By Praful Morar, Global Expansion Officer at Nuvei
The Australian ecommerce market continues to thrive in the post-pandemic era, with consumers spending twice as much when they shop online versus in a physical store. With over 90% of Internet users making online purchases, Australia’s ecommerce market was valued at AUD 47 billion – with an 8.9% growth – in 2022. With these figures only set to rise over the next few years, understanding and optimising the way Australia’s consumers pay is more crucial than ever.
For those businesses looking to expand their businesses internationally, Australia is a great place to start. A sizeable majority of online consumers – 61% – have shopped cross-border, making for a total market value of AUD 4.2 billion. The growth in popularity of online shopping worldwide stems from its ease and convenience, factors that rely heavily upon a seamless checkout experience. Australia is no different, and merchants need to ensure they choose a payments platform that can provide local acquiring to see success in the region.
Australia’s favorite ways to pay
Card remains the most popular payment method, with 50% of all ecommerce transactions taking place via debit or credit card. Digital wallets are also on the rise and are used in 33% of online payments.
Online card payments are set to be a permanent fixture for the foreseeable future in Australia, making it essential for merchants in the region to use a payments platform that can provide local acquiring to ensure accelerated sales and boost customer satisfaction.
Despite Australian consumers’ preference for card payments, it’s important not to brush other payment methods under the rug. For example, New Payments Platform (NPP) – Australia’s Account-to-Account fast payments open access infrastructure – has processed over 1 billion transactions worth more than AUD 1 trillion in the past year. In addition, there’s been a steep increase in the use of Buy Now, Pay Later (BNPL) brands such as Afterpay and Klarna, with 30% of the adult population holding an open BNPL account.
Merchants should be looking for a payments platform that provides an all-rounded solution that prioritises the consumer experience through payment optimisation.
Local acquiring: why it pays off
The significance of choosing a payment provider that has local acquiring and other cutting-edge services available in Australia should not be underestimated by merchants, who could gain a considerable competitive advantage in the following ways:
1. Increasing the number of approved transactions. Routing transactions through a local bank, such as Commonwealth Bank of Australia or National Australian bank, will lead to higher authorisation rates. This is largely due to the higher rates of fraud that occur when making international transactions, resulting in banks declining payments. Inevitably, declined payments will more-often-than-not result in consumers shopping elsewhere, thus incurring financial loss for merchants.
2. Avoiding cross-border fees. When the consumer’s issuing bank and the merchant’s acquirer are in different locations, it results in an increase of transaction fees. Businesses could be charged an additional 1.4% per transaction, depending on variables such as currency and card issuer. In addition, consumers could be charged a foreign transaction fee (between 1%-3% of the purchase value) when they use their card abroad or pay for something online from a foreign merchant. The AUD is currently in a healthier position than the EUR, USD, or the GBD, so consumers expect to be able to pay in their own currency without fearing additional costs.
3. Improving the customer experience. Working with a local acquirer could mean fewer hidden fees for the consumer, and, therefore, a more predictable, seamless checkout experience. Moreover, since local acquiring can ensure higher acceptance rates, this could also drive customer loyalty and trust, encouraging consumers to make more purchases in the future. With the average Australian consumer spending AUD 228 per week online, customer satisfaction should be the top priority for merchants seeking accelerated sales in the region.
Australia’s ecommerce market is growing at a rapid pace, and with that comes higher customer expectations, particularly when it comes to payments. Choosing a payments platform like Nuvei, which has a strong presence in the region, will optimise operating costs, boost conversion rates by maximising payments acceptance, and enhance the overall payment experience.
In addition, businesses should ensure that their payment technology provider enables them to accept all relevant payment methods in the region – including local currencies for cross-border transactions – apart from card acquiring. This is also true for Australian businesses looking to expand to new regions. As a global payments provider, Nuvei can provide support for local Australian businesses as they grow, empowering the expansion of ecommerce internationally.
To sum up, Australians prefer to shop online, and merchants can use this to their advantage by selecting a payments provider who prioritises customer growth on both a local and global scale.
This article was originally published in The Paypers.
