An efficient and well-functioning payment landscape that creates a cross-border level playing field is key to a flourishing ecommerce industry in Europe. The e-payments sector is subjected to rapid developments and the future ecommerce market is fully consumeroriented. It demands a seamless shopping experience for consumers to do online purchases wherever and whenever they want. A substantial part of the double-digit growth of the sector comes from innovation in payments, and especially innovation in alternative and mobile payments. Mobile devices interoperability should be mainstreamed in all e-payments, but this should, in essence, be left to the market. The ecommerce industry has proven to be keen on innovating, which should be stimulated by regulation that facilitates and does not restrict.
Alternative payments: offer the right payment mix to drive conversion
Mobile payments will most likely become the standard option for consumers in the years to come. A fragmented market of competing technologies supporting mobile payments is hampering the potential for consumers to buy wherever, whenever. In order for Europe to remain competitive in the payments market, and the ecommerce market in general, it is of vital importance that any (alternative) payment solution be available on all mobile devices.
Alternative payments are factually all payment solutions next to card payments. There are plenty of alternative payment solutions which are crucial for the turnover by merchants as the right payment mix will drive conversion. For online merchants, successful and interoperable e-payment innovations pay attention to and are judged on three basic principles: Reach, Conversion and Fair Cost.
Reach is defined as the number of potential buyers that have access to the mix of payment methods. The total reach of a retailer’s payment mix determines whether an interested visitor can become a potential buyer. Conversion defines the chance of whether an interested visitor will become an actual customer: it determines business volume and revenue.
Conversion is, among other factors, strongly influenced by the usability of a payment method, or the familiarity of the user experience and the technical reliability of the payment method. Finally, Fair Cost affects the profitability of each transaction. The cost of payments, including cost incurred from fraudulent payments and exception handling, is among the retailer’s most prominent concerns, but only after both reach and conversion are satisfied.
E-banking: the importance of online banking e-payment for cross-border commerce in Europe
Globally, it is very difficult to identify the perfect payment blend. Different cultures require different payment preferences. But, for sure, the merchant should have the option to offer the latest innovation. And, if payment institutions don’t catch up with market developments, they will be hauled over by developments outside the existing payments infrastructure. Are we still speaking of alternative payments or new payment systems? See, for example, the development with real time or instant payment. This is perceived as the new cash. In the ecommerce era, users expect such solutions to be available and deliver the same payment experience as cash, i.e. not only provide immediate confirmation that funds are available on the payer’s account, but also immediate availability of such funds to the payee. Another interesting development, from a European perspective, to have a closer look at is the online banking e-payment solution.
Online banking e-payment (OBeP) solutions can significantly reduce costs for consumers and retailers associated with mitigating fraud and authentication of the credit transaction, thereby increasing reach and conversion for retailers at a fair cost. OBeP redirection solutions potentially unlock e-payments for all European countries through the consumers’ familiar and trusted online banking portal in combination with the SEPA payment instruments. Online merchants urge the European payments industry to develop a suitable pan-European OBeP solution for the mobile market as well. Ecommerce Europe advocates a panEuropean OBeP solution, such as the MyBank initiative developed by EBA Clearing.
Digital wallets: how digital wallets change the landscape
It is safe to conclude that, with alternative payments, there are plenty of developments on a global scale that work towards a seamless shopping experience with one-click-buy. It is the only solution that can ensure maximum reach and conversion at a fair cost for merchants and consumers, and which consequently fits consumer demands for the years to come. Furthermore, one-clickbuy is the only solution that can adequately facilitate technological developments in mobile payments, business-to-consumer payments, peer-to-peer payments and brick-and-mortar store payments.
Whereas the market should facilitate the means for one-click-buy through mobile payment solutions, e-ID solutions, wallets and the institutional framework for realising this should be guaranteed by governments. Legislative solutions, such as the PSD2 and the e-ID security framework, should foster a safe and innovative cross-border payments infrastructure allowing merchants to move towards offering one-click-buy options.
In the end, it is up to the consumer to decide which options best meet their demands and which will become the most trusted oneclick-buy solutions. Wallet solutions are a viable candidate to bridge the gap between online, offline and mobile payment contexts and to improve the cross-border usability of cards. They can be used both on the internet (online) as well as in brick and mortar stores. Different funding sources provide consumers with the flexibility they need and a uniform interface on the merchant side enables merchants to rationalise payment options to offer the right payments mix on a global scale.
Article by Paul Alfing (photo), Chair of Ecommerce Europe’s e-Payments Working Committee