Payments is a source of innovation, and as with all innovation, the agile, efficient and fast will adapt and thrive while many other merchants will play catch-up and face diminished margins. Rob Lincolne, founder and CEO of PayDock, highlights four trends that merchants must know to stay ‘in front’ of the wave and outpace and outmanoeuvre their competitors
It’s easy to forget that while the concept of exchanging value is old, modern methods of payments are in many ways very new. The credit card, for example, of which any of us may have 3 or 4 has itself only been around since the late 1950s. Over the last decade the world has seen an explosion of payment solutions enter the market. Today the merchant sees everything from paper cheques to instantaneous global remittance.
In these corona-times, McKinsey identified that 90% of executives feel that the COVID-19 will fundamentally change the way they do business over the next 5 years. However, critically only 21% feel equipped to pursue new growth successfully. (Innovation in a Crisis, June 2020).
Therefore, in a now volatile, uncertain, complex and ambiguous (VUCA) world we must refer to that oldest of principles to guide us, adaptability. Megginson’s often mis-attributed quote must apply here. “It is not the strongest of the species that survives…It is the one that is most adaptable…”. This has never been more true.
Over the last three months the world has witnessed large corporations pivot from hubs to homes and the death of point-of-sale. Digital payments are on the rise and the world will never be the same. ACI Worldwide identified that “The COVID-19 crisis continued to drive global eCommerce sales in April, with the general retail sector experiencing 209% growth compared to the same period last year.”
So with over 200% shift in consumer buying behaviour and a wholesale change in how commerce is conducted, it’s no wonder that merchants and online platforms are taking a long strategic look at the sector. When considering how to compete and win in digital payments, what are the trends to be aware of? What are the traps to be avoided and the choices that can be made today to avoid chaos tomorrow? How can you be efficient, smart – and win?
Trend #1: The Rise of Fintechs
Merchants wishing to excel must capitalise on emerging B2C fintechs. It seems every day there’s a new and better way to pay and consumers are flocking to these tailored, friendly and accessible solutions. Better loyalty, better cashbacks, lower fees, payment-over-periods, seamless consumer experience. Examples include Afterpay, Azupay, WhatsApp, Facebook Pay, Apple Pay, Google Pay, Samsung Pay. The merchant wishing to succeed must embrace today’s consumer – and this requires a level of agility not previously seen in the payments sector.
Trend #2: Third Party Niche Apps
As the payments market has continued to break up, specialised organisations that create value along with different steps of the payments value chain include have emerged. These include know-your-customer, anti-money-laundering, fraud, reconciliation and remittance. These providers no longer try to be ‘everything to everybody’ but laser-focus on providing exceptional value in critical parts of a payments infrastructure. Examples of these services in the fraud sector are Accertify and Bleckwen. Both highly-focused fraud providers. Valuable to merchants, yet hardly a tick-and-flick to engage their services. The value is there, if the merchants can find a way to embrace it.
Trend #3 Accelerated Commoditization
There once was a day when STRIPE was the main game in town, but boiling the ocean has become hard as a plethora of competitors have emerged and the larger platforms are finding it hard to ‘boil the ocean’. Today there’re literally hundreds of hard-to-differentiate vendors, triggering a race to the bottom where the only genuine differentiation is price. In the payments sector, we have a saying, “In payments everybody is doing everything all the time.” Merchants can no longer clearly differentiate, and the only solution is to find a way to maintain power/control and capitalise on this dynamic, yet it’s hard for merchants to easily exploit this accelerated commoditization effect.
Trend #4 Regulation and Compliance Changes
National regulators such as the FCA in the UK have all been mandating greater transparency, faster speed and lower costs for merchants and consumers. As a consequence, a host of innovation-inducing regulation has been now implemented in the market. Vendors such as Azupay (Australia) and Truelayer and Tink (UK) are entering the market to compete with already incumbent payment processors. Market fragmentation increases and merchants struggle to know which service set to implement.
These payments can be as much as 90% cheaper on medium size transactions and the platforms hold significant promise for merchants who can embrace them.
In parallel the tightening of overall compliance requirements such as CCPA, GDPR, PCI DSS and other regimes are harder than ever to maintain and more strictly enforced than in years past. Large merchants are looking to offload the risk and automate compliance while incumbents are not positioned to fully support merchant needs and pass much of the burden directly to the merchant.
Merchants need a better solution.
Today, merchants need to be more agile than ever. There is a critical need to be able to rapidly navigate a fractured landscape and consume benefit while not being locked into any fixed strategy. Some of the trends listed above increase cost, while others present opportunities to reduce them dramatically – and each contain a chance to bring consumer relationships closer than ever.
But for the sophisticated, post-COVID merchant, the big dilemma today is in fact not how to survive, but how to capitalise? Keeping a watchful eye on these four trends will ensure success.
Copyright © 2020 Robert Lincolne