Due to the rapid growth of global e-commerce, payment service providers (PSPs) are now facing unexpected competitive challenges. The new digital generation expects fast and easy payment experiences – at any time, anywhere, on multiple devices, and also across borders using their preferred payment method. With online payments expected to hit $2.4 trillion USD in 2019, PSPs will need to adapt quickly to meet demand and stay ahead of the game.
The top seven challenges PSPs face in 2018 are:
1) Efficient payment processing in a global marketplace
Consumer behaviour differs greatly by country and consumers will quickly abandon their shopping cart if their preferred payment method is unavailable. Alternative payment methods (APMs) such as PayPal, ApplePay and eWallets have now overtaken credit card payments, and bank transfers (using platforms like iDeal, Sofort and Trustly) are forecast to surpass both credit cards and debit cards in popularity by 2021.
Offering consumers the choice to pay via credit card, APM or bank transfer gives retailers an incredible advantage in a competitive online market. PSPs will need to be knowledgeable on consumer payment preferences in each country, offer merchants a wide range of payment methods with individualised solutions, and also have the ability to do so efficiently.
2) Offering an omnichannel payments experience
Tech-savvy consumers are shopping with their smartphone more than ever before, with mobile payments expected to reach $3.38 trillion USD globally by 2022
Consumers have high expectations and expect a seamless shopping experience across all channels, with websites, email, social media and physical stores all showing the same messages, offers and product options. Consumers also expect uniform payment methods, regardless of where or how they are completing the purchase.
PSPs must adapt to merchants’ changing needs and offer seamless integration for mobile payments, e-commerce and in-store POS transactions. Successful PSPs will be those offering the complete package, with clear insights, payment settlements and reconciliation information across both physical and virtual channels. Offering this technology enables the merchant to provide a harmonious and high-quality customer experience, whether the customer is buying in-store, online or via smartphone.
3) Complying with new regulations mandated by PSD2
The second Payment Services Directive (PSD2) came into effect 13 January 2018 and aims to create an equal playing field by encouraging greater competition, innovation and transparency, thereby giving the consumer better value and protection. The ‘Access to Account’ rule (XS2A) requires banks to open customer account and transaction data to third parties via open APIs. PSPs face the challenge of quickly becoming PSD2-compliant while remaining innovative in a highly competitive market.
PSPs can benefit from XS2A as it allows easier access to bank account data such as transaction history and account balance. By focusing on direct debit and bank transfer as well as credit cards (which have the advantage of being lower risk but attract higher processing fees), PSPs can reduce costs while also potentially lowering fraud risk. Taking advantage of XS2A and open API technology, while quickly adapting to PSD2 regulations, will give PSPs a competitive advantage.
4) Maintaining first-class fraud detection and prevention
The rapid increase of online payments offers fraudsters an ever-growing market to exploit and perform fraud. PSD2 regulations now mandate a two-out-of-three Strong Customer Authentication (SCA) process for online payments, threatening the ease of the ‘one click checkout’. The shift to frictionless payments, coupled with tighter regulations on unauthorised transactions, present PSPs with the challenge of balancing security and fraud prevention with user-friendliness and customer experience.
PSPs must be proactive, working closely with anti-fraud providers on new technologies to detect and prevent fraud, rather than just handling fraud after it occurs. PSPs will need to employ first-class anti-fraud toolkits with smart analytics, data collection, behaviour profiling and machine learning risk scoring. By using risk management and transaction monitoring to determine risk, PSPs can take advantage of the SCA exemptions and reduce chargebacks, whilst still providing a superior customer experience.
5) Remaining innovative amidst increased competition
As new PSPs enter the payments space, the challenge lies in remaining innovative in a highly competitive market. Simply sending a transaction from A to B is no longer sufficient. Merchants want to simplify their business relationships and are now searching for a ‘one-stop-shop’ with the capabilities to combine functions and offer a complete payments solution.
To meet demand, PSPs must take advantage of Single RESTful API technology and collaborate with new partners to build their own innovative platform. The way forward is in offering merchants a complete consolidated package: a secure payment gateway with fully embedded and customisable payment forms, combined with advanced data analytics, risk and fraud management capabilities, and comprehensive business insights and reporting.
6) Competitive differentiation in a commoditised market
For the majority of consumers, purchasing products online has become commonplace. Payments services are quickly becoming commoditised and PSPs can no longer win business based on pricing and discounts alone. Merchants also have high expectations; they want complete payments solutions, fast approval and processing, and high-quality customer service from a PSP who understands their individual needs and requirements.
PSPs can differentiate from their competitors by offering a range of value-add services and personalised customer service. In an increasingly switched-on world, 24/7 customer support is vital, as well as fast approval, easy sign-up, no upfront fees, and quick integration so merchants can start processing immediately. PSPs who take the time to understand each merchant’s unique business issues and priorities, and offer guidance on payment strategies and individualised payments solutions, will stand out from the crowd and outperform competitors.
7) Complying with new Data Protection Regulations
The General Data Protection Regulation (GDPR) comes into effect May 2018 and aims to unify data protection laws in the European Union. GDPR expands the rights of EU citizens around privacy and protection of personal data, and requires companies maintain adequate data records, disclose data breaches within 72 hours, and gain ‘explicit consent’ before collecting, processing and storing personal data. Non-compliance may result in hefty fines of up to €20 million or 4% of global annual turnover.
PSP’s must avoid adopting a ‘wait-and-see’ approach and instead tackle the challenge head-on by re-examining their internal processes and procedures, auditing the data collection chain via data mapping, and running mock breaches to prepare for a security breach. Early preparation and implementation is key to ensure GDPR-compliance by May 2018 and could potentially be an advantage over lesser-prepared competitors.
If you have any questions or wish to talk to one of our team about how BillPro can help support PSP’s navigate these challenges, you can call us on +1833 245 5776 or send us an email via our website www.billpro.com/contact