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This article was produced in association with Credorax
Ecommerce is changing. In an increasingly cross-border marketplace, PSPs (and their merchants) expect more from their merchant acquirer than ever. In this article, we look at the state of the market, current offerings and what makes an ideal acquiring partner.
Ecommerce: the future of retail
Retail sales worldwide are at an all-time high. According to data from eMarketer, total retail sales hit $22tn worldwide in 2016, growing 6% from 2015. That figure is estimated to exceed $27 trillion by 2020 (excluding travel, event ticket and restaurant sales).
Retail sales are growing, too – although growth rate is predicted to peak at 6.3% in 2017, trending downwards towards the end of the 2010s, the market is expected to deliver strong numbers over the next five years.
Ecommerce makes up a major part of this total. Although overall growth is slowing in line with the rest of the retail market, ecommerce is predicted to make up an increasingly large proportion of total retail sales.
Accounting for 7.4% of that total in 2015, retail ecommerce sales across all devices will reach $2.3 trillion worldwide in 2017, rising to a whopping $4 trillion by 2020 (representing 14.6% of total retail sales).
This should come as no surprise, as over half of all internet users worldwide – more than 24 percent of the global population – made at least one purchase via a digital channel in 2015.
The importance of cross-border payments
A growing proportion of this trade is cross-border. As advancements in tech make it easier for merchants to market to customers beyond their domestic borders, the pressure for merchant acquirers to deliver fast, secure and cost-efficient cross-border payments is higher than ever.
DHL Express reports cross-border sales volumes are predicted to increase at an annual average rate of 25% – from $300 billion to $900 billion – between 2015 and 2020. This is twice the pace of domestic e-commerce growth.
PSPs should be able to service the cross-border needs of their merchants if they are to stay competitive. Merchants now expect to pay least-cost routing and local fees for cross-border transactions at minimum. PSPs must have in-depth knowledge of regional preferences and compliance regulations. And for all this, merchants expect the lowest costs and transparent pricing models as standard.
Traditional merchant acquirers aren’t delivering
The cost and complexity of providing a cross-border payment system means it often doesn’t make sense for traditional banks to develop their own platform capabilities. Many banks have begun to distance themselves from acquiring services to focus on ‘core’ banking services – choosing instead to outsource them to third parties.
Between 2010 and 2015, the number of Top 40 European banks providing in-house acquiring services shrank from 71% to 58%.
PSPs partnering with traditional banks risk losing merchants to smaller PSPs and merchant acquirers – who are typically more agile and better suited to global services. This sentiment is reflected in the dwindling proportion of PSPs who use larger (18%) or similar-sized merchant acquirers (18%) compared to the number who use smaller acquirers (23%) or newer entrants (23%).
Acquirer checklist: the essentials
- Cross-Border reliability: seamless connection of the PSP’s merchants to cross-border opportunities.
- Knowledge of cross-border commerce: an understanding of regional preferences, rules, and new regulations.
- Currency capability: able to handle multiple currencies and provide the lowest domestic rates for cross-border e- and m-commerce transactions.
- Multi-device: full cross-channel international sales, enabling merchants to connect and sell to customers on every type of device – especially mobile.
- Risk protection: ecommerce risk and fraud should be safeguarded against, and the latest threats to mobile commerce understood.
- Flexibility: should support a wide range of payment methods and be ready to deliver an updated service in response to new market trends.
The global ecommerce market provides a unique opportunity for PSPs to move beyond their traditional roles by providing cross-border options for their merchants, but partnering with the right merchant acquirer must be the first step.
To learn more about selecting the right merchant acquirer, download Credorax’s whitepaper: PSPs: why your choice of acquirer determines your future success.