Multiple Payment Methods, Risk Management and Optimized Conversion Rates
- 5 minute read
The rise of e-commerce has created a fertile ground for payment processors, gateways, PSPs and merchant acquirers to grow their business. This has resulted in a highly saturated payment market and the battle to gain the hearts and minds of merchants is fierce. Merchants are increasingly willing to pay for value-added-services (VAS). Services that optimize consumers’ customer retention, improve checkout rates, include compliance and risk management services that protect against fraud and chargebacks.
A Growing Variety of Payment Methods
In addition to secure PCI-compliant payment processing, merchants expect PSPs to enable them to offer their customer a growing variety of payment methods to optimize conversion rates.
- Direct Debit
- E-Wallets
- Account-to-Account Bank Transfers
- Buy Now Pay Later
- Alternative and Local Payment Methods (LPM)
- Crypto Payments
Statista 2021: Preferred Payment Methods in Central and Eastern Europe
Besides card payments and PayPal that have dominated the online payments market for decades, there are methods that are extremely popular in specific countries, such as Sofort and Giropay in Germany, iDEAL in the Netherlands, Bancontact in Belgium, EPS in Austria, and Multibanco in Portugal. Merchants that aim to expand their footprint into these countries should be aware of the amount of business they miss out to if they do not offer these methods on their web shops. Alternative payments, such as KLARNA BNPL (UK, Sweden, and Germany) and instant mobile payment (Bizum in Spain) are also on the rise. And then there is SEPA Direct Debit, where the merchant initiates the payment upon receiving the customer’s authorization.
Source: Flagship Advisory Partners, 2021
Alternative and LPMs are expanding their offering to meet the expectations of millions of young consumers who demand a secure, fast, and frictionless payment experience.
Source: Flagship, 2021
A PSP that enables merchants to offer crypto payments helps merchants to reach out to a new segment of digitally savvy customers. Crypto transactions fees are low and thanks to blockchain technology, each crypto transaction has a highly secure online record.
What else do merchant expect from PSPs, besides secure payment transactions in a growing variety of payment methods and integrated risk management solutions? Merchants will choose to partner with a PSP that offers them excellent customer services, a 24/7 helpdesk to solve their issues, in addition to solutions that enhance performance, secure subscription payments, billing solutions, expense management and reporting tools to prevent and predict patterns that inflict their business.
Payment Software and Commerce Enablement
According to a McKinsey analysis, optimized payment performance and e-commerce solutions could account for approximately 80% of revenue growth in payments-related merchant services over the next five years. This trend is certainly not limited to the US. In Europe, we see the same developments.
Core Transaction Processing
During the past decade, merchants selected a PSP that could offer them secure and fast core transaction processing services:
- Multi-Currency Capability
- Cross Boarder Capability
- Authorization
- Settlement
Nowadays, competition is fierce, and merchants switch to payment services providers that offer them value-added-services on top of core transaction processing. Payment software and extra infrastructure services, such as:
- Time-efficient Payment Facilitation software
- Gateway software
- PCI compliance
- API functionality
- Tokenization and encryption to optimize security
- Global payment capability
- Risk management and Compliance services
- CDD/KYC Onboarding process as part of Customer Due Diligence
- Periodical Risk Assessments as part of Enhanced Customer Due Diligence
- Transaction Monitoring as part of Ongoing Customer Due Diligence
- 3-D Secure protocol as an extra security layer card transactions
- Merchant – Acquirer Domain
- Issuer Domain
- Interoperability Domain
- Fraud Prevention
- Built-in, Artificial Intelligence empowered fraud detection that uses a vast network of data to detect and blocks fraudulent traffic automatically
- SMS Fraud Detection
- Reduce Losses on Low-Value Transactions
- Fraud Loss Recovery solutions
- Chargeback Prevention
- Chargeback Protection
- Dispute Management
- Threat Metrix Device Fingerprinting
- Security Risk Assessment for User Sign-In events, based device profile and user attributes
- Affiliate fraud monitoring
- Detect disproportionate conversion rates
- Detect IP Address Fraud
- Geolocation
- End use customer support
- 24/7 Customer Support
- Billing Support customer services
- Extensive reporting integration
- Back office, post back notifications
- Integration with Reporting Tools
However, the highest compound annual growth rate (CAGR) will be expected to come from what McKinsey calls Commerce Enablement Services, such as:
- Subscription- based payments management
- Secure ecommerce integration to be able to accept cryptocurrency
- Customer-friendly EZ or One Click Checkout which minimizes cart abandonment rates
- Hosted (Customized) Payment Page
- Affiliate management system
- Retention Tools – Cancel Keep, Upgrade Downgrade features to keep members active
- Payment recovery through Dunning Management where customers are notified about payment failure via email, SMS, or in-app notification, after which the payment process is reinitiated.
- Split Payments to support Content Creator, Affiliate, Vendor payments
This last VAS is very interesting because merchants are able to split payments among their marketing partners, vendors and content creators, etc. Split Payments very interesting for those companies that need to split their profits among different stakeholders and in multiple locations.
As we have learned from this article, the PSP market is saturated, and competition is high. PSPs that want to stay in the race will have to step up their game. Merchants demand much more than secure payment processing and only those payment service providers that understand the importance of offering their merchants the best value-added-services will be able to expand their business and grow their merchant portfolio.
Want to learn more about value-added-services?
If you are a merchant in search of a PSP that can offer you an extended package of VAS to expand your business into Europe, the UK or in the USA, feel free to contact us today, Reach out to us with your questions at [email protected]
Author: @SandeCopywriter on behalf of Segpay International
