Roman Korobkov, PSD2 Domain Expert at Riskified
Despite significant efforts to maintain and safeguard Europe’s payment infrastructure, online retailers continue to battle with implementing the Second Payment Services Directive (PSD2), an industry-wide regulation for EU member states and the UK to make online transactions more secure.
A recent study conducted by Forrester Consulting and commissioned by Riskified, entitled E-Commerce Fraud Prevention: What Is The Post-PSD2 State of Play?, found that nearly half (45%) of online retailers are navigating issues related to the PSD2 rollout or have only managed to implement the minimum requirements.
While the benefits of implementing PSD2 are evident by the steady decrease of fraud rates across the EU and UK, the new PSD2 landscape has left many eCommerce merchants grappling with where to begin – or how to catch up – in order to adhere to the regulations.
Why are businesses struggling with PSD2?
Many of the delays in implementing PSD2 can be attributed to the initial roll out. Its launch in late 2015 was followed by the long process of setting standards and requirements – meaning businesses did not have to consider ‘true’ compliance until December 2020 in EEA states and March 2022 in the UK. Despite extended time to prepare, many online merchants were not equipped to put the run-up period to good use.
As more time has passed, the study found that online merchants face limitations when attempting to optimise their payments strategies under PSD2. 31% of online retailers say they feel restricted to using the tools offered by their payment providers, either out of convenience or simply not knowing that there might be other options which can be better suited to their specific needs.
As stated in the study, some payment service providers (PSPs) present e-commerce merchants with 3DS solutions and exemption engines as part of a package offer. Although this can be helpful in narrowing down the available tools and solutions, it may lead merchants to believe that they are receiving everything they need, which sometimes is not the case.
Many online merchants still rely on 3DS as their sole solution for fraud, despite it being designed as an additional layer of security for Card-Not-Present (CNP) transactions. While it has indisputable value, 3DS is not a one-size-fits-all solution and it is not enough to ensure a complete fraud prevention strategy.
When 3DS was adopted as the industry standard for customer authentication, fraudsters immediately started searching for ways to bypass it. In the study, 39% of merchants admitted that fraudulent chargebacks have even increased on 3DS-authenticated transactions, negatively affecting their overall fraud rates.
In today’s payment landscape, fraudsters are increasingly sophisticated and targeted in their approach. The use of e-commerce patterns and the dark web has led to the prevalence of malware, bots, and other tactics to manipulate the authentication process. Navigating these issues whilst maintaining customer satisfaction is a common challenge. However, secure and frictionless payments are an achievable reality – e-commerce merchants just need to know the variety of options available to them.
The road ahead
PSD2 presents an opportunity for eCommerce merchants to explore new types of solutions and tools that will support them in the long-term. While it can be tempting to take an easier route, there are some crucial factors to keep in mind to ensure a proper strategy for efficient payments flows.
Firstly, online retailers should take the time to explore all their options before settling for a provider. To better optimise payments under PSD2, merchants should look at performance-based indicators, such as efficiency, effectiveness and productivity measures. This will require a full-scale holistic approach that looks to combine fraud prevention and payment optimisation strategies.
Secondly, improving data transparency is essential to building and implementing a successful payments strategy. The study showed that 65% of respondents need more data around payment processing fees, regular market performance updates and thorough reviews of available solutions in order to help their business advance its PSD2-related strategies. Having the same transparency with their provider can allow businesses to explore all of the options. Knowing why an authentication request or exemption has been declined will ultimately help the retailer get to the root of the issue, resulting in a more seamless transaction process in the future.
Thirdly, one of the biggest obstacles for e-commerce businesses is the dreaded abandoned shopping cart. According to a recent workshop conducted by the European Payment Institutional Federation (EPIF), some merchants in Italy have seen cart abandonments reach rates of 50%. Merchants should keep an eye out for an increase in shopping cart abandonments, working with their payment partner to ensure the solution they have in place is optimal. It is often worthwhile to integrate a Payments Orchestration Platform which allows the business to work with several PSPs to help reduce the shopping cart abandonment rate.
