“The banks had no idea how valuable the customer experience is. That is why other companies came to take this part of the relationship off their hands: everything related to e-commerce,” says Gaston Aussems, CEO of Mollie. He explains the synergy between e-commerce and payments. Payment Service Providers (PSPs) such as Mollie play an important role in this. But how did it come to be that online entrepreneurs can easily link all kinds of payment options to their webshop thanks to PSPs? Why have PSPs taken over the bank's role in e-commerce?
“Traditionally, the banks in Europe provide payment services for both consumers and businesses. But around 2005, shifts took place: the growth of e-commerce and the financial crisis. In e-commerce, a whole new ecosystem emerged,” Gaston says, “an ecosystem where entrepreneurs started using shopping carts and that’s where the relationship with the banks was disrupted. In order to offer payment options, you had to be more of a technology company than a financial service provider.”
Despite this, the banks started to develop solutions. “However, these products were not easy to integrate,” Gaston says, making them difficult for entrepreneurs to use. The banks also gave entrepreneurs the option of offering wire transfers, but this was far from ideal. “When entrepreneurs sell something, they want the guarantee that they will get paid before they deliver the product,” said Gaston. “When a customer pays via bank transfer, it slows down the sales process as they have to wait for payment, which in turn leads to shipping delays.” As a result, the conversion decreased.
Entrepreneurs had different needs
In addition, the banks did not offer the payment methods that entrepreneurs needed, such as cartes de crédit or popular online payment methods such as PayPal. Entrepreneurs had to approach each company that offered these payment methods directly and close separate deals with them. In addition, they had to integrate the payment methods themselves, they received the payouts at varying times and each payment method had to be individually matched to outstanding items.
“Entrepreneurs clearly had different needs,” Gaston says. Therefore, e-commerce created a need for other payment services, which the banks were unable to meet. And then something drastic happened: the financial crisis of 2008. “All the attention of the banks turned inward, because their very existence was threatened. All innovation came to a halt.” This is when PSPs sprang into action and came to the fore. The PSPs were much better able to offer comprehensive payment services than the banks. One integration, one contract, one-time alignment.”
Something that would have been impossible
Today, PSPs are considered financial service providers, but that was not always the case. “PSPs are essentially technology companies that have integrated payment services into the customer journey of the merchants’ shopping cart software. In fact, PSPs have never asked to become financial service providers,” continues Gaston. “It wasn’t until the Payment Service Directive (PSD) came into effect in Europe in 2009 that any business dealing with third-party money became subject to regulation. This underlines the importance of the role that PSPs currently play.
According to Gaston, the technology of companies active in financial technology (fintech), such as PSPs, offers something that would have been impossible before. “By disconnecting the consumer experience from the services that run in the background, one smooth user experience created. And that while all services are provided by different companies.”
What does this mean for the banks?
“The banks are now forced into a position where they maintain the infrastructure – the pipes, the rails – and the fintech companies train on these rails, also taking over the customer relationship, which is most important,” said Gaston. . And even if banks can offer all kinds of payment methods, “they still don’t have access to the ecosystems, such as Magento or Shopify, that the entrepreneurs use. At Mollie we build a lot of modules for these platforms.”
The recent emergence of PSPs and fintechs specializing in providing a single service that is often cheaper and faster than the banks is “slowly taking over not just the payments, but all the profitable aspects of the banking services,” Gaston said.