Key Takeaways:
- Rising Beyond Traditional Authorisation Rates: Payment service providers (PSPs) are evolving past the conventional focus on authorisation rates to stay competitive.
- Embracing Omni-Channel and Fraud Solutions: Integrating omni-channel experiences and advanced fraud solutions is crucial for PSPs in the modern retail ecosystem.
- Adoption of Alternative Payment Methods (APMs): PSPs are increasingly incorporating APMs, including digital wallets and cryptocurrencies, to cater to diverse customer preferences.
Introduction to the Evolving Payment Landscape
The world of payment service providers (PSPs) is witnessing a seismic shift. As e-commerce, mobile payments, and digital wallets continue to rise, PSPs find themselves in a race to differentiate their services and capture a larger market share. This article delves into how PSPs have historically set themselves apart and the innovative solutions they can adopt today to stay competitive.
The Challenge: Beyond Authorisation Rates
Market Consolidation and the Need for Differentiation
The PSP market, while consolidated, comprises key global players and numerous local entities contributing significantly to the payment ecosystem. The commoditisation of core PSP offerings has necessitated the search for new differentiation sources. High merchant attrition rates, with an estimated one in five merchants switching providers, add to the complexity, causing a revenue loss of approximately $2 billion annually in the payment ecosystem.
Shifting from Authorisation Rate Competition
Historically, PSPs competed primarily on authorisation rates to combat high merchant attrition. However, as the market saturated with similar service offerings, the benefits of differentiation through authorisation rates started to wane. This shift has prompted PSPs to look beyond pricing and explore other competitive factors like automation, support clarity, and billing transparency.
Innovative Solutions for Competitive Edge
Omni-Channel Propositions: The New Retail Mantra
Providing a seamless omni-channel experience has become vital in retail. PSPs that offer solutions spanning online, mobile, and in-store channels can offer customers convenience and flexibility, leading to increased sales and customer attraction.
Best-in-Class Fraud Solutions
With the rise of e-commerce, fraud poses a significant challenge. Traditional risk mitigation strategies are becoming obsolete. Modern PSPs are now turning to automated, machine-learning, and data analysis-based solutions to efficiently handle fraud, thereby improving authorisation rates and customer satisfaction.
Embracing Alternative Payment Methods (APMs)
To address the evolving payment preferences of customers, PSPs are integrating APMs like digital wallets and cryptocurrencies. These methods cater to a segment of customers who prefer non-traditional payment modes, aiding merchants in tapping into new customer bases and facilitating cross-border ecommerce.
FX Solutions: Multi-Currency and Dynamic Currency Conversion (DCC)
FX solutions, including multi-currency and DCC, are becoming crucial for PSPs serving global merchants. These solutions enable customers to pay in their local currency, reducing conversion costs and enhancing customer satisfaction.
Loyalty Solutions to Drive Merchant Value
PSPs are increasingly offering loyalty solutions to help merchants encourage repeat business and customer retention. These can include cashback, discounts, or loyalty points for regular purchases.
Enhanced Customer Service and Support
Investment in customer service and support has become a critical differentiator. PSPs offering value-added services like compliance support and smart exemptions engines are more likely to be chosen by merchants.
Conclusion: A New Era for PSPs
Payment service providers are at a pivotal juncture. No longer confined to competing on authorisation rates, they are exploring a broader mix of solutions to stay ahead in the market. From omni-channel retailing and advanced fraud solutions to the adoption of APMs and loyalty programs, PSPs are redefining their role in the digital payment landscape. As they continue to innovate and adapt, PSPs are not just responding to market demands but are actively shaping the future of payments.
Sources: https://www.signifyd.com/payment-service-provider-challenges-into-strengths/
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