Payment service providers (PSPs) are feeling the heat amid a challenging macroeconomic environment as 34 per cent of UK, US and Eurozone businesses plan to end relationships with their PSP in the next 12 months.
GoCardless, the bank payments company, revealed this stat and more in its new report Embedding a Competitive Edge. It further reveals that while not all are looking to end things, 66 per cent of businesses in the same regions are looking to consolidate the number of PSPs they use.
The bank payments company found that high operational costs were the primary reason for businesses (31 per cent) wanting to cut back. However, while the news may be bleak for PSPs, the report shows that businesses are still open to PSPs if it will add value to the company.
“If staying competitive is a priority, payment providers may find that the best — and quickest — way to satisfy customer demand is to enhance their offering through a third-party expert.” – Deepak Colluru
What businesses demand from their payments today
The insights also indicate that merchants care most about protecting their hard-earned revenue and offering payment choice.
The greatest proportion of businesses surveyed (34 per cent) say they would be willing to pay more for fraud prevention solutions, and a quarter (25 per cent) would do the same for tools that increase their payment success rates. Three in 10 (31 per cent) say they would be willing to pay more for a wider range of payment methods, rising to 38 per cent in the US.
Account-to-account payment methods are especially popular. Over a third (35 per cent) of merchants indicate they want their PSP to offer bank debit. Meanwhile, 27 per cent call for open banking or other bank payment options.
Can PSPs keep up?
The report also contains insight from a survey of more than 200 PSPs in the same five markets. The top priority for this group over the next 12 months is increasing customer satisfaction and retention, chosen by 58 per cent of respondents. In a similar vein, 44 per cent also say they want to become more competitive.
Many are focusing on what their customers have asked for a wide range of payment options. Eight in 10 (86 per cent) PSPs are looking to add one or more payment methods within the next 12 months. Of those, the most popular method to add is digital wallet, chosen by 58 per cent, followed by credit or debit card (48 per cent) and bank debit (47 per cent).
Globally, the proportion of PSPs that plan to add real-time bank payments, including open banking payments, is 35 per cent — but this increases to more than half (53 per cent) of PSPs in the UK, perhaps reflecting the continued growth of open banking in the market.
The challenge for PSPs, however, is managing the amount of time and effort required to improve their offering. When asked about the concerns they have in adding a new payment method, ‘taking a long time to deliver’ took top billing, chosen by 45 per cent of PSPs.
This was closely followed by fears around complexity: 40 per cent say they’re worried about the complications for their engineering team when integrating or building a new solution. Thirty-seven per cent are concerned about the complexity of managing the new payment method on an ongoing basis.
Deepak Colluru, director of product management for GoCardless Embed said: “In today’s challenging environment, businesses are looking for every supplier to deliver value. PSPs are no exception. One simple way to demonstrate this is by focusing on the areas that merchants care about most, including anti-fraud solutions, features to boost payment success and a range of payment options.
“PSPs that want to add or enhance any of these must grapple with the classic ‘buy versus build’ dilemma. When we’ve spoken to PSPs that are interested in adding bank payments, for example, they are all too aware of the time and resources required to not only build but also maintain a new payment method in-house. If staying competitive is a priority, payment providers may find that the best — and quickest — way to satisfy customer demand is to enhance their offering through a third-party expert.”