The four panels covered diverse topics relating to the acceptance and processing of merchant/retailer payments, and the panel participates came from an equally diverse set of companies and fintech businesses operating in the payment ecosystem. The contributions by all the panellists, either as their own event presentations or as individual panellists, were much appreciated and made the debate engaging and insightful. There is always the opportunity to learn from others at MPE.
For the intensely debated topic of Buy Now, Pay Later (BNPL), this panel started discussing the reasons behind the global success of BNPL. On the one hand an argument was presented that BNPL is really filling a gap in the market and meets the needs for both consumers and merchants. A large part of BNPL users either have thin credit files or limited access to credit and, thanks to some strong marketing messages from certain providers, BNPL becomes a ‘trendy way to pay’. Merchants benefit from more loyal customers, increased sales, and increased average ticket sizes. Jupiter Research has put a figure of 30% to the increase in sales. On the other hand, panellists were stating that BNPL isn’t really anything new and that delayed invoicing or attaching specific repayment terms to transactions is nothing new at all. In fact, mytoys has offered this for the last 20 years to its customers – the difference now being that new technologies are enabling a more seamless process and a far better user experience. You then give it a cool name (BNPL) and the success will come. It is important to recognise local payment preferences and attitudes as well as local regulation, but the success to date has been universal.
On the topic of regulation, there was a genuine recognition that BNPL currently creates a lot of bad publicity and whilst some providers might push the boat as far as possible and sail close to what is possible, many responsible providers work proactively with regulators or aim to be ahead of any upcoming regulation. This is especially relevant in the context of transparency and customer communication and education. Customers perceive BNPL as a payment product whereas in fact it is a line of credit. It is assumed that as BNPL becomes a mainstream proposition, further regulation will come, with Australia and the UK being regarded as two trendsetting markets. There was some interesting debate whether regulation will be restricted to providers or whether it extends to merchants too, but the initial conclusion was that merchants, despite not having a specific license for it, manage it at their own risk for their own customers only and are unlikely to be impacted by most regulatory developments.
The final part of the discussion was about the future of BNPL. Four trends stood out:
New business models such as ACI’s BNPL marketplace or BNPL-as-a-Service
Leveraging data insights to develop alternative (risk) scoring models
The increasing relevance of banks in the BNPL space
And finally, the role of Big Tech, exemplified by the entry of Apple into the BNPL space.
Everybody agreed that this is a highly dynamic industry which will create many more interesting discussions at MPE 2023.
This panel debated the impact of the pandemic on ecommerce and its position within an omnichannel retailer – but first there was a definition of omnichannel. There was no doubt there were different definitions around amongst the panellists and different definitions amongst the merchants. What may be omnichannel for a grocery store is not omnichannel for a fashion retailer. It was discussed that omnichannel was the ability to identify the customer across the different touch points with the merchant. Omnichannel must also include convenience for the customer and security as well as frictionless payments. Omnichannel must be on the customer’s terms.
Following the global COVID-19 pandemic, there is a debate whether we will see a ‘new normal’ with significant changes to consumer behaviour, or we will see consumers returning to their usual shopping habits. At EDC, we believe there is something in between. The impact of COVID-19 has resulted in a big shift in the customers’ expectations, and their shopping experiences with merchants have changed. Interactions that were not online pre-COVID have moved online. Post-COVID, there will be some consumers preferring to return to pre-COVID shopping patterns, but there will be a meaningful segment of consumers, more than half of them, based on research, who will not return to their pre-COVID shopping behaviour.
It was agreed that there will be an impact because of the pandemic. There will be greater focus on ecommerce/remote payments/contactless payments, and the customer journey will be varied and more complex.
Tokenisation and network tokens were discussed, and it was acknowledged these would help to get merchants someway in their own development roadmaps to be fully omnichannel or at least closer to supporting the omnichannel behaviours that customers are pursuing.
