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Partnering to Scale and Succeed

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By Matthias Setzer, CCO, PayU

 

2018 has been a huge year for partnerships across the payments industry. We’ve seen e-commerce giants like Walmart partnering with payments titans like PayPal, and Swedish payments start up Klarna raising $20 million from global fashion retailer H&M. These partnerships have one common goal: to fight for a bigger share of the wallet.

 

To form the most successful partnerships though, companies must approach with a rational and considered mindset, starting by identifying the key players that they need to collaborate with. The most profitable partnerships will recognise and capitalise on each other’s strengths to deliver industry leading market offerings.

 

The changing face of e-commerce

E-commerce across sectors is in the midst of a revolution. The widespread global adoption of online devices means that technology is permeating every aspect of any digital shopping or purchasing experience, creating a host of challenges and opportunities for consumers and merchants alike.

 

Data collected from those online devices is used by merchants to tailor respective shopping experiences, from the very first targeted ad, to the payment transaction and delivery method. When considering that, according to PwC’s 2018 Global Consumer Insights Survey, social networks ranked number one for finding inspiration for purchases, it is fair to say that consumer experience and the projection of a company’s online brand has never been so important. If businesses are to succeed in the digital era, leaders must ensure that their consumer offering is of a consistently high quality, globally competitive and as hassle free as possible. Adobe’s eConsultancy Study shows that merchants recognise this, with 54% considering customer experience to be their most important focus.

 

The importance of collaborative partnerships for scalability

One fundamental pillar that is integral to positive customer experience, and consequently merchant success, is the payment infrastructure. Consumers have become accustomed to an ‘always-on’ lifestyle where connectivity and convenience are no longer considered luxuries, but essentials. This ‘always-on’ attitude manifests itself through the expectation for instantaneous service and transactions. This is especially prominent in the e-commerce sector where consumers are able to access services at any time on their smartphone, expecting the same quality of service every time they do. They expect the service at any time, and it needs to be seamless, secure and processed with their locally preferred and habituated payment methods.

 

The e-commerce market is not one that merchants can afford to ignore. Statista’s research shows that in 2017, retail e-commerce sales worldwide amounted to 2.3 trillion US dollars and e-retail revenues are projected to grow to 4.88 trillion US dollars in 2021. Merchants need a payment infrastructure that is capable of scaling in line with this rapid growth and are increasingly turning to more deeply integrated partnerships with payment providers to ensure they deliver the speed that consumers are looking for.

 

Astute leadership teams will forge partnerships that place technological innovation at the very heart of a combined business model, allowing them to become market leaders through a combination of reputation built on heritage and new business models that fully capitalise on the benefits of technology.

 

Modern day payments platforms are increasingly designed with the technology, speed and architecture that merchants need to compete. This will be particularly relevant as they open up into new markets which bring with them an increase in user demand and the associated additional complexities. Partnering with payments providers to build these platforms that scale with growth, maintaining speed and functionality, will be critical for any merchants looking to expand across borders and into new markets.

 

The consumer benefits

Partnerships between merchants and payment service providers can have huge benefits to the end user. Firstly, and perhaps most noticeably, will be an improved user experience. More sophisticated and modern payment infrastructure will contribute to a fast, frictionless transaction experience. Better connectivity will make international payments seamless.

 

Secondly, as payment service providers are duty bound to adhere to stringent regulation around data safeguarding, a consistently high quality of security is guaranteed. This leaves the consumer safe in the knowledge that their personal payment details are well protected against fraud and breaches. On top of the pure payments data, data can be shared to facilitate a seamless experience or allow for advanced payment methods like credit. A consumer needs to be safe and assured that his or her data is staying safe and will only be used for the purpose at hand.