Finally, customer retention and improved customer experience is at the heart of all successful payment strategies. PSD2 optimisation helps online merchants stand out, giving them a competitive edge by building trust with their customers. Implementing a secure, safe and frictionless checkout process for the customers will not only help retain customers and reduce abandonment rates but also boost the overall visibility of the business online.
With increased transparency and the freedom to choose a partnership based on specific payment needs and wider access to data, businesses can look forward to making more informed decisions which will benefit them in the short and long-term. The fastest way to implement these changes is for online retailers to establish a more transparent relationship with their payments providers. It really can be as simple as being open, collaborative and sharing existing knowledge with others.
E-commerce marketplaces have become more than third-party platforms
By Luke Trayfoot, CRO, MANGOPAY
E-commerce marketplaces have become an essential driver of e-commerce growth. As found by Ascential in their annual Future of Marketplaces Report, by 2027, third-party sellers using marketplaces will capture 59% of global e-commerce sales. A trend accelerated by the pandemic. Marketplaces are helping more brands cater to the ever-changing needs of consumers.
As businesses are continually being challenged to provide a seamless shopping experience, marketplaces can support this venture. Without the added costs of warehousing, supply chain and logistics for additional products, marketplaces can help to alleviate some of those pressures, especially as consumer demand grows.
Now, marketplaces need to further evolve their offering through payments infrastructure, whilst remaining compliant with payment regulations.
The marketplace offering – lowering barriers to entry
Beyond access to the best deals, seamless checkout and quick deliveries, marketplaces also exceed consumer expectations for an intuitive one-stop shopping experience. Through marketplaces, retailers can continue to evolve their proposition, collecting data on what their customers want and need and continually refining their offerings at the right time and in the right place (web/app).
Marketplaces can also support businesses entering new markets or competing with bigger players in their respective fields. Entering a marketplace network allows small businesses to quickly gain influence, benefiting from larger audiences and quickly generating high sales volumes.
With multiple sellers, many with an international presence, implementing a sophisticated payments environment is much more complex than building one for an e-commerce website. Trading globally has different rules and regulations to adhere to per country which means payments environments must be multi-layered, accepting various forms of payments, which can be an inhibitor to businesses scaling at pace. Marketplace’s innate customer-centredness must be maintained end to end, including the purchase journey, so a sophisticated environment is essential.
Building the right payments environment
A crucial part of the customer experience, it is important that merchants provide a choice of payment methods at checkout. As payments have evolved, marketplace operators should consider what options they provide to sellers, and subsequently, their end consumers.
The number one expectation is of course payment security, which is a key step in building a long-term relationship based on trust. Increased control points, however, generally means more friction being introduced into the payment process, so this is a balancing act.
As the retail landscape continues to grow, so does competition and as new players enter the market, businesses must find new ways to innovate, and the creation of payment options is one of the most important avenue to do so.
Considering regulation at every step
Increased marketplace activity has led to the introduction of regulation for the platform economy. In the UK, HMRC has implemented changes to VAT reporting requirements for digital marketplaces and their third-party sellers, especially for overseas sales. Across Europe, KYC (Know Your Customers) regulations intended to protect customers from data breaches on a marketplace and identify the persons (legal or natural) with whom the marketplace does business, as part of anti-money laundering and terrorist financing directives, have also been enacted.
As online platforms continue to play an increasingly significant role, the implementation of the Digital Services Act supports creating a safer, online experience for citizens. This regulation enables the expression of ideas, communication, and online shopping by reducing exposure to illegal activities and dangerous goods. Regulation can seem extremely daunting, especially for those looking to enter the market. However, its purpose is to protect both the business and users.
