As payments diversify, flexibility is all

Some banks might seek to partner with a third-party provider to speed up the modernization of their offering. However, too often these partners provide simplistic, one-size-fits-all solutions that don’t meet the needs of a bank’s specific geographies or customer segments.

Consolidation, Open Banking and cross-border: the drivers of diversity

A number of market forces have combined to form today’s more diverse payments online landscape. For example, while cards remain popular in many markets, Open Banking is creating new opportunities in payments, with banks offering API access to accounts for third parties. This makes it possible for banks to offer whitelabel payment products (such as A2A transactions with a BNPL option) tailored for specific markets – in this case, young people.

Meanwhile, other markets are experiencing a surge in digital wallet use, or the beginnings of crypto-currencies used to pay online. Across Europe, cross-border e-commerce growth is surging, too. According to an analysis by FedEx and Poste Italiane, last year just over one-third (€326 billion) of all e-commerce transactions were cross-border, up 16% from the previous year. This growth rate is double that of domestic e-commerce, demonstrating the speed at which the digital world is going global.

“Last year, over 33% of online transactions were cross-border – and cross-border e-commerce grew twice as fast as domestic transactions.

From an acquiring perspective, cross-border e-commerce has its own specific challenges, including the fees and charges incurred by specific transaction types such as credit cards compared with those for A2A transactions. Furthermore, merchants will want the ability to accept a much wider range of payment types in a cross-border environment, while being able to handle transactions in a range of currencies is a necessity.

Finally, many banks have also experienced merger and acquisition events during the period of stagnant profitability between 2008 and 2018; now the dust has settled, these new, multi-national groups are re-examining their acquiring operations and looking for more flexible solutions that are able to scale to meet the diverse needs of different payment preferences and national regulators’ requirements.

When it comes to acquiring, owning a proprietary whitelabel e-commerce gateway empowers a bank to accept new forms of payment such as A2A transactions or crypto while avoiding the fees and costs of a third-party provider – not to mention the risk of being dependent on a third party. At the same time, as the gateway’s owner, banks can cross-sell new products and services to merchants and their end customers (such as loans and account services) using analysis of transaction data to shape their offering.

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