Payment services future is fintech

As a growing number of online merchants are moving to a marketplace business model, the payment services industry needs to shift away from an IT transaction-based approach to a finances aware integrated management service.

When I still was an undergraduate, selling online generally meant that one would sell its own products to customers in one’s own country. Going “international” meant nothing more than selling in neighbouring countries. At that time, major ecommerce brands were also rightly seen as a competitor of the existing store or franchise network, often diverting existing customers from the shops instead of attracting new ones. Since then, two connected topics have emerged: new products and services are digital and, as a result, they can produce and purchase from anywhere in the world. While a local retailer can only sell in relatively close countries, Amazon, Deezer or Alibaba can sell everywhere in the world. In the digital world, “international” now truly means “global”, and it matches the consumer`s expectation to purchas anytime, anywhere, from any vendor, through any channel. We’ve entered a new “marketplace business model”.

Let’s look at this trend from behind the payment scene. In the old days, online merchants would connect to a limited number of well-established payment methods, such as Visa, MasterCard, Amex and PayPal. They collected customer payments in their own name through a single bank account. But things started to change as the number of available payment methods exploded. Each new payment method not only required a technical connection but also a growing financial expertise to manage cash inflow on a daily basis, securing receivables and dealing with local taxes or customer protection regulations. The more online merchants were expanding internationally, the more complex it became. Just imagine trying to figure out what went wrong in a payment status in China or Russia, with the time difference and the language barrier.

To better explain this, let’s see how we deal with a similar issue as individuals. While it is easy to tell almost in real time what has been left after each spending if you only own a debit card, you may need to take a closer look at each credit card statement and crunch the numbers to really know what your account balance will be at the end of the month. Global online brands and payment service providers (PSPs) are facing the same challenge. A key point here is the time scale: cash inflow management i not only a matter of real-time data and IT connections. It requires additional and asynchronous financial work to effectively monitor and manage each payment, dealing with specifics of payment method, regulations, time zones, languages. Some payment methods aggregation service providers now have answers to this challenge, embracing both technical and financial aspects of payment management. But yet, there is more to come with the rapid development of fully-fledged marketplace business models.

From a payment management perspective, marketplace business model raises rather complex issues, starting with currency conversion and associated fees. Being a market place means collecting payments and repay vendors anywhere in the world. Doing so, the marketplace also needs to make sure that it has been paid before paying back, and that no refund request is pending. Not to mention that for each payment, there will be several vendors to pay back, each having its own negotiated fees, taxes. The marketplace must also take care of its vendors, providing them with detailed information on outstanding payments, payments made, fees, etc.

If we look again at it from behind the payment scene, we see that a fully-fledged online payment management increasingly requires bank-like financial knowledge. It also means turning existing transactional IT-based payment services architectures to business rules enabled systems, which are able to aggregate multiple sources of information such as up-to-date conversion rates and local taxes, as well as specific customer protection regulation. This vision of a one stop shop global payment management service is almost there. But it doesn’t come to life without a significant investment.

From a payment services provider perspective, this vision requires moving from a technical partner of PSPs and online merchants to a global payment management specialist, developing a broad financial expertise to implement complex business, regulatory and financial rules into our payment connectivity platform. Failing to do so is not only failing to answer today’s needs of PSPs and marketplace customers to deliver their respective internationalisation strategies. It is also facing the risk of being, again, led back in times, just like we’ve all been through this very moment in the past as an industry.

Back to my college days, when alternative payment was in its infancy, each online merchant or PSP had no option but to implement by itself each new payment method, one by one, slowly and missing a lot of business opportunities. It seems to me that we are standing now where we used to stand in the past, so it is about time we made the right move.

About Christophe Bourbier

Christophe is a born entrepreneur and an executive with over 15 years of experience in competitive and disruptive strategy. Competitor at heart, captivated by international affairs, Christophe, before he founded Limonetik in 2007, had created different companies in High Tech and Communications.

About Limonetik

Limonetik is a service provider in the payment ecosystem. The company proposes to merchants, marketplaces and PSPs to easily and quickly connect to a large panel of international payment methods via a unique API. Through its “one stop” shopping payment solution (PaaS), Limonetik delivers services from collection and settlement management to reconciliation. Limonetik is the guarantee of regulation compliance.

This article is part of the exclusive Online Payments and Ecommerce Market Guide 2016, an educational overview of the global payments industry. For more insights into the latest trends in ecommerce and e-payment methods developments please download a free copy here.