 

Lastly, by partnering with a global payment service provider, it is likely that merchants will be able to offer international consumers a payment method tailored to their local market. By offering this level of interoperability between global transactions and local market nuances, merchants will capture the entire market potential. For example, in Brazil as much as 70% of local payments are made by card payments with instalments and almost a quarter of online payments are made with Boleto Bancario, a cash payment method. If they fail to offer local payment processes, merchants could miss out on significant opportunities to increase revenue.

 

Creating walled gardens

While the impact of these partnerships is predominantly positive for consumers, as with any innovation or large partnerships, we must not overlook potential downsides. Online devices are generating more and more data that retailers can use to hyper-personalise product offering. As retailers and other large platforms expand to offer a huge range of products and services, allowing customers to consume, buy or enjoy almost anything, there is a real danger that we see the creation of a walled garden.

 

These all-encompassing models only work if they can capture a majority share of the consumer’s time, money and attention. It is easy to predict that partnerships will become more exclusive, providing certain services only to a specific platform or retailer in order to differentiate themselves from the competition. This may ultimately limit consumer choice, compared to a fully open and interoperable internet.

 

The future

It’s clear to see that partnerships between merchants or platforms and payment service providers will become an increasingly prevalent trend across the payment landscape. In particular, we are likely to see smaller, more technologically innovative players being acquired and used by their partners to get ahead in the increasingly competitive market landscape.

 

Partnerships can be unpredictable and challenging, but one thing is for certain, they hold unparalleled opportunity for innovation. Even more so than in 2018, we can expect to see partnerships being formed in 2019 that are bigger, more exclusive and of a higher investment value.

 

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Top 10

2022: A FUTURE FOR SIMPLE AND FRICTIONLESS CROSS-BORDER PAYMENTS

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Dima Kats, CEO, Clear Junction

Dima Kats, CEO, Clear Junction

 

Even after 18 months of stuttered lockdowns, businesses are still learning how to navigate the effects of the pandemic. However, in 2022 there is a lot more certainty surrounding how events in the future might unfold compared to the start of the series of lockdowns in 2020-2021 – when businesses had to accommodate ever-changing rules.

Ironically, the coronavirus pandemic may be a catalyst for a more globalised world in the near future, which will directly and quickly affect the world of finance and payments.

 

Activity in the fintech sector.

Fintech development flourished over the course of the pandemic. Reducing the need for face-to-face interactions was essential for maintaining economic activity during lockdowns. Many of the trends that are driving the increased economic activity in the fintech sector are a direct result of social distancing: the rise of digital payments, increased work-from-home arrangements, retailers diversifying their payment channels, and an increased use of autonomous finance. As a result of these trends, there has been a large number of fintech start-ups emerging.

Due to the growth of the fintech sector in the past year, there has been a significant increase in demand for industry professionals, and the effects of that demand will be playing out into 2022. This is mainly due to employees being re-trained during the pandemic for new roles, creating a more skilled and mobile workforce.

 

Cross-border payments.

There are currently three trends that are reshaping cross-border payments, and in a sector that is predicted to reach over $156 trillion in 2022, staying ahead of those trends may prove to be a lucrative decision.

The first trend is the changing consumer demands. Customers are less inclined to pay for banking services while still expecting them to be fast and intuitive. Alternative service providers that can offer the customer more of what they want while being faster, cheaper and more transparent will gain a competitive advantage over banks.

The second trend is the increase in trade with emerging markets. As the share of international transactions involving emerging markets grows, cross-border payment solution providers are focusing on these markets. Growth in these emerging markets is bolstered by free trade initiatives, while some countries have established protectionist policies that slow them down. Growth in emerging markets is expected to be at around 11% per year, while the overall growth of cross-border trade is estimated at just 5% per year.

The third trend is that the accessibility of mobile phones has increased. As people gain a larger online presence, there is more opportunity for people to make online payments. The percentage of mobile phones ownership among adults in emerging countries is at 83%, compared with just 62% in 2014. This figure is expected to increase even further, and subsequently increase the number of e-payments being completed.

 

Cryptocurrency in 2022.

