Merchants to drive change in payments ecosystem

Srushti Ghisad/Ovum
30 Nov 2016
00:00

It’s clear that 2017 will be another year of major change in the retail payments industry. One trend that will be particularly key will be the growing importance of merchants – and retailers in particular – in setting the innovation agenda for acquirers, payment gateways, and other PSPs.

The rapid growth of digital commerce, and the convergence of the physical and digital channels in more traditional retail, will see the influence of merchants grow when it comes to the direction of innovation in payment services. There are three important factors behind this trend.

Merchants will be major drivers of payments industry change in 2017

Firstly, the business of managing payments has become a top priority for merchants of all sizes and types. An Ovum survey of 465 merchants conducted in 3Q16 found that 85% of all retailers and B2C service businesses have a clearly defined strategy in relation to payments – an increase from the 73% indicating as such in Ovum’s 2015 survey. At the same time, 75% of merchants are investing in new payment technologies because they believe this will help them drive incremental sales.

In essence, where once payment acceptance was largely an operational necessity, it has now become a critical enabler of business growth.

Online and mobile commerce are key drivers of activity here, particularly in enabling any merchant with an online presence and the right PSP (and logistics) partners to successfully reach customers across international borders. Indeed, the attraction of enabling cross-border e-commerce has catalyzed developments in the online payment gateway market and wider acquiring ecosystem.

In turn, this potential has seen cross-border digital commerce grow rapidly as a share of the total market. While estimates vary, Ovum believes that cross-border e-commerce by value has grown to reach around 20% of global e-commerce, and will continue to grow in the coming years.

However, the biggest changes are yet to come.

In the same way that the current wave of online payment services has focused on simplicity and speed of use for customers, merchants too are investing heavily in their own future service delivery. Relatively standalone channel offerings are becoming better integrated, even in mid-sized merchants, and the most sophisticated players are moving toward entirely reimagined omnichannel digital-led customer journeys. Rather than focusing on using marketing to drive sales conversions alone, developing deeper relationships through personalized services and – crucially – encouraging repeat business through the quality of the transaction experience will be key.

The expectations for payment service providers will be to support these experiences by being invisible to the customer as far as possible but providing flexibility, high security, rapid settlement, and added-value services. For PSPs, this will require continued investment and innovation to deliver. As payments become a less visible part of the transaction process, it will also shift the needle for how the industry develops and delivers services.

We have seen the first wave of consumer-led payment innovation, driven by convenience and new digital channels; the next one will be driven by merchants.

Srushti Ghisad is a senior analyst for Latin America at Ovum. For more information, visit www.ovum.com/

Related content

Follow Telecom Asia Sport!
Comments
No Comments Yet! Be the first to share what you think!
This website uses cookies
This provides customers with a personalized experience and increases the efficiency of visiting the site, allowing us to provide the most efficient service. By using the website and accepting the terms of the policy, you consent to the use of cookies in accordance with the terms of this policy.