Covid ushering in the new way of payments
With the pandemic having confined people within their homes, the e-commerce sector got a steroid boost. The US e-commerce market witnessed a
10-year growth in only three months beginning of 2020. And the
acceleration in payment transformation leapt years ahead of pre-pandemic plans. After the era of globalized shopping, it now seems to be the age of payments ubiquity when a customer would not have to worry about the mode of payment as long as one’s credit
balance allows the purchase.
During Covid-19, customers have been trained to be more efficient in their online purchasing behaviors. And now that these customers are coming out of their homes to shop, merchants and online vendors have to be prepared. Traditional businesses cannot expect
to make pre-lockdown margins by limiting their offering to brick and mortar stores.
On the other end of the spectrum, key online players could see a reduction in their sales as customers' time and attention are being competed for by physical stores. These online sellers would need to enhance their physical presence and consequently physical
payment acceptance offerings. With web traffic slowing down, resources could be better allocated to handling the demand on other channels. This would be a necessary rebalance, as consumers will be coming with certain pre-established expectations in proximity
payments, especially in terms of speed and efficiency.
Digital players expanding offline
Retailers, particularly digital commerce marketplaces, have
elevated their competitive position by deepening both B2C and B2B customer engagement leveraging payment solutions. For example, MercadoLibre, Latin America’s largest e-commerce player, owns the online payments network MercadoPago and has built an
ecosystem encompassing a marketplace, one-click checkout but also a digital wallet and Point-Of-Sales (POS) acceptance solutions used by tens of millions on the field.
Korta to complete its payment services stack with card processing. In July 2021, the fast-expanding unicorn then went on to
acquire Iceland based Valitor, that provides in-store and online payments acceptance solutions, to offer merchants a full omnichannel setup.
To support Dutch retailers facing changing consumer needs and helping them remain competitive, Shopify is launching a
fully integrated POS and physical payment solution that unifies online and offline activities of retailers. This allows merchants to track and manage sales, payments, and payouts between online and physical from a single location.
Stripe, traditionally a developer-friendly platform
best suited for e-commerce and online subscriptions, introduced
Terminal, to compete with Square’s point of sale offering, as well as Zettle’s parent company
Last but not least, there have been recently rumors of
Amazon entering the POS game, by developing a solution for third-party retailers.
As a matter of fact, integrated shopping experiences between online and physical spaces should not be limited to large Corporates with big project teams. They must instead be made available for SMEs and independent businesses.
What are the different strategies to get omni ?
When proximity payments support becomes a must-have as part of top Digital players’ strategy, there can be a variety of implementation approaches, based on both short-term considerations and objectives in the long run. Time-to-market and the availability
of the required level of expertise and resources in-house are some of the main factors regarding the “make or buy” decision. Here are some possible paths:
Buy & Resale partnership: promotion of a co-branded solution with a specialist. A widespread approach in the Fintech galaxy, partnership is usually the fastest and easiest way to complement a portfolio with a proven solution. Most Fintech
do have to focus on building their core offering and tend to partner to implement value-added services operated by peers, who are acknowledged leaders in their field. In the context of POS solutions, the best illustration is the vast majority of European neobanks,
who have entered into commercial partnerships with mobile POS pioneers, such as SumUp and Zettle. The required technology investment can be close to zero, with a revenue stream then also limited to a referral fee or small revenue share. One of the risks though,
is to consider the co-branded solution a side activity and as such, not dedicating the right level of commercial and promotional efforts to it.
Leveraging a white-label solution: there is a big difference between being a technology provider and a large-scale service distributor to SMEs. Very few players in in-person payments fit both roles, with probably the exception of Square.
From terminal design, manufacturing, payment application development, transaction processing to maintenance and logistics, it is extremely complex to cover all activities internally, mostly developing other services in parallel. Though, it is instrumental
for actors coming from the online space to make sure their POS solution is reflecting their brand, particularly because it is often the unique physical product they put in the hands of their customers. The right balance for most actors is to rely on some bricks
existing internally, while partnering with technology and service experts for others. This does not prevent the ambition of Payment Service Providers aiming to differentiate by delivering custom-made payment devices and an innovative user interface, as some
vendors have developed a strong experience in addressing these demands.
Insourcing: Fintechs that are pure-players in proximity payments may be tempted to internalize a growing share of the value-chain, sometimes with M&A as seen above. But this may have some limitations, as defining a PCI and EMV-compliant
setup is likely to call for expert help. They can design the external POS look but rely on technology and industrial partners respectively to define a compatible security architecture and produce the device. They can also build-on proven software bricks from
third-party partners and embed them into their own payment device.
Omni-channel has been identified by most Top Payment Service Providers as the new level playing field, not only to serve leading retailers, but also DNVBs and small merchants. In Europe in particular, the competition should intensify over the coming years
with POS solution implementation strategies reflecting the ambitions and priorities of each player.