As online transactions have grown in popularity, the need for businesses to choose the right payments vendor has become increasingly important. For growing businesses, in particular, selecting a payment service provider (PSP) that can scale rapidly and seamlessly handle a large volume of transactions is key. The RfP process should help businesses assess whether a payments provider meets all their requirements but to provide further assistance, we’ve listed seven key considerations below.
Although regulators are embracing innovation in the payments space through initiatives like Open Banking and PSD2, greater scrutiny is expected, particularly as more new players emerge and the payments market becomes increasingly fragmented. Fintech firms are disrupting the status quo previously enjoyed by established banks, causing a rapid expansion of the payments market, which is expected to reach $175.8 billion by 2026.
"The payments market is expected to reach $175.8 billion by 2026"
In fact, regulators are already taking action. The European Commission is preparing to launch its own digital finance strategy/FinTech action plan for the next five years that takes into account “recent market and technological developments.” Keeping future regulatory shifts in mind should certainly feature highly in the payments vendor selection process for any business.
Businesses may feel that once they have managed to attract a consumer to their site, enticed them to click on a product, and directed them to the checkout page, that most of the hard work is complete. However, evidence suggests that this is far from the case. The average shopping cart abandonment rate is believed to be just under 70% - indicating that no sale can be counted on until payment has gone through.
For consumers, the payment process is often a significant reason for shopping cart abandonment. Research indicates that 32% of shoppers will abandon a purchase due to a lengthy payment process. Having a choice of payment options is also key. For online retailers, using a vendor that offers a data-driven approach to facilitating payments is crucial to understanding how many customers are abandoning purchases and why.
There are several different fees that are levied as part of the payments process, including interchange, assessment, markup, and processing costs, which can all influence the price charged by your chosen payments vendor. In addition, how businesses will be billed could vary, with one-time setup fees, monthly costs, and transaction fees all needing to be considered.
While the price of a payments vendor will be a vital consideration, businesses should not simply opt for the cheapest provider. An inexpensive but unreliable payment gateway will result in customers going elsewhere - which will ultimately cost more in the long run.
A number of innovations are revamping the payments space - and businesses would be wise to select a vendor that is already exploring some of these new developments. Distributed Ledger Technology (DLT) is one of the most exciting innovations and, despite a pandemic-induced slowdown, spending on blockchain (the most well-known example of DLT) was expected to reach $4.3 billion in 2020, with cross-border payments driving this growth.
"Spending on blockchain was expected to reach $4.3 billion in 2020"
Other new technologies that are expected to impact the payments space include artificial intelligence and the rise of cloud-based Payments-as-a-Service (PaaS) offerings. These innovations could deliver significant speed and performance benefits that businesses will be keen to make the most of.
The COVID-19 pandemic has had a profound impact on the payments space, compressing a half-decade’s worth of change into just a few months. This has affected customer behavior, economic development, and payment operating models. As a result, the payments vendors that look best placed to survive this disruption are those that are adaptable.
Alternative payment methods, like buy-now, pay-later and contactless checkouts, have witnessed rapid growth, and digital wallets are expected to represent half of all global eCommerce sales by 2023. Further changes will undoubtedly be on the way, so businesses must choose their payments vendor wisely if they expect to ride out future market shifts without compromising on customer service.
In essence, reconciliation is the process by which two sets of records are checked against one another to ensure they are consistent, accurate, and complete. In practice, this usually means checking invoices against bank statements to check that any expected payments have been made correctly.
It is essential that your payments vendor offers fast and reliable reconciliation to make the process as smooth as possible. With businesses now likely to receive payments involving multiple methods, they should also look for a vendor that offers omnichannel reconciliation so all bases are covered.
Delivering a secure service is essential for all modern, digital businesses but it is especially important for payment vendors given the sensitive nature of the information they handle. The pandemic has shone a spotlight on the risks associated with digital payments, with coronavirus-related scams resulting in a loss of almost £1 million in the UK in the first month of the pandemic alone.
'Delivering a secure service is essential for payment vendors given the sensitive nature of financial data'
Fortunately, there are security protocols that payment vendors can implement to bolster trust in the digital payments space. Investments in Digital ID functionality will allow payment providers to deliver a service that keeps customers happy and cybercriminals at bay.
As the payment sector expands, choosing a vendor that is fit for purpose and meets all your needs will only become more challenging. Businesses must assess each vendor’s key functionalities carefully before making a decision. Be sure to assess how much the payments service will cost, what sort of features it provides, and whether it delivers the kind of support and security that your customers can trust.
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