The rapidly-changing payments ecosystem is creating opportunities and space for new and innovative business models, but in the process it also puts pressure on existing business models and traditional players. How do you think the industry needs to adapt?
Today’s payments industry is more dynamic than ever, and the speed of change is putting pressure on traditional business models. The roles of acquiring banks and payment service providers (PSPs) – which were previously quite clearly defined – are blurring, as merchant demands become technologically more complex.
PSPs, which have so far fared well within an increasingly dynamic payments market, are now experiencing the effects of rising merchant expectations. Businesses selling online are seeking to reach a global customer base, at the same time as maximising their conversion rates. They are asking their PSPs not only for secure and reliable payment processing, but for an extensive toolkit that will support any number of different growth trajectories; from mobile to omni-channel, from domestic optimisation to cross-border expansion. PSPs need to be able to offer their merchants such a toolkit – either by building it themselves or by forging a strong partnership with a technology provider.
If PSPs are now having to adapt as a response to merchants, what are the key trends in ecommerce that are shaping merchant demands?
Shopping online is becoming borderless, with cross-border sales reaching USD 300 billion in 2015. That is 25% of total global ecommerce, and the slice of the pie is expected to increase as consumers become even more accustomed to shopping anytime, and anywhere. Merchants – especially those in the digital space – know that cross-border expansion is a proven path that allows them to rapidly scale their business, but they need a PSP that can support them on this path.
Another trend, and this is related to cross-border, is that alternative payment methods continue to grow, and in some markets have already overtaken card payments. While it’s a given that global expansion requires merchants to enable locally-preferred alternative payment methods, those merchants seeking to optimise operations within their domestic market also have to consider how to optimise the payment mix to raise conversion rates.
Are there any specific trends on the technology side that also play a role?
A major trend – and this is also evident in banking – is towards ‘open’ technology platforms based on open API technology. Payment platforms that are built on next-generation infrastructure are being sought out by merchants that know that the only constant is change, and that the flexibility of open platforms will allow their offering to evolve and adapt as needed.
With the rise of the ‘API economy’ is it fair to say that PSPs still operating legacy systems will lose market share to PSPs who are more responsive and versatile?
Open API technology, and the value-added services that can be bundled together with a responsive platform, definitely increase merchant “stickiness” for a PSP, but remember this is not a silver bullet for reducing merchant attrition. PSPs are also facing pressure from new market entrants. Non-PSPs eying the market are recognising the potential, and adapting their own offerings in a bid to win market share.
Acquirers, logistics companies, banks, and card schemes are all encroaching on the traditional services offered by a PSP. Even bellweather tech giants are making inroads in the payments space. In this highly-competitive environment, it is critical for PSPs to develop a differentiated product portfolio and be able to back this up with outstanding customer service.
ACI Worldwide is one of the technology partners that is able to provide clients with the open technology infrastructure and differentiated service offerings that you have described above – can you share a particular client success story that illustrates this in practice?
One of our recent success stories is Planet Payment, a leading provider of international payment services and multi-currency processing. Powered by ACI’s UP eCommerce Payments solution, Planet Payment were able to deliver a range of new products and services that overcame the constraints of their legacy systems. Planet Payment expanded on their mobile offering with mobile SDKs, and were able to support like-for-like settlement in more than 85 currencies. Additionally, they were able to offer embeddable and flexible payment forms that are completely PCI compliant. Finally, leveraging open payment platform technology, Planet Payment developed a unique end-to-end China UnionPay acquiring and processing solution. What Planet Payment were able to achieve with the UP eCommerce Payments solution all relates to what we see as the cornerstones of an effective payments strategy; it needs to offer simplicity, it needs be truly global, and it needs to ensure that transaction processing is secure.
You have already mentioned that in payments ‘the only constant is change’ – so looking ahead, what do you think will be the right formula for success for a PSP?
If a PSP is working with the right partners today – those that have embraced technological openness and have an open attitude to commercial partnerships – they are already well set up for success in the future. But on the technology front, what is next-generation today is standard tomorrow, so PSPs should make superior customer service a top priority.
PSPs and merchants should be cognisant that fraud rates continue to rise, and fraudulent activity is constantly adapting and becoming more sophisticated. Especially in cross-border, where fraud rates are three-fold higher when compared to domestic rates, it will be important for PSPs to have a suite of fraud prevention and risk management tools that are capable of adapting to meet their changing needs.
ACI Worldwide’s eGuide ‘The Brave New Payments World for PSPs’ is now available for download here.
About Adam Bowman
Adam Bowman is Vice President of PAY.ON Sales, focusing on serving PSPs and other payments businesses in the EMEA region. Adam brings over 20 years of experience in payments and management consulting to his role, with in-depth knowledge of cross-border eCommerce, and international merchant acquiring.
About ACI Worldwide
ACI Worldwide, the Universal Payments (UP) company, powers electronic payments for more than 5.100 organisations around the world. More than 1.000 of the largest financial institutions and intermediaries as well as thousands of global merchants rely on ACI to execute USD 14 trillion each day in payments. In addition, myriad organisations utilise our electronic bill presentment and payment services. Through our comprehensive suite of software and SaaS-based solutions, we deliver real-time, immediate payments capabilities and enable the industry’s most complete omni-channel payments experience. To learn more about ACI, please visit www.aciworldwide.com. You can also find us on Twitter @ACI_Worldwide.
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