See how digital goods merchants can leverage global payment strategy to optimize business expansion in key growth markets.
As more and more consumers turn to digital formats instead for goods ranging from books to education courses, e-commerce offerings in the digital sector are blooming. Since 2020, the digital goods industry has expanded even more at an even faster pace as the pandemic accelerated existing trends in digital consumption.
Where is the industry headed in a post-pandemic world? Are digital offerings still on the rise with “normal” life slowly returning? And how can e-commerce businesses prepare for the future?
This guide covers the most important trends and strategies shaping digital goods and content today, and shows merchants how strategic improvements in global online payment processing capabilities can play a role in successfully expanding e-commerce business across this vertical in the years to come.
Content and digital goods: The global state of affairs
Digital growth in emerging markets
6 proven payment strategies for global expansion
Summary: Don’t overlook payment strategy when expanding globally
Between 2021 and 2025, global consumer spending on media and digital content will grow by 12% as customers spend around $1.26 trillion on services with recurring payments.
During the same period, single transaction orders are expected to generate approximately $340 billion from consumers worldwide.
At the same time, subscription-based models for digital content and services are still popular after rising in usage in the years leading up to the pandemic. The leading mobile apps operating on this model saw their annual consumer spending grow by almost 300% between 2016 and 2020.
One of the key challenges for digital content brands is a typical one for any e-commerce business: online fraud and payment security (more on this below).
It’s an unfortunate reality that as more transactions move online, the number of attempted fraudsters also continues to increase. Total losses due to online fraud in e-commerce are projected to amount to over $200 billion between 2021 and 2025.
Looking at digital goods specifically, direct fraud losses totaled more than $3.5 billion in 2021, with over $13 billion worth of genuine transactions rejected due to false payment declines, which occur when a legitimate payment is suspected of fraud due to suspicious characteristics.
In addition to the dangers of fraud itself, false declines can also cost online businesses dearly: according to some estimates, over $400 billion in global e-commerce revenue is lost annually due to falsely declined transactions.
Worldwide, the share of internet users paying each month for digital content is 71.5% globally.
A few notable countries that see a higher-than-average share include Mexico (79.7%), India (76.9%), Brazil (74.9%), and the United States (72.1%).
What does the picture look like on a regional level? Over the past few years, PayU’s global payment platform and connected local platforms have also seen noticeably large increases in payment volume in the digital goods sector.
How large has the increase been in key growth markets? Here’s a snapshot:
Across Europe, e-commerce spending in the digital goods segment is growing fastest in Romania and the Czech Republic. In Romania, digital goods spending increased by 54% between 2019 and the end of 2021 (compared to the previous three years).
Poland’s growth in e-commerce spend on digital goods between 2019 and 2021 is second only to Romania’s, clocking in at 39%.
Growing at a rate of 14%, the digital goods segment in Colombia is one of PayU’s fastest-growing markets in Latin America. Across the digital goods segment, our platform in Colombia saw significantly higher growth (62%) both from existing as well as new merchants, as more consumers flocked to digital offerings.
Brazil and Mexico remain the largest Latin American markets in terms of absolute value, at $3.16 billion and $2.1 billion, respectively.
In Turkey, total e-commerce spending on digital goods on the PayU platform increased from $519 million in 2019 to $879 million by the end of 2021.
In South Africa, PayU’s average transaction values on its platform nearly quadrupled in the education sector between 2020 and 2021. In total, digital goods spending was projected to grow from $1.06 billion to $2 billion over the same time period.
Any successful online business owner knows that a smooth and well-optimized e-commerce store focuses relentlessly on the customer journey. This includes a friendly and quick checkout process and security measures that avoid risk and fraud while minimizing friction.
When it comes to payments, there are a handful of best practices that any merchant can follow to ensure a seamless experience for customers.
Here are a few best practices to help merchants capture and engage more consumers, while driving revenue and customer loyalty.
Every successful online store must focus on building an end-to-end frictionless experience – from the initial product landing page up through the “thank you” page and beyond.
