By Kristian Gjerding
Editor's Note: [This article, copyright (c) 2021 by CellPoint Digital, was published previously online in The Fintech Times. It is included in The Green Sheet's Sept. 13, 2021, online edition with permission.]
The shift to ecommerce has changed the game for modern retailers, leading many to shift their attention online and start to plan for international growth. To do so effectively, however, retailers need to optimize their payments ecosystems now to put in place the right framework for expansion in the future. In a digital-first world where consumers are increasingly demanding when it comes to payment flexibility, we explore why payment orchestration platforms are the key to the future of ecommerce.
The ecommerce market saw unprecedented growth as a result of the pandemic; globally, the market is forecasted to be worth $4.8 trillion (https://bit.ly/3kk6B7I) by the end of 2021, and represent 1 in 5 retail sales by the end of 2024. This is due to a shift in consumer behavior resulting from local lockdowns and social distancing guidelines, which drove customers to explore online shopping channels: 71 percent of people (https://bit.ly/2Wn5DiM) reported purchasing more items online since the pandemic.
Consumers also became more open to experimenting with new payment methods, with 60 percent of consumers saying they tried out a BNPL service last year. The significant shifts in consumer behavior have greatly affected the operating models of most retailers; the question is no longer, How can I get a customer into the store? but rather, How can I ensure a customer converts? Payment flexibility—and allowing consumers to pay how they want, when they want—will play a crucial role in ensuring a strong website conversion rate.
After driving website traffic, reducing cart abandonment has become one of the top priorities for modern retailers, and delivering complete payment flexibility has become vital to ensure customers actually convert. A complicated checkout process accounts for 18 percent of all cart abandonments (https://bit.ly/3zg3N1I), with a further 11 percent of customers citing lack of payment options or payment rejections as reasons not to convert.
As consumers become more digitally-savvy, and demand for more alternative payment methods (which are particularly prevalent gen Z and millennial audiences, https://bit.ly/3mqLfbq) increases, payment flexibility and user experience will become synonymous, and online retailers who prioritize this element of their service will reduce friction and streamline the conversion process.
The move toward ecommerce has upended the customer journey for most modern retailers. In sectors such as fashion, for example, the point of conversion no longer happens when the customer clicks “buy,” but rather when the goods have been delivered and tried on, and the customer has made a conscious decision to keep the item. With that in mind, retailers need to prioritize their post-purchase aftercare service to protect relationships with customers. In practice, this means streamlining key elements such as returns, and automating processes such as refunds and voucher issuing to offer ultimate customer flexibility.
Wherever customers choose to convert, they expect a frictionless payment experience on the front end, which requires a simplified, efficient back end. For many international retailers, complex payments ecosystems comprised of lots of individual partnerships with various Payment Service Providers (PSPs) or acquirers have proved unable to handle the stress placed on them by the pandemic.
This led to a number of challenges for both merchants and consumers, including increased operating costs, failed payments and even down time.
As a greater proportion of commerce shifts online, the priority for retailers has come to focus on simplifying the back-end process wherever possible, including automating or streamlining crucial parts of their business model such as reconciliation and refunds. In doing so, they will not only reduce their operating costs and provide a more stable experience for the consumer, but also free up internal resources to invest in improving their overall site experience. Preparing for cross-border expansion For many small and midsize retailers, the shift to digital has unlocked the potential of international custom, but merchants need to ensure their payments ecosystems are optimized to match their ambition. Consumers want to pay in their local currency, and cultural leanings towards different payment methods mean that merchants have to prioritize payment flexibility as they move into new markets.
As they look to expand internationally, merchants typically have one of two options when it comes to managing payments. Some retailers opt to build out their own payments ecosystem manually, developing relationships with individual acquirers on a country-by-country basis, as and when they expand.
The resulting ecosystem requires significant time and operational budget to manage, can often be cumbersome to navigate, and doesn’t leave a lot of room for risk mitigation in the event an acquirer or PSP suffers a network outage. Alternatively, merchants can work with an international PSP to streamline their payments ecosystem, at the cost of sub-optimal transaction rates.
The opportunities for growth in ecommerce are clear to see, but for ecommerce merchants to scale effectively while prioritizing the customer experience, efficient management of the payments ecosystem is key. Payment orchestration platforms have been designed to make payments easier not just for merchants, but for their customers, too, and will help accelerate the global shift to digital commerce.
A payment orchestration platform works by connecting merchants with a global network of PSPs, acquirers and payment methods, all through a single point of integration. They allow merchants to reduce payment friction for the end customer while also streamlining their processes internally.
Once established, payment orchestration platforms can enable merchants to process any payment method in any currency they choose, allowing customers ultimate flexibility to pay how they want. This allows merchants to mix established payment methods such as cards with in-house loyalty schemes, application performance monitoring tools and vouchers. Merchants can also boost their conversion rate by incorporating value-add services such as stored cards, the ability to pay by link, BNPL offerings and more.
In the digital first future, streamlining the payments experience will be a key point of differentiation. As merchants look to expand internationally, payment orchestration will not only help improve conversion rates in the short term, but also establish a platform for long-term cross border growth. More importantly, prioritizing payment flexibility will lead to more positive user experiences with the brand overall, turning one-time purchasers in new markets into loyal, returning brand advocates.
Kristian Gjerding is the CEO of CellPoint Digital. Velocity, CellPoint Digital’s payment orchestration platform, offers access to over 410 payment methods globally. Integrated directly into existing networks via API or mobile SDK, Velocity allows merchants to unify their payment experience across all channels, including web, mobile, call centres and more, resulting in an optimized conversion process for consumers, regardless of how they choose to purchase. For more information, visit https://cellpointdigital.com.
The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.
Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.Prev Next