The eCommerce Opportunity in South Africa
High mobile penetration, rising consumer confidence in online transactions, and secure online gateways are driving eCommerce growth globally. However, by international standards, eCommerce penetration across Africa is still relatively low. But it is estimated that 600M consumers will be online by 2025, spending $75B each year, which offers a tremendous opportunity.
Traditional payment instruments, including payment cards and credit transfers, remain the preferred method of payment for online shoppers in South Africa—however 40 percent of online transactions in the next five years are expected to be alternative payments.
97 percent of South Africans believe that their payment credentials are safe when shopping in person, but nearly one-fifth (19 percent) believe that their credentials are not safe when shopping online. There is a real gap in perception of safety, which means that the growth trajectory of in eCommerce in South Africa may be stymied by the perceived threat of the fraud online as well as actual fraud. 70 percent of consumers indicate that they would stop shopping at a merchant where they have been a victim of fraud. Fraud is a reality (one-third of all consumers report that they have experienced card fraud in the past five years) and the growth of eCommerce without effective fraud prevention measures will deter fraud-fatigued South Africans from moving their shopping online.
Retailers are taking advantage of the eCommerce opportunity by focusing intensely on digital channels to drive growth. However, there are a range of growth strategies that can be pursued, as not every merchant has the same starting point or the same motivations. What these growth strategies have in common is that they require focus on the customer experience.
While there are variations and overlaps, there are five key strategies that provide a useful framework for evaluating the different growth trajectories;
- Brick-and-mortar retailers going online for the first time
- Successful domestic online merchants that optimize eCommerce by diversifying channels and distribution models
- Multi-channel retailers investing in mobile
- Domestic merchants expanding internationally
- Digital merchants delivering omni-channel experiences and expanding into point of sale
Each of these starting points has its own unique challenges. For example, expanding internationally creates a range of unique payment challenges. Cross-border merchants should present prices in the local currency, tailor their fraud prevention systems for local patterns and calculate local sales tax and VAT.
If marketing itself as a local business, a merchant must also translate its online shop into the local language, offer local shipping methods, and accept locally-preferred payment methods. South African merchants may consider one or a combination of these growth strategies, but they must carefully evaluate the ability of their payments vendors to support their chosen strategy as they seek to claim a slice of pie that could be worth $75 billion a year within the next decade.
ACI Worldwide will be discussing the challenges of cross-border eCommerce at the upcoming Seamless Payments conference in South Africa. Please stop by to see us at Booth #30.
Related Blog Posts
Customer Innovation: Erste Bank [Q&A]
The global banking sector is becoming both more strategically focused and technologically advanced, responding to rising consumer expectations while trying to defend market share against an increasing array of competitors. A great deal of emphasis is being placed on digitizing core business processes, and reassessing organizational structures and internal talent to be better prepared for the future of banking.
Regulating for Real-Time: The Role of Government in Payments Modernization
Dr. Leo Lipis and Craig Ramsey, Head of Real-Time Payments for ACI Worldwide, continue their discussion on real-time payments and the findings of the new white paper, Get More from Real-Time.
Issuing and Acquiring in a Real-Time and Open Payments Ecosystem – The Global Picture
Dr Leo Lipis and Craig Ramsey, Head of Real-Time Payments for ACI Worldwide, continue their discussion on real-time payments, stemming from the findings of the new white paper, Get More from Real-Time. See part one.
Four Questions to Drive Your Retail Banking Payments Strategy in 2019
I keep hearing that it’s “an exciting time to be in payments,” and I certainly agree that there is a lot of noise. However, when I look below the surface, I’d argue that the interesting activity is not with the payment itself, but with all the related events and steps in the value chain.
What Can the Re-Regulation of Other Industries Tell Us About Open Banking One Year On?
UK Open Banking just reached its first birthday milestone (on January 13 to be precise) and given my own commentary – including in the ACI blog – on this topic, the first anniversary of Open Banking in the UK certainly won’t pass without a debrief on the progress that’s been made and what challenges lie ahead.
Instant Payments in Italy – And Beyond: Lessons from Il Salone dei Pagamenti
ACI was invited back to Il Salone dei Pagamenti – Italy’s premier payments event organized by the Italian Banking Association (ABI) – to participate in a panel, “SEPA Inst – the Future.” As expected, the session was packed with stats and advice for a more efficient roll out of instant payments – in Italy and beyond.
To Regulate Or Not To Regulate – Is That Thy Question?
Debates are healthy, and as someone who spent a little time during my college years dabbling around the edges of the speech and debate team, I can tell you it’s something that I personally relish. A chance to really talk through the pros and cons of an argument and lay out the bare facts… and then be judged based not only on those facts, but on the presentation and power of persuasion—sign me up!
Request for Pay – What Does It Mean For Financial Institutions?
What do banks – one with $60B+ in assets, one a mid-size regional bank, and one, a small innovative credit union – have in common with payment networks and the ‘Big 4’ consulting firms? They were all part of the first ACI #PaymentsForBreakfast event in North America! The theme was real-time payments, but the focus was more specifically on Request for Pay.
Why Open Banking Might Need to Rely on a Magic Illusion of 24x7 Availability
The adage “the more things change, the more they stay the same” appears to ring true when applied to the early phases of the evolution of open banking (or open payments). Especially when you contrast it with the early days of ATM withdrawals; particularly those made in the dead of night so you could pay cash for your after-party greasy feast.
Sibos Preview: The Five Trends Transforming Real-Time Payments
Real-time is now a reality, with more than 30 schemes live around the world. And real-time is in the spotlight as banks and financial service providers make their way to Sydney for Sibos 2018. What better time to look ahead at the key trends that are going to shape the ongoing development of real-time payments.