The last few years’ economic climate has been incredibly tough. We’ve seen record-breaking inflation, with the Bank of England’s interest rates hitting and holding a 16-year high in the UK, and the Federal Reserve’s key interest rate in North America at its highest level in over two decades. Having a healthy bottom line has always been essential to merchants, however, inflated costs have made margins smaller, forcing them to look at where they can reduce non-essential spending. We know from a recent survey we conducted with Attest that cost reduction is currently the top priority for merchants, and payment suppliers and payment service providers (PSPs) are now being scrutinised as part of those cost-saving exercises. Two-thirds of merchants are looking to consolidate the number of PSPs they use, with just over a third intending to do so before the end of the year.
Where there are challenges, there are also opportunities. Merchants are reducing their overall costs, while simultaneously looking at how they can grow their revenue. In that same Attest survey, we also found that 38% want to strengthen existing customer retention rates, and 33% are assessing how they can take a bigger share of their respective markets. Regardless of their chosen route, they can’t achieve their goal without tapping into customer needs and bringing a more compelling offering to the table. This is where account-to-account (A2A) payments come in. 67% of payers will abandon an online purchase if they can’t select their preferred way to pay, and they judge their preferences on what’s secure, what’s easy, and how quickly funds leave their account. A2A payments shine in this space, particularly with the continued improvements to Open Banking and Faster ACH. And merchants are paying attention. Over a quarter want access to Open Banking or new A2A technology, with 27% even willing to pay more to have them. A further 31% are open to paying more the PSPs who give access to a wider mix of payment methods.
A2A payments could be the ‘secret sauce’ that helps merchants achieve their ambitious growth targets. They offer payers the security, speed, and ease of paying how they want while helping merchants reduce outgoings by having significantly lower transaction fees and failure rates than cards.
The PSPs that survive the impending consolidation will be those that can open up access to A2A payments and overall offer more, all in one place. Whilst there are upfront costs to PSPs, they’ll manage to recoup by charging for their add-ons. It becomes a win-win for everyone in the payment chain.
The six elements we would encourage merchants to consider are:
Geographic coverage,
Transaction speed and settlement times,
Total cost of ownership,
Security and compliance,
Integration and compatibility,
Customer preferences and user experience.
A reputable provider or PSP should be able to manage the more nuanced elements on behalf of a merchant – such as regulatory or compliance requirements – and advise on which schemes will work best. Rather than looking at the six steps as just a way to evaluate payment schemes, merchants should consider them as ways to compare providers.
We’ve learnt that it’s important to make accessing and managing payments as simple as possible. After all, our customers have enough to think about. Merchants can connect directly to our Dashboard and select which payments or features they want, or choose to integrate through one of 350+ partners. We believe that growing your business shouldn’t equate to more admin, so being able to incorporate GoCardless bank payments through existing software or management tools is a huge benefit for merchants.
Last year we also expanded our offering and launched GoCardless Embed, a single API that unlocks access to instant one-off and automated recurring bank payment rails across the globe. By embedding the payments into their existing platform, PSPs can stay in control of their merchant relationships whilst benefiting from being quick-to-market with bank payments and additional add-ons. On average, it takes PSPs six to nine months to build a new payment method in-house, and the reality is that the current economic environment is not conducive to that timeline.
This editorial piece was first published in The Paypers' Unlocking the Potential of A2A Payments Report 2024 – Changing the Way We Pay and Get Paid, which taps into the fast, ever-expanding A2A payments industry, being the ultimate source of information for businesses looking to grow their consumer base.
Seb Hempstead is the VP of Partnerships at GoCardless, joining the organisation in 2022 to drive their global partnership strategy. Prior to joining the direct bank payments organisation, Seb was the CRO and General Manager of North America at Streetbees and the CRO of Idio, which was later acquired by Episerver. About GoCardless
GoCardless is a global bank payment company. We help more than 85,000 businesses, from start-ups to household names, collect both recurring and one-off payments, without the chasing, stress or expensive fees. Each year GoCardless processes more than USD 35 billion of payments across 30+ countries.
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