Marketplaces need to work with payment infrastructure specialists that can support providing methods for local users, as well as options that are familiar and trustworthy for a global audience. Additional flexibility also needs to be built in to adapt to different demographics to ensure that a variety of consumers are appropriately catered for. If a brand wants to establish itself in a new market, varied payment methods are not a nice to have, but a must.
Despite the current economic climate, global e-commerce will continue to grow in the years ahead. Those that will be able to stay ahead of the curve will ensure that their customers’ experience is balanced with greater choice and varied payment options, in tandem with regulatory compliance.
The trends to expect in the future of work in 2023 through the lens of a CFO
By Eliran Glazer, CFO at monday.com
Not a week goes by without significant evolution in the world of work. The landscape is continuously evolving and these shifts can be analysed from many different perspectives..As it has been in recent years, the position of the CFO will continue to be paramount in spearheading essential business initiatives, communicating with employees and other stakeholders, and ensuring cross-company alignment and advancement. However, how will the role of the CFO evolve in 2023 and what can those involved in financial decisions expect in 2023?
CEO and CFO alignment is crucial for success in 2023
CEOs and CFOs know a company’s success can only occur when they work in tandem to improve organisational performance for sustainable growth. To continue to expand, the CEO and CFO will work together more closely than ever to guarantee company operation, efficiency, resiliency and guidance throughout times of transition.
With the market changing at a rapid speed, organisational agility is vital for continued success. When the CEO and CFO are closely aligned, they bring their areas of expertise to the table to drive crucial strategic decisions together so the organisation can adapt to a changing economic landscape.
This is even more applicable in the current macroeconomic environment and geopolitical tension, when every business decision has a significant financial weight. With 70% of boards of directors looking to accelerate digital business endeavours and strategies, finance leaders will have an integral role when it comes to ensuring sustainable company growth.
Investments in digital tech is paramount this year
Since the onset of the Covid-19 pandemic, teams have taken a more dynamic and digitised approach in collaboration to address remote work, across time zones, between offices and at home. For 2023, corporations should expect to see further investment in digital technology that will enable teams to have a more harmonised approach to the digital workforce. Finance leaders will play a substantial role in implementing the processes and structure by identifying the right tech tools needed for this approach. Due to this, CFOs must now be aware of the need to adopt digital technology to drive efficiency.
Based on research from a Gartner survey that polled CFOs in July 2022, 66% said they planned to expand their investment in digital technology in the next 12 months. Additionally,another 32% said they would uphold such spending – the most significant percentage of any spend category. To best serve hybrid workers, businesses will need to enhance not only the customer experience but also their employee experience and satisfaction through the support of dynamic and digital collaboration tools.
Proactivity & transparency in this era of change
During this unpredictable economic climate, proactivity and transparency from finance leaders are key for making decisions that are data-driven and staying agile. To stay agile, CFOs must actively drive collaboration and partnering across functions to position the enterprise to respond to the challenges. This requires finance leaders to ensure that employees are kept in the loop of strategic decisions pertaining to the company. This can only be done by regular updates to the employees about the company’s range of projected scenarios for the upcoming months and any planning adjustments.
To ensure success and resiliency in combatting today’s challenges, finance leaders must be proactive and transparent when conveying the business landscape. It is crucial that CFOs set realistic expectations and break down concepts so that they are well understood and clear for all employees within the company. Educating employees about financial jargon alongside the state of the global economy will also help them find their footing in these challenging times.
2023 marks a milestone in the evolution of a CFO
While 2023 may seem challenging for CFOs with this great responsibility, they have a unique opportunity to make a significant and positive impact. What is most important for a company to overcome the challenges in 2023 is how flexible and nimble they can be, which requires the CFO to be a crucial player in the company’s growth during these times.
The scope of the role of CFOs has changed over the years. It is no longer solely on how to scale a business, but rather how to focus on the efficiency within that growth. To facilitate opportunities, the role of finance leaders will continue to expand this year. By identifying ways in which the CFO role can produce results, support, and even lead other parts of the company, will stimulate more collaboration, communication, and, ultimately, success.
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