We expect to see cryptocurrency develop even more mainstream appeal as it becomes less speculative and more widely accepted. This will cause banks to increase their investment in fintech, in conjunction with governments introducing new regulations to ensure that transactions that involve both traditional currency and cryptocurrency are safer. One of the most tangible effects of the pandemic was the need to use online payment solutions. In the same way, people are beginning to trust and realise that cryptocurrencies may be a feasible payment solution even in the post-pandemic world.

Consumers are increasingly dependent on digital devices, but over half of them prefer to make online purchases over a computer than a mobile device. Mobile screens on smartphones or tablets are smaller than desktop monitors, which leaves users feeling discouraged and less secure while shopping compared to completing transactions over a desktop.

Mobile shopping or M-commerce has benefitted from several innovations that encourage users to finish payments on their phones: instant checkout solutions like Apple Pay, the use of augmented reality to show consumers the products they are buying, and sites building mobile-friendly user interfaces. Due to these innovations, Insider Intelligence predicts that shoppers will inch closer to using their mobile devices as a preferred channel in the next few years.

 

Open banking and the need for collaboration.

As the industry grows and becomes more diverse, there will be an increasing need for partnerships and collaboration to take advantage of the emerging opportunities.

One direction we’ll be seeing them in will be in the form of open banking. Traditional firms are beginning to see open banking as something more appealing due to the opportunity for partnerships. The rise of alliances within the finance industry began to take place long before the ongoing pandemic. Currently, over 30 partner banks represent hundreds of fintech  relationships and financial services. We think firms who adopt open banking early and secure partnerships will reap the rewards compared to their competitors.  firms who adopt open banking early and secure partnerships will see themselves reaping the rewards compared to their competitors.

2022 will likely be the year that open finance starts reshaping financial services and the year that banks savvy up to the opportunities that open finance represents. With regulators in the EU and UK proposing measures to heighten data sharing principles across a broader set of financial products, 2022 will see many banks experimenting and evolving their business models toward a more open, collaborative platform approach.

The multiple challenges to the finance industry over the last year have highlighted the need for fresh thinking, to face the future with strength and confidence. Fintech partnerships can create a significant opportunity for levelling the playing field, streamlining internal processes, adding technological capabilities, and improving the end customer experience.

Companies like Clear Junction offer businesses a mix of these benefits and opportunities at one time. Continued and original collaboration and partnerships between fintech companies and banks are essential for the future of the financial services industry and the finance sector. The digital marketplace is indeed growing, and the future belongs to the financial institutions that can stay ahead of the curve.

I think we need to add some context about the Fintech industry over the last 12 months, and how the pandemic has actually affected the industry. Need for innovation etc etc how much money has been put into it etc. And then lead on the predictions around talents and retraining. Otherwise this byline reads as just a list of predictions, without adding the relevant context.

 

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CHRISTMAS IS COMING: WHAT MAKES A GREAT ECOMMERCE STRATEGY FOR THE FESTIVE SEASON?

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Christmas Gifts

By Laura Lough, Director of Ecommerce Operations at Digital River

 

There is no doubt the year 2020 presented an array of economic and personal challenges worldwide. But, there was a silver lining for the world of ecommerce. By necessity, the pandemic encouraged people to shop online, which grew the ecommerce industry rapidly. The outlook for 2021 is cautiously optimistic. While consumers may react to lifted social distancing restrictions with exuberant spending, they could also continue to hang on to their money over fear COVID variants might cause more economic upheaval during the winter of 2021-22. Experts are predicting another year of growth, but not at the breath-taking rates seen in 2020.

Whether the growth rate surges or stabilises, one thing is certain: new shopping behaviours learned by consumers because of COVID are here to stay. Contactless payments, mobile wallets and social spending all saw new consumer use in 2020, and consumers who appreciate their convenience aren’t likely to abandon those new habits.

There are some fundamentals that eCommerce providers must take onboard now if they want to have a successful holiday season.

