To buy or not to buy? A payments business dilemma
The ecommerce market is on a powerful growth trajectory – one that has only been boosted by the ongoing COVID-19 pandemic forcing shoppers globally to stay at home. According to eMarketer, global ecommerce sales will hit $5 trillion next year, following a period of annual growth rates of over 20%.
The opportunity for banks and other payment businesses is enormous. Billions of dollars of fees are available for companies that can make international ecommerce as smooth and seamless as possible for their merchants.
Merchants’ expectations have expanded
The trouble is that offering a truly international payments platform is challenging for any organisation, let alone an established bank or payments business with dated technology and a sprawling existing infrastructure and client base to manage. They need to think about a myriad of different factors. How can they ensure robust compliance with legal and regulatory frameworks across multiple territories? How can they best integrate with multiple acquirers to guarantee their merchants’ high success rates at low cost, across different countries? How can they offer the best range of payment methods, reconciliation and payment pages in multiple languages in order to support both their merchants and their merchants’ customers?
Then there’s the question of business intelligence and insights. As the ecommerce market continues to grow, strategic-thinking merchants want access to as much information as possible as to their online customers’ behaviour. What payment methods and currencies do they expect? Which devices do they tend to shop from? When are conversion rates highest?
All this is why a raft of non-banking financial solutions providers have joined the market in recent years. Free from the technological constraints limiting established players, these disruptors have been able to develop innovative ecommerce and payments offerings, integrating with the latest payment methods and managing fast-changing compliance across multiple jurisdictions. In short, in many cases they have been able to develop the features and benefits that merchants expect, faster and more efficiently than traditional banks and PSPs.
To buy or not to buy?
Where does this leave those traditional players? They can attempt to build their own in-house payments platform, meeting the demands of international commerce as outlined above. This gives them comprehensive control, and the ability to offer a truly consistent brand experience for merchants. However, such a project can be hugely costly and time-consuming. If such a build takes, say, two years, then a huge opportunity will have been lost.
Alternatively, they can turn to one or more of those disruptors, either partnering with them to offer a third-party payments platform to merchants, or even acquiring them to bring their solution in-house.
These options mean that truly sophisticated, multi-feature payments platforms can be made available to their merchants immediately. However, partnering with a third-party means relinquishing a share of clients’ wallets, a share of their business intelligence and insights, and opportunities for cross-selling and up-selling. It can also dilute the original bank or PSP’s brand. Meanwhile, acquiring a third-party provider is hardly an inexpensive option – and the challenges of technological and cultural integration can be considerable.
White-labelling: the perfect balance?
A third option – and one which can strike a careful balance between these benefits and challenges – is a white-labelled payments platform.
This enables the bank, acquirer or PSP to carry out a single integration with the platform – rather than multiple integrations with different providers – and then immediately gain access to all the features of that payments platform. Such a process can take mere weeks or even days to achieve. From there, all of the business’s merchants gain access to an out-of-the-box solution, configurable to their precise needs depending on where and how they are trading.
So for payments businesses that want to thrive and grow in a landscape in which the ecommerce marketplace is growing rapidly, a white-labelled payments platform could be the perfect choice, offering the ideal combination of speed, agility, brand consistency and cost-effectiveness.
By Sunil Jhamb, Founder and CEO, WL Payments