In a rapidly changing business environment, for a large part due to a global pandemic, it has become ironically clear that while global commerce and connectivity might have brought this upon us, it is also the skill sets that we acquired through the need to act globally, that serve us well today.
It is a new world of risk, but also the safety in the near and distant, in the local versus global.
We continue to rely on what we know and trust through embracing the digital and contactless world that connects the near and far. The many conversations I had with colleagues and clients over the last months, taught me that nearly all of us are contemplating this to be seemingly inconsistent.
What became obvious too is that what was once considered to be definitely not suggestive, namely payments operations - the belly of the beast – that has now clearly become the safe house of the real and virtual business world. Connecting consumers to vendors, vendors to merchants, banks, and payment providers, and those again to global financial infrastructures has become a vital function in society. Digital has firmly moved from being a ‘channel’ to the leading modus operandi, which is particularly visible in payments.
Four trends that define the future of commerce payments
A recent research note by Gartner in Payments & Mobile talked about four trends that define the future of commerce payments in a digital society: mobile payments & digital wallets Open Banking & interoperability, Real-Time Payments (RTP), and crypto. All four trends examined had one thing in common: the current fragmented payments landscape impedes innovation. Just running the operations across all those methods in different parts of the world, to different standards and compliance with different end user expectations and needs means that it is near impossible for any PSP, bank, issuer, or acquirer to score on all points. Safety and security, lean and agile, low cost, best fit, and CEX. In the meantime, their customers, the businesses that are the real economy, really suffer from ineffective payment processes and service and are in desperate need of fast optimisation.
What do PSPs and banks worry about?
PSPs and banks who have to serve those customers – merchants and business owners in both the physical and virtual world, do worry about all of the above including offering a unique end customer experience that ensures people not aborting a transaction, either in store or online. This requires a lot of focus on innovation and customer trends, on culture and on creating a single experience irrespective of the payment instrument. That in its own manner is a challenge, and inevitable choices have to be made on what and where to invest first.
Build or Buy?
So, they – and in fact, all of us - come up to a point where we have to decide. Do we pour our capital into buying technology and amassing large tech teams as a bank or payments provider, or do we channel those funds and brains towards business development with our clients? Towards listing to them and fine-tuning our businesses, whilst someone else runs the technology infrastructure, maybe even the processes too?
Over time, bureau-based services as this model was called out in the 80s, got a bad image for offering limited choices. The basic choice was bronze, silver, or gold and where would you like the logo on the page? Without being demeaning, in many places, this is still the case. Today’s cloud sounds too far off and intangible to many, but modern PSPs do understand that choices can be offered at a reasonable price. But that does require volume and a dedicated skilled team but most of all, passion, and focus. And PSPs too have to make choices on their USP: running or building.
Compliance is a second excellent reason to consider moving your payments operation into a white label environment. Operating in one jurisdiction is tough, in more even a challenge. The regulation will increase and so will the intolerance with failure. Businesses that purely focus on running a service, rather than connecting with end customers can afford to be totally compliance focused. In fact, they cannot afford not to be ‘too vital to fail’ on the security and compliance front.
Circling back to the Gartner paper, Open Banking, in particular, opens up many roads to innovation – for all players in the ecosystem, but it cannot be done without understanding the preferred and supported payment methods that vary greatly from country to country. And as overarching initiatives such as the European Payments Initiative whereby 16 banks aim to create a unified payment solution for consumers and merchants across Europe, we live in a very different reality today were running and innovating at the same time at a low-cost point is nearly impossible.
Therefore banks, PSPs, acquirers, and issuers that care about their customers might want to look for white label environments that are global players with multi-national expertise to offer universal connectivity.
2020 is proving to be an unsettling year for all of us, but the payment system has not failed us, thanks to all the ecosystem partners working together. Let’s see what more we can do together, for globalisation is here to stay, digitisation will increase at a rapid pace and customer behaviour can change as we have seen and experienced.
There is so much to do right now and it can be done at the same time, but not by one. Let’s collaborate for a connected world.
As published in the Voice of the Industry by The Paypers