Markus Rinderer, ACI Worldwide: "Payments become increasingly central to the growth trajectories that merchants choose to pursue"

The opportunities for ecommerce growth have never been so significant – but payments, and the role they play in converting shoppers into buyer, are becoming increasingly central to the varied growth trajectories that merchants choose to pursue.

ACI Worldwide recently published a whitepaper that talks about the digital commerce opportunity as a key driver for a number of merchant growth paths. What exactly do you mean by the digital commerce opportunity?

Digital commerce has been a growth opportunity for retailers and brands for more than two decades now, but unparalleled advances in technology along with major demographic shifts have created new and diverse opportunities. This is changing the rules of engagement between merchant and consumer. Shoppers – increasingly millennials who do not remember a pre-internet world – purchase goods and services at home, at work, or on the go instead of stepping into physical stores. Shoppers learn about products through online review sites and after purchase they throw bricks and bouquets on social media. There are more payment methods and digital wallets to choose from than ever before, as smartphone penetration continues to rise and high-speed internet becomes ubiquitous. As a result, digital commerce is growing 10-20% annually while in-store sales remain flat or even decline, and merchants are focusing more intensely on growth through digital.

When you talk about ‘growth through digital’ within the whitepaper, you mention several possible growth paths – or trajectories – that merchants can pursue. Can you summarize the different paths that you identify?

We identify five principal growth paths, and while there is often some overlap, each of these growth paths comes with a unique set of challenges with regard to payment acceptance. The first growth path is the one that many merchants, particularly in developed markets, have already taken: selling online for the first time. Having taken this initial step into the world of digital commerce, many merchants aim to grow their business through incremental optimization, raising conversion rate through improved customer experience, minimizing fraud, and diversifying channels. For some merchants – particularly those dealing in digital goods – the cross-border growth path and its potential for rapid scale is alluring, while for other merchants investment in mobile can reap rewards. The fifth growth path that we highlight is omni-channel, in this case specifically those major ecommerce players opting to open physical storefronts.

The importance of mobile commerce to a specific merchant is driven by a number of factors and market requirements - could you mention the most important ones?

There are four key consideration that come to mind. Firstly, there are certain sectors - including gaming, digital goods, and travel – that are mobile by nature and tend to lead mCommerce adoption. However this is starting to change, as mainstream verticals like electronics, apparel, and general retail are seeing higher acceptance driven by omni-channel initiatives. Secondly, merchants experiencing high frequency and low average transaction values tend to lead mobile payment. Classic examples include Starbucks, as well as European and Asian public transit systems. So purchase behavior is another important factor.

Merchants should also closely examine their customer demographics. Merchants with young, urban, and tech-savvy customers have higher mobile service demand, as those individuals tend to be early adopters. Alongside demographics, merchants should also account for smartphone penetration rates. Modern smartphones are dramatically more capable and user-friendly than their predecessors, fully enabling mobile commerce. In most European markets smartphone ownership is well over 50%, and is 80% in the U.S. and 88% in South Korea. Mobile commerce still occurs in markets dominated by feature phones, but is an SMS-centric experience enabled by closed-loop carrier-based mobile payment systems.

Can you give some examples of ecommerce businesses pursuing the omni-channel strategy, and the challenges they face on the payments acceptance side?

The major challenge for these merchants is offering a consistent and seamless experience, because payment services are still too often divided between online and POS. However, everything that is old becomes new again, and ecommerce giants such as Amazon are venturing into the offline world. Physical “showrooms” give customers the opportunity to personally experience products before purchasing, and build a deeper connection with a brand. 

One interesting example is Coolblue, a successfully online retailer for electronic goods in the Benelux region, which has recently expanded its limited network of physical stores. In 2015 they achieved 54% growth, driven by expansion of their physical store network. The objective of these new locations was not purely sales, but to reinforce the online channels.

What technical capabilities do merchants need to implement an effective omni-channel fraud management strategy?

Omni-channel retail increases the complexity around payments, and by extension the complexity around fraud management. The complexity is due to certain payment methods being more prone to fraud in different channels, increased risk exposure when entering new markets, or rules and regulations that shift fraud from one channel to another (i.e. EMV).

One of the challenges of omni-channel is that multiple customer touch points create more data, multiple channels demand more payment options, and consumers are demanding both convenient checkout and fast fulfilment. Merchants are being pushed to deliver a frictionless experience, which brings real-time fraud management to the fore. Real-time decisioning can help merchants to ensure a seamless checkout (maximizing conversion rates) and also help with the goal of faster fulfilment. The human touch is still needed though, to interpret trends and fine-tune real-time decisioning, and for this reason support from expert risk analysts is preferable to a ‘plug and play’ solution.

In your opinion, what will the payments experience look like from the consumer perspective in 2020?

Much has been made of the way the so-called ‘millennial generation’ is transforming commerce – and payment – with different expectations, preferences, and shopping behaviors to their older cohorts. 70% prefer debit over credit cards, 62% are comfortable connecting payment information to retailer apps to speed up payment, 45% are comfortable with the idea of connecting payment information to a wearable device, and 44% would prefer to use phones instead of cash to pay for small items.

But millennials are simply ‘early adopters’ - merchants need look no further than the demands and expectations of millennials today, to know how they will need to shape their payments experience in 2020. Consumers will expect a seamless payments experience, regardless of device or channel.

ACI Worldwide’s whitepaper ‘Fast-track Merchant Growth Paths in eCommerce’ explores this topic in greater detail, illustrating each growth path with real-world examples, and setting out best practices for enabling merchant growth strategies.

About the author

Markus Rinderer serves as SVP at ACI Worldwide, driving the development of the companys omni-channel merchant retail strategy. Previously, he served as CEO and founder of PAY.ON, a leader in ecommerce payment gateway services, which was acquired by ACI in 2015.

About the company

ACI Worldwide, the Universal Payments (UP) company, powers electronic payments for more than 5,100 organizations around the world. Through a comprehensive suite of software and SaaS-based solutions, ACI delivers real-time, any-to-any payments capabilities and enables the industry’s most complete omni-channel payments experience.