International payments: Opportunity vs barriers

The world has changed so much since we entered the 2020s and one thing that has really come to light is that the network that is connecting us as a global business community is, like a spider’s web; a structure simultaneously fragile and strong.

Using Swift in Russian sanctions

At the beginning of March 2022 when Swift and other payment systems with Russia were blocked by the US, Canada and Europe the mainstream news agenda drew people’s attention to this previously invisible international exchange of money and goods.

We have long taken for granted international payment systems, but if I look back to how it functioned at the start of my career in payment technology, 25 years ago I realise just how far we’ve come technologically.

International commerce, the beginnings

Back then, paying for something in another country involved travellers’ cheques, packing physical cash in your suitcase that you’d previously had to convert, paying commission for it and all this, only once you had ordered it from the bank to pick up at an appointed time. Buying from abroad took many phone calls, export  /import specialists, advisors, and high charges. All of this is now taken care of electronically in a couple of seconds.

Today, we all feel that we have everything at our fingertips, we can answer any question at the tap of a screen, we can fulfil any need with a swipe. The smooth connectivity that we have taken for granted in recent times now feels complicated. However, the truth is, that it has always been that way. It is only when something so dramatic happens, such as conflict, that we think about the links in the chain.

In fact, every seamless transaction is the result of hundreds of processes, regulatory controls, technical security, data protection legislations, just to buy something in another country.

The complacency of a connected world

The reason why we have become so complacent is because the internet has become incredibly fast, exchanging financial data around the world in seconds, with software and algorithms to guide the way.

Conflict is not the only reason for a country limiting access to its global connectivity. There are examples all over the world of how access to information or services from other countries can be limited, whether it is due to technological sovereignty, commercial competitiveness or differences in national laws.

China is of course a reference point, as a country that took control of internet access early on. Its access to the internet outside the country has been restricted since the late 1990’s and then in 2016, the Chinese government passed the Internet Security Law of the People’s Republic of China.

Overcoming barriers to connecting with Chinese consumers

Before COVID-19 hit, the volume of tourism from China to the European continent, including the UK, was rapidly growing due increased personal income, improved experience for Chinese tourists abroad and attractive shopping prices. This obviously ground to a halt during the first two years of the pandemic, but has slowly started to pick up .

During the period of the pandemic where travel was impossible, the interest in buying goods from Europe and beyond turned online.

Chinese consumers are keen followers of British brands and have real spending potential. In 2020, it was reported that the value of goods sold by UK brands on Tmall and Tmall Global (Alibaba’s China marketplaces) had increased by 27% year on year. But how can British e-commerce companies reach Chinese customers when so many international sites are blocked? It’s a matter of adapting to the local shopping culture.

Innovations in Chinese e-commerce and how this has eased international shopping online

E-commerce is a very fast-growing sector in China and consumers are increasingly looking for more and more advanced shopping experiences. The “mini programme” has become an everyday way of shopping for Chinese consumers. This is a sub-app integrated within a social media application where consumers can enjoy a targeted shopping experience.

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Foreign retailers wanting to reach Chinese consumers, need to get up-to-speed with this new retail technology. Many major foreign social networks are blocked in China, as are e-commerce websites, so companies abroad need to work closely with Chinese social networks like AliPay and WeChat to create shopping experiences that overcome the barriers of language and new cultural shopping habits.

Over the last few years, use of Chinese payment providers Wechat and Alipay payment solutions made through smartphones using QR codes to connect, have exploded. The two apps together are forecast to reach a combined user base of nearly 2.5 billion users by 2025 and account for over 90% of Chinese mobile payments.

Speaking your customers’ language

Starting out as social networks, it is this walled garden approach that has made them so successful. In order to reach online shoppers from China, UK companies need to create their own Wechat or Alipay profiles that are secure within the social network’s ecosystem, in Mandarin and cannot be found through Google etc.

E-retailers wanting to attract Chinese customers need to create mini programmes, social media zones that provide product information, a sales channel and then a platform where they can arrange delivery of the product to China, taking care of appropriate invoices forms, customs and excise paperwork, making the whole process easy for the customer encouraging repeat purchases all in Mandarin.

A payment winner at the Olympic games

The recent Beijing Winter Games’ push of the e-cn digital currency has given a lot of food for thought about innovative payment methods from China. This move from the state to promote adoption of its currency is a reaction to the huge popularity of Alipay and Wechat Pay. It is clear that this will be the next frontier for payment technology.

UK business has adapted to the online business behaviour of other countries to continue to trade across borders. Once upon a time we used to worry about cultural etiquette in the boardroom, how to act in a meeting according to cultural traditions, whether to shake hands or bow, when to talk, how best to negotiate etc. Today, we talk about how to approach people virtually, how to navigate business online and how to fulfil the expectation of their online transactions.

Disruption: The route to innovation

Obstacles and challenges always spur progress. The COVID-19 pandemic has accelerated innovation in a whole range of technology and adoption. In the fintech sector technological solutions flourished so that international business could continue to function, so that despite borders, trade could continue to flow and be as cost-efficient as possible to keep the world turning.