 

Meet your customers’ high expectations

Gone are the days when fulfilment and supply chain were little-known ecommerce topics. Shipping delays due to a surge in ecommerce demand in 2020 as well as the Suez Canal blockage in March of 2021 brought fulfilment issues to the front page, literally.

Adding to the challenges are current lorry driver shortages and supply chain disruptions. The upshot is supply chain issues will continue to challenge ecommerce brands. Those ramping up closer to the holidays are likely to face some headwinds. However, whether you’re ahead of the game or playing catch-up, you can develop fulfilment strategies that will serve you well in the years to come, as supply chain issues are not going away anytime soon.

Laura Lough

Businesses can use their data to intelligently predict consumer behaviour, allowing them to be ready for surges in demand for different products and locations. Avoid costly returns by giving the shopper an overload of information such as product images, comparison charts and reviews. To simplify reverse logistics and appeal to your customers, consider partnering with third-party drop-off sites for brands that don’t have physical stores.

Most critically, brands must communicate clearly, effectively and transparently with customers. They cannot expect sympathy from customers if fulfilment issues outside of their control delay delivery. Customers have come to expect shipping that fulfils their needs and desires—not the needs of retailers.

 

Accessibility for all

Many ecommerce marketing best practices that were true pre-COVID will continue to hold true this season. Retailers must develop unique customer acquisition strategies and marketing collateral for each market they enter — translated content isn’t enough. They should also use local channels, and messaging should remain cohesive across channels.

It’s critical to incorporate social buying into your marketing strategy as more customers are engaging with brands on their preferred platforms, which are increasingly social. Mobile commerce is another critical component to your marketing strategy, and it’s important to develop an optimised and responsive mobile experience for your customers.

Another important consideration is making sure your D2C platform is accessible to those with disabilities. In addition, brands need to pay attention to how COVID has affected various areas of the world, so tailoring your messaging to local realities is critical.

 

Payment strategies as a tool for business success

Payment systems are so important for brands that they should constitute a strategy in and of themselves, rather than just a back-office tactic. Over the pandemic several payment systems have become business-critical:

  • Digital Wallets: Consumer use of digital wallets surged during the pandemic. Chinese shoppers made the bulk of digital wallet purchases. In the US, digital wallet usage was up nearly 24% over 2019 numbers.
  • BNPL: Buy now, pay later (BNPL) is another payment method that is quickly rising in popularity. Brands offering BNPL have reported a 45% increase in average order value when customers pay in four instalments.
  • Mobile: Consumers will continue to rely more heavily on their smartphones to make purchases in 2021 and beyond. It’s critical for brands to optimise the mobile experience with payment methods that allow shoppers to pay with one touch of a button rather than entering a credit card number.
  • Direct Debit: Direct debit is another payment method that brands should consider adding to their online store. In this scenario, which is most popular in Europe, the retailer withdraws money directly from a consumer’s bank account.

 

Lean on tech

Underpinning every aspect of an eCommerce strategy is data. Businesses must leverage their data by developing a comprehensive customer-centric system that includes the entire customer lifecycle, including search, payment methods, and sales and shopper support data.

eCommerce providers can boost conversion rates, improve customer experience and reduce false declines by using a local payments processor that understands each market you’re in. Ensure that your payments partners are using retry logic to automatically route payments in a way that maximises the likelihood of authorisation.

Retailers simply must prepare well in advance for a surge in traffic to their platforms. If 2020 is any indication, the number of shoppers transacting through your platforms at any given time can vary wildly. That’s why it’s critical to test your system well ahead of time to ensure it can handle the load and make the adjustments early. More than any time of year, a failure to prepare spells trouble.

Finally, companies should select their partners carefully. They should look to work with back-office experts with specific tech and market experience. Appropriate partners can facilitate your brand to deliver tangible results this holiday season, ensuring you finish the year with a bang.

 

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