless - Covid saw consumers turn away from cash, and governments encourage uptake of local card payment methods, with a 4% growth in the use of digital wallets between summer 2020 and summer 2021. Qatar and Bahrain are the biggest markets for card payments, while Saudi Arabia and Bahrain are the biggest for digital wallets
• The power of the digital generation - the digital generation - who represent the largest proportion of the population in MENA - is far more likely to use APMs, with 45% preferring to purchase via an app. BNPL has also seen growth, increasing from 1% to 4% in the year to summer 2021
• Plenty of growth potential - 53% of consumers in MENAP say they have been shopping online more frequently since Covid, with 47% predicting they will do so even more in the future. Best of all, every sector is set to benefit from the growth of ecommere in the region

Learn more: A guide to payment methods

Benefits of offering local payment methods

So, the growth of local payment methods and the importance of offering the most widely used options in any country in which you operate is clear, but what are the benefits for merchants?

Stay competitive

Whether you’re entering a market for the first time or you’ve been operating there for a while, offering the correct payment options (or even the broadest range) will set you apart from the competition and encourage consumers to choose you over a rival.

More trust between customer and business

Loyalty is so important in local markets. Customers are more likely to trust a business offering local payment methods and will continue to shop with merchants they have built a relationship with.

Better checkout experience

A consumer who reaches the point of payment and discovers their preferred payment method will have a much better checkout experience than one who doesn’t, even if they can still pay but only with an inferior method.

Higher conversion

As we explored earlier, a lack of payment methods is one of the top reasons for an abandoned cart. Even if, for example, a consumer who prefers BNPL could make a card payment at checkout if they wanted to, they might choose not to complete the purchase if they aren’t able to pay in installments.

Reach more people

The more payment methods you can offer, the more people you can reach, especially when it comes to hyper-local options. You can also target specific demographics. For example, not offering BNPL could mean you miss out on Gen Z and Millennial consumers, the most likely to use this option worldwide.

Start offering local payment methods with Checkout.com

If you’re convinced of the case for local payment methods, look no further than Checkout.com to help you accept many of the payment methods discussed here. From BNPL to digital wallets, our expertise will ensure you can make the most of whichever APM you need to offer, ensuring you can widen your customer base, generate loyalty, and boost your sales.

For a full list of the payment methods Checkout.com supports see our directory.