EXCLUSIVE: “Local heroes: the key to cross-border success” – PPRO in ‘The Fintech Magazine’

Keeping up with consumers’ local payment preferences, especially if you’re trading internationally, is a pillar of long-term success. PPRO is at the heart of that, globalising payment platforms for businesses, so they can offer more choice at the checkout

From mobile wallets, to buy now, pay later, a new generation of instant account-to-account (A2A) transfers to cash-based internet purchases… the surging choice in alternative ways to pay has come amidst disruptive times for us all. The COVID-19 pandemic, conflict in Europe, and a cost of living crisis has prompted record numbers of people to pay virtually in a world with pronounced physical restrictions. And that presents a huge challenge for merchants and marketplaces, especially those operating, or planning to operate, internationally.

“The global payments scene is evolving, but there isn’t a single joined-up ecosystem today,” says Simon Black, CEO of PPRO, which provides digital payments infrastructure to businesses and banks so they can scale their services through one connection.

“Particularly with transactions going cross-border, greater complexity comes into play and our infrastructure helps solve that,” he adds.

PPRO itself defines alternative payment methods (APMs) as whatever is preferred in place of using cash or a credit card in any given country. There are hundreds, if not thousands of them – and they are used to make 77 per cent of global online purchases. Simon Hughes, global head of partnerships at APEXX Global, a payment orchestration layer and one of PPRO’s partners, understands only too well the complexity that creates.

“I’ve come from the merchant side, so I’ve faced it head-on,” he says. “It’s so complex that many merchants prefer just to focus on the standard card as the payment option of choice. But if they’re operating cross-border, they need to be closer to their customers in local markets – to do that, digital local payment methods are crucial.”

THE MARCH OF THE APMs

It’s worth merchants bearing in mind that, even with the best checkout experience, if a customer’s preferred payment option is not available, there’s a risk they will abandon their cart – and cart abandonment rates are already worryingly high.Whilst card schemes still provide the underlying mechanism for the majority of wallet transactions, things are changing fast – it’s staggering just how popular some local A2A payment methods have become.

“The global payments scene is evolving, but there isn’t a single joined-up ecosystem today… our infrastructure helps solve that”

Simon Black, PPRO

Take Pix, the Brazilian instant payments scheme, developed and owned by the central bank, which was launched in November 2020 and by mid-2023 had amassed more than 150 million users, processing roughly the equivalent of US$2.1trillion a year.

It’s held up as one of the world’s most successful APMs, rivalled only by India’s Unified Payments Interface (UPI), the instant A2A payment system developed by the National Payments Corporation of India (NPCI). According to the NPCI, the total value of UPI transactions in 2022 was the equivalent of US$1.5trillion – and it’s on track to be the preferred way of making 90 per cent of retail payments locally within the next three years.

“UPI is the most modern framework of real-time payments in the world,” says Oliver Rajic, chief growth officer for PPRO. “It’s set a standard that’s difficult to comprehend – no real-time payments network has succeeded at the scale of UPI, where over 330 million users are not using Visa and Mastercard, but UPI instead.

“So, if I’m a payment service provider (PSP), why would a merchant work with me if I’m not enabling 330 million potential buyers to buy from them, but my rival is?“And UPI is just the first step to driving real-time payments in Asia.”

“Merchants need to be closer to their customers in local markets – to do that, digital local payment methods are crucial”

Simon Hughes, APEXX Global

In other words, if you thought the instant payments landscape was already crowded, you ain’t seen nothing yet. Shawn Curtis, director of growth and partnerships at Spreedly, a payments orchestration platform, says rails like UPI and Pix highlight that the most powerful payment methods are the ones that ‘meet people in the context and the geography they’re actually in’.

“Ultimately, no one company can integrate with every payments services provider (PSP), and so it takes partnerships to achieve a greater and greater breadth of coverage. You can’t do it alone,” he adds.

“Having to integrate with lots of individual payment methods is expensive, and it takes a long time,” agrees James Fry, vice president of global expansion at Worldpay.

“Finding strategic partners that can give you multiple countries and multiple methods, especially via a single contract, means that you can simplify this work, become much more scalable, and go to market quicker.”

The Worldpay from FIS Global Payments Report 2023 explored how consumers are paying, both in-store and online, across 40 markets. It found that there are around 70 real-time payment schemes providing high-speed payment rails that helped drive A2A payments to account for $525billion in global e-commerce transaction value in 2022, up 13 per cent from $463billion in 2021.

“It takes partnership to achieve a greater and greater breadth of coverage. You can’t do it alone “

Shawn Curtis, Spreedly

The report goes on to state the global e-commerce market is set to be worth nearly $8.5trillion in 2026 – APMs will account for a massive chunk of that.

UNLOCKING THE POWER OF PARTNERSHIPS

So, if they are to keep pace with this payments evolution, and stay relevant in markets they wish to serve, it’s clear that businesses need to work with an integration platform like PPRO that can help them understand the nuances of each market. These can, and do, differ tremendously. China, for example, is dominated by wallets, such as Alipay, which are the country’s most popular type of online payment method.

PPRO research highlights that wallets in China now boast a 65 per cent market share. A merchant that doesn’t support wallets is therefore unlikely to gain much traction with Chinese consumers. On the other hand, credit cards remain the United States’ payment method of choice with a 51 per cent market share.

This is perhaps unsurprising, given the pedigree of the payment card – the first modern credit card was the Diners Club charge card, founded in 1950 by a group of New York businessmen who, according to legend, one night found themselves unexpectedly short of cash when it came to pay their hefty restaurant bill.

