Key regulatory changes and the rise of open banking have led to big changes in the global payments space – and rationalisation and integration are at the core of those changes. Nash Riggins explores the benefits of integration and what key players are able to offer corporates in order to reduce friction and maximise potential.
There’s been a seismic shift in the global payments space over the course of the last decade. The meteoric rise of digital payments, real-time account-to-account transactions and open APIs have created a sea of opportunity for payment intermediaries and service providers – while merchants and vendors are enjoying unprecedented levels of flexibility, accessibility and transparency thanks to a surge in competition that has forced PSPs to rollout bigger, better and more comprehensive products than ever before.
Why have so many changes been taking place in the payments space? Above all else, the shifting sands stem from a serious influx of sweeping regulatory updates that have taken place across a variety of jurisdictions and forced global markets to open up.
PSD2 and the introduction of open banking have created a wealth of prospects for scrappy fintechs hoping to take on large, stagnating incumbents – while projects like SWIFT’s Global Payments Innovation are set to slash the cost of cross-border transactions in order to facilitate faster and cheaper international trading.
Add the Payment Systems Regulator’s consolidation of three payment system operators in the UK last year, and these earth-shattering regulatory changes are inevitably forcing existing PSPs to rationalise payment infrastructure wherever they possibly can. The market is already witnessing an unprecedented number of mergers, acquisitions and collaborations, further stoked by the $21.5bn merger of Global Payments and TSYS in May. The bottom line is simple: payments are changing fast.
With that in mind, PSPs are working at breakneck speed in order to survive this new and open environment by increasing their value proposition, meeting evolving customer demands and creating holistic, all-in-one payments solutions for companies. This rapid consolidation is fantastic news for corporate treasurers, because it’s enabled firms to adopt their own integrated payments ecosystems that minimise friction and create innovative opportunities for major growth – and the benefits of integration are incredibly far-reaching.
At the end of the day, integrated payments are the single greatest driving force behind the principle of one-to-many payments. Corporates tend to lose a tidy sum and loads of time when onboarding new merchants or payment methods using existing legacy systems. Worse yet, when onboarding becomes too costly or unfeasible from a technical or financial point-of-view, teams are then forced to implement a gaggle of patchwork systems and solutions which include different payment gateways and acquiring platforms that can be tricky to rationalise.
Yet by combining payment processing tools with POS systems, CRM or ERP solutions, accounting, marketing and scheduling within the confines of a single app, SaaS providers, VARs and ISVs are able to offer treasurers a proverbial one-stop-shop for all their payment requirements. Beyond the obvious benefit of removing pain points like set-up fees and rationalising otherwise incompatible systems, setting up a corporate-wide integrated payments ecosystem offers multiple bonuses for treasury teams.
Integrated ecosystems save corporates cash on multiple levels. First and foremost, by integrating multiple services under one PSP, companies will typically gain from some sort of ‘mate’s rate’ in which service costs are driven down as a show of good faith. Market leaders like Worldpay, Secure Trading and Bellin offer all-in-one solutions that include a payment gateway, acquiring bank, facilitate e-wallets, shopping carts, cross-border payments in multiple currencies and more.
By uniting all of these components under a single roof, payments systems reconcile with one another substantially faster and without needing multiple points of contact for various functions. For companies that are heavily reliant upon online sales and ecommerce as a means of business, this friction minimalization also has the ability to shrink drop-off rates, increase the volume of leads that are being generated and bolster sales.
Total integration in a payments system also maximises product functionality. With patchwork ecosystems composed of incompatible information systems and gateways, critical features such as a company’s ability to accept e-wallet transactions through ApplePay or Alipay can be rendered totally useless. Disjointed systems subsequently lead to a rockier payment journey for consumers. That erodes trust and increases a merchant’s odds of failing to complete a sale.
More important still, an integrated payments ecosystem delivers drastically enhanced security. Integrated service providers are able to offer end-to-end encryption and tokenization that bring heightened protection for consumers, merchants and banks. Tokenization is an incredibly useful feature in which customers have come to know and love because it replaces their credit or debit information with a uniquely generated token number that can be deciphered only by an issuing bank during the authorisation procedure.
That means payment data is always safe at rest, and customers enjoy a frictionless payment experience at the point of sale. Likewise, by minimising the number of solutions existing within a payments system, there are less entry ports of entry with which cybercriminals could penetrate a system in order to commit counterfeit fraud or instigate a data breach.
As regulatory swings continue pushing incumbent PSPs and fintechs to rationalise infrastructure, consolidate services and produce more collaborative products, treasurers are absolutely spoilt for choice when it comes to shopping for and implementing an integrated payments solution. Bearing that in mind, corporates hoping to centralise and streamline payments capability must kick start the integration process by taking stock of what it is they need in a system, and what should be on their wish list.
Regardless of bespoke requirements, any integrated payments solution worth its salt should be designed to leverage APIs so that ISVs and VARs are able to integrate any incoming payments capabilities into a company’s core offerings with virtual ease. Likewise, teams would do well only to consider integrated solutions that are pre-built to facilitate connectivity with global payment rails so that corporates are able to support transactions in foreign currencies and localised or regional payment methods.
Innovative solutions like Stripe Connect are coded with pre-made UI components and APIs that enable teams to swiftly reshuffle payments infrastructure using a single platform. Connect features intuitive and simple onboarding and verification processes, and is powered by secure tokenization in order to ensure regulatory compliance obligations are met. PayPal features similar offerings that are ideal for smaller businesses by combining custom online APIs to support digital tokenized transactions, POS terminals and invoicing services all using a single platform.
Other big players like Sage Pay offer complete end-to-end cloud solutions that boast near universal compatibility in terms of acquirers and POS providers in order to integrate existing ecommerce sites, in-store terminals and mobile payments onto the same dashboard. Sharded software architecture protects corporates from any single point of failure, while dynamic currency conversion (DCC) and built-in compliance standards simplify cross-border payments for global transactions through any channel.
Secure Trading offers a similar holistic, omni-channel payments approach that can help corporates to achieve its own, fully integrated ecosystem. From multiple language hosted payments pages and virtual terminals to secure payment links, cart recapture, direct server-to-server processing, DCC and more, these bigger players in the payments space offer an invaluable combination of security, gateways, end-user experience and simplified acquirer relationship management that totally streamlines payment operations.
Simply put: there are plenty of options out there. Yet while various PSPs are able to offer all-in-one services, it’s worth bearing in mind that no two businesses are alike – and so the ideal integrated payments solution for each corporate will vary based upon size, activity, jurisdiction and more. Despite those differences, the outstanding benefits that accompany implementation are difficult to ignore – and so businesses would do well to shop around, ask big questions and actively pursue the development of their own fully integrated payment ecosystem.