The panel’s closing question was ‘how does the panel envisage omnichannel in five years’ time?’. The answers varied but the common theme was around the use of consumer data to help customers through the shopping journey, identify customers, and include customer preferences. The concept of channels will gradually disappear, and we are already seeing this today with the blurring of what is online and what is offline commerce.
This panel acknowledged marketplaces and platform economies as one of the key payment trends for 2022 – and not just for B2C commerce but especially for B2B commerce, where we are seeing the greatest digitalisation of the financial services ecosystem. Modular platforms for the management of all payment challenges, buyer/seller onboarding, pay-in/pay-outs, regulatory constraints, payments acceptance, financial reconciliation, fraud, and optimisation of internal processes were some of the topics that the panel wanted to cover.
A best practice of marketplaces and platforms was discussed across the panel, and it was stated that ‘payment’ is the first thing to get right. The B2B marketplaces will allow a more efficient ecosystem for commerce, and building greater sticky customer propositions is another key best practice to get right. Also, how marketplaces evolve, from merchant to marketplace, will also influence how it drives the business. The value proposition is a key best practice that must be defined and articulated to build on the network effect.
Super apps and super wallets were discussed, and how they developed in the East – such as WeChat Pay and Alipay – and how they will evolve in the West will be different. In the West, it is more likely to start with the wallet. Regulatory challenges of a marketplace and platform were also discussed and the need to protect consumer and merchant funds – so that buyers and sellers are ensured their funds are processed appropriately within a compliant framework.
Technology providers of marketplaces and platforms will be key. There is a long way to go, and growth is expected to be significant, but then there will be consolidation in the platforms.
It was the last panel discussion of the last day of the event, and to be honest, we were expecting less people in the audience than on the stage. Nevertheless, the room was full – payment orchestration may be new terminology, or it could be something old with a new name, but there was abundant interest from the audience to learn more about payment orchestration. The topics the panel covered were wide and first started with a definition. We discussed the relationship with other solution providers – such as fraud prevention, customer authentication, and how payment orchestration was a new technology that acted as a layer between the merchant and the payment gateways, acquirers, and alternative payment methods (APMs). It was agreed that a Payment Orchestration Platform (POP) must be the merchant champion and independent from the providers it aims to integrate.
The panel discussed whether a merchant could build their own POP or work with a specialist POP company. This debate could go on. The answer to this question was – ‘it depends’. It depends on the merchant’s situation, such as the size of the merchant, the geographic coverage, the number of transactions, number of different interconnections, etc.
The panel ended with answering the classic interview question – not ‘how do you see yourself in five years’ time?’, but ‘how do you see payment orchestration in five years’ time?’. The panellists all agreed that payment orchestration was here to stay. The concept had some way to go in providing a positive return on investment within a reasonable timeframe – where initially the effort was on least cost routing, conversion boosting features, or reducing the number of declined transaction authorisations. The future will be improved merchant reconciliation. Consolidation in the market of the number of POPs was also predicted.
The only way to find out the future of payment orchestration in five years’ time is to come back to MPE in 2027, and we will see whether these predictions were accurate.
Volker is a Director at Edgar, Dunn & Company (EDC), based in the London office, and he heads the European Acquiring Practice. Volker has provided consulting advice in payments for over 20 years and has developed significant experience in digital financial services from working with banks, merchants, card payment schemes, technology vendors, and regulatory bodies in different geographies.
Mark Beresford is a Director at Edgar, Dunn & Company (EDC) and has over 25 years of strategic consulting experience in the payments sector. He is responsible for the company’s Retailer/Merchant payments practice, working with omnichannel merchants and payment service providers across the globe.
Edgar, Dunn & Company (EDC) is an independent global payments consultancy. The company is widely regarded as a trusted adviser, providing a full range of strategy consulting services, expertise, and market insights. EDC expertise includes M&A due diligence, legal and regulatory support across the payment ecosystem, fintech, mobile payments, digitalisation of retail and corporate payments, and financial services.
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