“In the end, we may have one single payment solution – a digital Euro, perhaps. But before that, there will be more local schemes and solutions”

Maurice Jongmans, Online Payments Platform (OPP)

Meanwhile, Brazilians, thanks to Pix, are adopting digital payments faster than anyone on the planet – though it’s worth noting that PPRO’s research finds that 80 per cent of consumers say poor merchant onboarding is an obstacle to using online shopping sites… a lesson for any retailer.

Even Europe, a region that most people think of as being relatively homogenous, is divided by significant differences in payments culture, which is exactly why you need a partner that understands them all and can advise on which payment methods are most appropriate for customers, says Motie Bring, chief commercial officer of PPRO.

“Take Germany and France, for example – they’re neighbouring countries and, on the face of it, they should be very similar. But, if you go to Germany, bank-to-bank transfers will be the leading payment method and, if you go to France, it’s cards. But it’s different types of credit and debit cards that are being used as the main payment method in France, compared to the US.”

WHAT’S NEXT?

Looking to the future, Bring believes that technology will have a big say in the payments race. “For example, I think we are just seeing the start of how blockchain will impact payments. And everything around security, and creating a seamless experience for consumers – easing the process, less clicks, and biometrics – will shape what payments will look like in the next five years.”

Maurice Jongmans, CEO of Online Payments Platform (OPP) in the Netherlands, is certain of one thing: partnerships will continue to be crucial. “In the end, we may have one single solution – a digital Euro, perhaps. But before that, there will be more local schemes and solutions, and if people want to use these ’local heroes’ to pay, then we have to adapt to that. Working with PPRO allows us to have one single contact, and one single solution that we can leverage.

THE SHAPE OF THINGS TO COME
Going with the flow…

As Vice President and Head of Partnerships for Europe at PPRO, James Booth manages client relationships, helping PSPs, acquirers, and gateways go to market successfully. We asked him how he sees the payments landscape, and PPRO’s role in it, evolving over the next few years

THE FINTECH MAGAZINE: What are the macro trends you’re seeing in global e-commerce payments?

JAMES BOOTH: Big card markets are starting to slow down, like the UK, the US, and Australia. They’re still growing, still doing very well, but they’re not growing at the rates they used to. There are now smaller markets around the world where we’re seeing some interesting patterns developing. The next few years will be very exciting for payments and e-commerce. We’ll see certain markets leapfrog the more established ones.

TFM: With such a fast rate of change in payments, how can merchants, especially sole traders or small businesses, keep up?
JB: It’s difficult. That’s the short answer. Payments is like a spaghetti junction and it’s constantly moving. Merchants need to find the best way to enter a market, and the best way to increase conversion rates and optimise their payments. But merchants aren’t payments businesses, so they need to work with the right PSP, the right acquirer, and the right orchestration layer to be able to fix together a best-in-class service for any particular market.

TFM: How long do you think cards will remain a method of payment?
JB: They will stick around, but their form will change. We’ll see the rise of e-wallets because it’s just easier to transact that way – it’s easier to pay a friend, make peer-to-peer payments, and so on. Cards will power some of these wallets, but not all. Some will move over to bank transfer methods, or buy now, pay later. The big card schemes know this. Visa and Mastercard are investing in open banking schemes, and certain e-wallets.

They know the clock’s running down. Ultimately, we’ll live our lives through some of these e-wallets, and associated apps. If you look at Asia-Pacific, you’ve got Alipay and WeChat Pay, where you’re literally doing everything through these apps, whether it’s ordering taxis, food, or rail tickets. We haven’t seen the same adoption in Europe, but it will happen – though things will remain fragmented for a few more years.

“Visa and Mastercard are investing in open banking schemes, and certain e-wallets. They know the clock’s running down”

TFM: How can merchants keep up in that fractured landscape?
JB: It’s about working with the right partners, but also trying to think one step ahead. Merchants, when they enter a new market, should already have steps two and three in place, because what we tend to find is some merchants will work with some partners, or some platforms, and within a year or two, they’ll grow out of those platforms.

Then they get into technical debt and struggle to grow. The rise of payment orchestration, and the rise of all these different kinds of routing solutions, is helping to solve that challenge.

TFM: Why are cross-border payments significantly increasing?
JB: The rise of platforms is helping merchants access the right solutions, and the right providers. That allows them to sell cross-border. Without such platforms, retail merchants struggle to connect into different shipping providers, or language APIs to localise their website in certain regions, or appropriate FX solutions. The fact that it’s much easier for merchants, and even different payment platforms, to access these services has significantly increased cross-border volume and flow.

And we’ve seen this first hand. PPRO was born out of the cross-border world. We made a name for ourselves around cross-border payments, and we’re starting to see that accelerate even faster, just because it’s so much easier to access some of these services, and build a holistic cross-border transaction flow.

Knowing what payment methods to use, and knowing what markets to move into, is very important, but also knowing how to enter those markets, and having the right services in those markets, is extremely important.

That’s actually where PPRO’s future is. The core of our business, I think, will always be payments. We love payments. We’ll always be payment professionals, but we’re starting to provide more value around the transaction.

We’re starting to do shipping APIs for some clients, and checkout page widgets for others, so they can move into countries quicker, and they can display payment methods on the checkout easier. So we’re moving into that world, and that’s certainly where I see the future.

This article was published in The Fintech Magazine Issue 29, Page 38-42