To minimize cart abandons when selling globally, it’s important to display the page in the customer’s language and adjust the currency to match the geographical location. Some consumers may be hesitant to buy using foreign currency, so it’s important to show the product in the customer’s native currency whenever possible.
The checkout page also should ask only for the information that the store really needs. Note that some countries have regulations demanding additional information at checkout.
High-performing online merchants know that good customer experience doesn’t end with the purchase. For many digital goods businesses, a free trial with pre-authorization can help to scale and capture new users, since customers have more time to decide if they’re going to keep the subscription or not. This also helps to reduce chargebacks.
E-commerce makes it easier than ever to expand to new markets, many of which don’t require a local business entity in order to make sales and acquire new customers. But to be successful, localization is critical.
This, of course, extends to payments. To capture conversions and win new customers, merchants must offer payment method options that reflect the preferences of each market where they hope to do business. By offering the online payment methods that customers know and trust, businesses can improve their conversion rates across both domestic and international markets. This includes alternative payment methods, which often vary by market.
For merchants, the most efficient way to offer the necessary range of payment methods in different markets is by partnering with a payment gateway who can provide instant access to global and local payment method options around the world. PayU’s global payment solution provides a single worldwide connection to hundreds of local, global, and alternative payment methods, helping merchants to offer a seamless and localized checkout experience no matter where the location of their customers.
The importance of mobile payments shows no signs of abating – Gen Z and Millennials already convert more via mobile than any other generation, with mobile payments playing a particularly important role in the payment landscape in many emerging markets where smartphones are the primary means of internet access.
With mobile devices accounting for a particularly large share of digital goods and content consumption, optimizing for mobile is one of the most essential ways for digital content businesses to generate higher conversion rates.
Digital-first businesses are used to leveraging data in order to improve online business performance. But while inbound traffic and performance marketing data is a common part of successful e-commerce, many businesses overlook the ways that payment processing data can also help to optimize revenue and conversions.
One example: By using PayU’s advanced payment analytics module, digital goods merchants can integrate and analyze payment data worldwide to find hidden insights from the payment journey and use them to optimize sales and revenue.
PayU’s advanced analytics tools allow keeping track of payment approval rates by card country, currency, payment method, and issuing bank – helping merchants to optimize not only the customer journey but also payment flows to achieve the highest possible share of accepted payments while reducing transaction costs.
As mentioned earlier, fraud continues to be one of the biggest challenges for any e-commerce business. In addition to the risk of failed transactions, there is the need to appropriately safeguard customer data, and the risk of significant penalties for businesses that do not take appropriate action to keep payment data secure.
Unfortunately, investing in piecemeal anti-fraud and payment security solutions can be inefficient and time-consuming. That’s why businesses increasingly look for payment providers that can integrate essential payment security technology as part of one central offering.
Merchants working with PayU can access our comprehensive suite of integrated payment security offerings which include network tokenization, PCI DSS compliance, anti-fraud tools, and support with 3DS 2 requirements.
PayU’s payment security tools handle the most important aspects of keeping companies and customers safe, so that digital goods merchants can focus on what they are good at: the growth of their online business.
Another way that merchants can optimize transactions is by using a payment provider that offers smart routing. Smart routing is an AI-driven system that allows merchants to create custom rules for routing payments to increase approval rates and lower transaction costs.
Merchants should also look for a provider capable of reducing false declines by retrying failed payments. PayU’s Instant Retry Feature, part of the smart routing tools available to merchants, restores failed transactions by using a pre-configured set of routing rules. This allows merchants to minimize false declines while making checkout faster and more streamlined.
With an increasingly competitive global landscape for digital goods and content, businesses seeking to expand to new markets must ensure that all the parts of their online customer acquisition and retention machinery are running smoothly.
Modern payment optimization and security tools are an essential part of preparing any online business for local and global success. As merchants look for growth opportunities and seek to acquire new customers, online payment strategy is an important place to start for companies in the digital landscape who hope to succeed in diverse markets.