The pandemic-induced shift from in-store to online shopping has ushered in a new era in e-commerce and the Baltic region is no exception: according to Statisticale-commerce revenues in the coming year are expected to increase by 13.66% in Estonia, 14.80% in Latvia and 18.45% in Lithuania.
In response to the continued increase in demand, the region often dubbed Europe’s fintech hub has been quick to respond with innovative local payment solutions highlighted in an in-depth study of the European payments industry Paypers commissioned by Deloittewhich presented an analysis of emerging solutions in the Baltic region.
According to data from Lithuanian, Latvian and Estonian statistical institutes, more than half of the region’s population aged 16-74 made an online purchase at least once a month for a 12-month period. Moreover, data shows that an increasing number of Baltic residents are buying from international merchant sites: in 2021, around 50% of Estonian online shoppers made cross-border purchases.
The rise of e-commerce in the region has fostered the creation of new local payment methods to meet the needs of local consumers who are fond of cross-border purchases. Many global online merchant payment options still revolve around credit cards, a fact that does not correlate with credit card penetration levels in the Baltic States with less than 30% in Estonia and around 16 % in Latvia and Lithuania. Lack of preferred payment options leads to digital shopping cart abandonment: up to 60% of Europeans abandon their shopping cart if a preferred payment method is not presented to them at checkout.
According to the Paypers report, 65% of Baltic consumers prefer to pay by bank transfer, which allows most local payment providers to adapt their products to online banking. Along with strong support from the three local central banks, the environment is there to adopt PSD2 and bring innovation using open banking – Lithuania currently leads the list of licensed e-money and payment institutions in continental Europe. The bank is an example of a local payment option that connects virtually all major financial institutions in the region, including traditional banks and competing banks, helping Baltic shoppers make cross-border payments conveniently and seamlessly.
“We’ve partnered with nearly every bank in the Baltics, to give consumers the ability to shop globally by giving them access to international providers – all the way to the payment methods they already use and that they already trust”, explains Franc BreussCEO and co-founder of Nikulipe, Baltic regional expert contributor to the Paypers industry report. “Region-specific payment solutions can open up a number of new opportunities not only for Baltic consumers, but also for international merchants, looking to enter new and emerging markets.”
Breuss adds that offering local alternative payment options will provide shoppers with enhanced shopping choices free from geographic constraints and will most likely lead to a more competitive pricing landscape, as shoppers will have the ability to not only browse global merchant websites, but also to make purchases and pay for products and services using familiar and trusted payment alternatives.
Overall, with the growing demand for cross-border shopping, LPM solutions offer a long list of benefits such as reduced abandoned online shopping carts and improved customer experience that could further support commerce growth. electronics in the region.
“The Baltic consumer has shifted from cash and cards to online banking as their preferred payment method when shopping online. This enables LPM providers to bring local solutions with native language checkouts and payment that consumers recognize,” says Breuss. “Online banking also solves some of the problems with card transactions, such as eliminating chargebacks and increasing transaction speed.”