The Rise of PSPs, Part 2: How PSPs can compete with big tech and big e-commerce
February 18, 2020
“In Europe and the US, big e-commerce and big tech companies are gaining a lot of power,” says Mollie CEO Gaston Aussems. He’s talking about e-commerce giants like Amazon and tech companies like Apple. They’re growing by leaps and bounds, and as a result are cutting in on the payments game.
And they’re doing it using innovative tech, the same tool payment service providers (PSPs) used to grab payments and the customer experience from banks.
Data and the smooth customer experience
Why are big techs and big e-commerce getting into payments? Data. They value data so much because it’s a powerful tool in generating revenue. Gaston illustrates this point: “If you’re buying with Amazon Pay [Amazon’s payment processing service] via another online retailer, Amazon uses that data to tailor products to you on their site. They hope this improved customer experience will translate into higher sales.” Standalone payment products by big tech players like Apple and Google expand their offerings, giving them more touchpoints with consumers.
And big e-commerce companies like Zalando, Coolblue, and Veepee are moving to something called “checking in” to make shopping and paying simpler. Gaston explains: “Check-in means that the moment you log in, the webshop says ‘hi’ and welcomes you back. And they can follow you while shopping, offering you items they think you’ll like. When it’s checkout time, they already know how you like to pay and your address because the moment you logged in they identified you.” Just click the buy button and everything’s paid and on its way to you. Therefore, Gaston adds, “they can give you a very smooth experience using data.”
The emergence of ecosystems
Only large merchants, though, can do checking in Gaston says, “because they make creating a profile worthwhile for consumers by offering a wealth of products and services, which in turn keeps bringing people back to purchase more. Here, you don’t want to keep having to enter all your info every time you buy something.”
Loans, marketplaces for merchants, and even healthcare are on offer by big e-commerce. Some of them, like Amazon, are also handling their own payments.
“In the end,” Gaston says, “big e-commerce companies want to make sure they’re the only ones you turn to for your every single need.” What’s going on here is a snowball effect. Gaston describes it like this: “the more you turn to them, the more they learn about you, the better they understand your needs, the more they can sell you. When you throw in services that bundle free delivery and other benefits, like Bol Select or Amazon Prime, this further makes these merchants go-to places for consumers.” Thus, “out of all this comes the rise of e-commerce ecosystems.”
Digital payments are everywhere
Where does all this leave PSPs, exactly? They will, of course, continue providing payments to merchants’ online shops as well as to some of the big ecosystems themselves. But there are still plenty of other opportunities for them to sink their teeth into.
“Ever had food delivered?” Gaston asks, “A company provided that payment.” PSPs can also offer payments and other services, like reconciliation and fraud protection, to smaller e-commerce platforms, “because it’ll save these platforms time, money, and a lot of effort by hiring a licensed party to handle their payments,” Gaston says. The B2B part in e-commerce is also up for grabs by PSPs. That’s why we have so many integrations on our platform,” Gaston notes, “and why we want to help our clients become as successful as possible through, eventually, providing additional business services.”
“People owning less and sharing or renting more is happening and will continue into the future,” Gaston adds, “meaning subscriptions are and will keep becoming more part of daily life.” Ikea is piloting renting furniture and people can hire cars on an as-needed basis with companies like Green Wheels. You can even rent home appliances from outfits like Coolblue, or bikes from companies like Swapfiets. “This is why we [Mollie] started eCurring,” Gaston says, which makes setting up and everything involved in managing subscriptions easy.
This all points to the fact that, “e-commerce payments are a fraction of the payments market,” Gaston says, “Basically, digital payments are spreading to all sectors of the economy.” And they’re spreading because they’re convenient. For example, “Electronic invoices with built-in payment options are paid significantly faster, “ Gaston says, “resulting in a shift away from traditional invoices.”
But just how big will big e-commerce and big tech become? Will they swallow up everything payments and e-commerce?
“I don’t think it’ll go this far,” Gaston says, “because in Europe and the US there are political forces to stop the further growth of power these ecosystems have.” Regulators in these parts of the world will prevent big e-commerce and big tech from becoming like Alibaba and Tencent in China, which provide all-encompassing ecosystems, from chat services, to shopping, to financial services.
But despite this, Gaston says, “PSPs should develop knowing that these things are happening and know that these forces posed by big e-commerce and big tech are tremendous.”
Ultimately, Gaston thinks, big techs and big e-commerce alike don’t even want the added regulation and supervision that comes with offering more and more financial services, “because it’s a pain in the neck.” Using Apple as an example of this, he observes that, “They are very smart with Apple Pay. They just handle everything right up until it becomes a payment and then hand that part to a regulated financial institution to deal with, and Apple gets all the data.”
And just like Apple and other innovative businesses, PSPs need to find where they can add value because, “Those who are successful at this,” Gaston says, “will have a very bright future.”