There has been much speculation about how the payments landscape will evolve. For instance, increasing competition has accelerated the need to reduce merchant fees, necessitating acquiring banks to reduce their costs and increase revenues by providing value-added services at the point of sale.
Today there are only a handful of acquirers that are truly able to address such needs in addition to being able to operate across multiple countries and regions. It has become quite evident that acquirers need to deliver compelling services to their merchants globally across all service points, including e-commerce, m-commerce (mobile devices), physical POS (point of sale) devices, MPOS (mobile point of sale), self-service payment points and other kiosks. In addition, merchants are looking at reconciling the amount of payment partnerships and acquirers need to cover global e-commerce at the lowest cost, including overhead, to manage multiple contracts and functionality, as well as get the highest approval rates.
Listening to Merchants and Payment Services Providers
Surveying our merchants and payment services providers (PSPs) around the globe, it became quickly apparent that these constituents are expecting more from their acquirers. They want them to be able to create value that extends innovation beyond the invention of something ‘new’ but instead tailors its product, service, or proposition to yield a positive business impact. The findings of our research show the top 7 scenarios that PSPs and merchants grapple with most:
- How best to leverage cross-border business opportunities while containing associated inter/intra-regional processing costs
- How best to manage multiple acquiring relationships across multiple countries each with different output and functionality
- How to improve operational efficiencies and control the overall cost of payment processing by not having to maintain multiple vendor relationships with different processes and reporting systems
- How to gain a consolidated view of all payments through intuitive online reporting and simplified reconciliation that includes statements and an operations dashboard
- How to determine what technology to use to attain one single accurate view of the customer in order to optimise revenue growth and market penetration initiatives.
- How to achieve higher authorisation rates to increase the bottom line
- How to develop a secure end-to-end payments process that eliminates the headaches and delivers better client experiences.
Smart acquirers are investing in offering value-added services that can be deployed in e-commerce environments cost effectively and, most importantly, quickly.
The Cross Border Consideration
Cross-border e-commerce is when consumers buy online from merchants located in other countries and jurisdictions. Online trade between consumers and merchants who share one common language and border - or which make use of the same currency - are not always perceived as cross-border by consumers. European Union (EU) neighbors who speak a common language, united by SEPA (single euro payments area), are just one example.
In general, the EU is a mature e-commerce market, but that is not to say that it keeps evolving. The major cross border e-commerce “corridors” between the US and UK account for approximately $25B of payments flow. For merchants, this represents plenty of opportunity for growth by expanding into new European markets. However, the unique dynamics of the cross-border e-commerce market do require careful consideration and planning. Understanding where major e-commerce corridors occur will be instrumental for merchants in helping them to focus on their business, align their products, services and functionality needed for specific markets without the risk of diluting their core focus across all markets. This obviously poses an implication on the choice of their payment products, gateway functionality and back-end acquiring capabilities.
For any cross border consideration, selecting the right payment mix per country is necessary. Forward-thinking merchants should anticipate and act on such macro-trends as changes in the regulatory environment or in consumer behavior and expectations. Merchants today are finding the need to actively analyse and optimise their business through aggressive fraud management and the application of big data analytics. They have the need to independently manage their entire payment processing experience, from their immediate merchant onboarding experience to detailed customer data analysis.
This is especially true in order for merchants to leverage the use of mobile devices for online shopping and payments. Sweden and the UK are matching global leaders in Asia-Pac and North America in regards to mobile shopper penetration. Chinese shoppers who buy from foreign websites represented about $18.5B in 2012 but is growing by more than 60% year on year – more than 60% or $11B of that volume comes from US and UK websites.
Global Payment Gateway Quandary
The global payment gateway, the e-commerce platform that provides transaction authorisation and clearing services to web-based merchants, should integrate with the e-commerce website’s shopping cart and activate once a visitor places an order. The gateway then encrypts the transaction information and transmits it between the website and the merchant’s acquiring bank.
The payment gateway is the e-commerce equivalent of the POS credit card terminal used in brick-and-mortar retail outlets. Both serve as a means of communication between merchants and acquiring banks.
Consumers, irrelevant of where they reside, have a wide range of mobile card payment processing methods available to them. Smart technology and mobile payment trends are increasing m-commerce adoption and will likely outdo e-commerce in terms of stand-alone PCs and laptops, within the next few years. It is estimated by the CBEC (the Cross-Border Ecommerce Community) that by 2014, there will be over 580 million online shoppers who will pay for their purchase from their smart devices, phones or tablets.
Smart Acquirer Attributes
Any e-commerce merchant will profit from international expansion through cross-border e-commerce if they connect to a global acquirer with partners in different regions, with experts in all the aspects of international payment processing, including international law and local legislation. A global network in which stakeholders carefully define responsibilities can mitigate risk while profits through exciting business opportunities in emerging markets can be shared.
It has been proven that e-commerce merchants that invest in using technology- savvy bank acquirers are more readily able to support comprehensive financial management services and will be able to:
- Simplify a complex payment environment:
- Expand their global market reach
- Reduce cross-border bank fees via domestic BINs
- âIncrease card processing approval rates
- Provide customised and flexible solutions to consumers
- âEnsure the highest level of customer service
- Deliver a better customer experience
This can only be achieved by using a smart acquirer that can deliver a:
- Single, global acquiring platform
- Comprehensive reporting capabilities
- âLower bank and exchange fees
- Reduced chargeback rates
- â“Client-centric” approach
The Good News: 5 Steps to Success
Merchants and PSPs can now have access to next generation technology and advanced cross border payment processing functionality using a single platform. This offers the ability to achieve a 360-degree customer view no matter where customers reside, digital onboarding without paper, access to processing within hours or a few days and customised relevant data analysis and reporting. CBEC experts recommend merchants do their due diligence and find a pro-active partner that offers a flexible technology solution that will support their growth across the e-commerce supply chain.
The 5 key steps that merchants who were surveyed said were instrumental in supporting them to have a successful cross border payments initiative were as follows:
- Be sure to partner with an acquirer capable of providing a global platform, yet local processing through one unified setup. This lowers cost and increases efficiency.
- Make sure the setup and activation is quick and straightforward. In today’s e-commerce markets, lost hours can translate to losing millions.
- Ensure it is a solution that enables a merchant’s partners to team up with little to no effort. It is especially needed in times when a new product or service is launched or when a new market emerges or when promotional campaigns are released in order to leverage the opportunity at hand.
- Require the acquirer’s solution to deliver global and relevant data on the spot and formatted in such a way it will allow for quicker and better decision making.
- Last but not least, find a partner that allows for a flexible, adaptable solution that can scale easily as the merchants’ business grows while the solution continues to ensure the best possible customer care and service.
Such a smart acquiring approach will allow merchants to focus on their core business without forcing them to have to get involved in activities which are not supporting their core business. The trend for merchants to grow their business beyond existing boundaries will accelerate.
By Koen Vanpraet, Chief Commercial Officer, Credorax