Skip to main content

A Catalyst For Alternative Payment Methods.




The UK e-commerce market is Europe’s largest and is set to reach £90 bn before 2020 (up from £60 bn in 2015). But while e-commerce grows, the preferred consumer payment mechanisms are changing.

The Payment Services Directive 2 (PSD2) will come into force in the UK (and the wider EU) within two years and will have a profound effect on retail and commercial banking. While new payment categories like PISP (Payment Initiation Service Provider) and AISP (Account Information Service Provider) will transform how consumers interact with their banks and third parties, they also hold the potential to transform e-commerce.

A catalyst for alternative payment methods

Today, credit and debit cards in particular are the preferred consumer payment method in the UK, with card spending comprising 63% of all e-commerce payments.

However, according to WorldPay, alternative payment methods will see their overall share of transactions grow from 37% to 50% by 2019. The implementation of PSD2 will act as a catalyst and will further fuel the use of alternative payment methods for e-commerce transactions.

It’s not broken, but it can go much faster

As it stands, there is nothing fundamentally wrong with current payment methods and in all likelihood, debit and credit cards will continue to represent a significant share of e-commerce transactions. However, the card model continues to be expensive (despite the recently introduced interchange caps) and settlements happens at best D+1 (i.e. the day after the transaction). 

But in the faster e-commerce model of the PSD2 world, consumers will authorise trusted third parties to perform direct transfers from their current accounts that leverage a more efficient (in terms of cost and speed) payment infrastructure via the UK Instant Faster Payment scheme.

All this is good news for customers, of course. When authorising PISPs to make payments, they will no longer have to manually enter card details, transforming a multi-click checkout process into one click. It should also lead to significant declines in cart abandonment and higher sale conversation rates for merchants. However, merchants may need to incentivise the consumer through loyalty programs to start using PISP payments instead of card-based solutions.

Good news for merchants, too

For merchants, faster e-commerce will bypass expensive card platforms, enabling instant settlements. Merchants will be able to see transactions in their accounts within seconds, resulting in improved working capital, as the days sales outstanding (DSO) drop from multiple days to same day.

Though merchants clearly benefit from the new system in terms of cost savings, the intangible advantages of card payments (namely, the consumer fraud protection) will not be removed entirely. Liability will be broadly shared between PSPs acting on the payer's instructions and those receiving payments on behalf of payees. Each PSP will be liable for any issues related to their part of the transaction while merchants’ liabilities are reduced.

What about banks and cards?

Post-PSD2, issuing banks are not necessarily relegated to becoming the “dumb pipes” of the payments world. While some interchange revenue will be lost, innovative financial institutions can stay relevant (and cross-sell) with value-added offerings, using AISP to perform Personal Finance Management services.

The downside of the faster e-commerce model is the risk that card schemes and merchant acquirers stand to be hit hard by declining card volumes. However, card companies are already being pushed to make strategic choices due to IFR (Interchange Fee Regulation) and are reviewing their future business models. For example, Master Card is in exclusive talks to take over VocaLink, the UK Faster Payment processor.

Faster e-commerce – a not-too-distant future

Within the next few years the European payments space will undergo considerable changes as PSD2 improves access to customer accounts for TPPs (third party providers). While some banks may look to implement the bare minimum of the PSD2 requirements, there are sizable rewards and opportunities for financial institutions willing to invest in upgrading their payment capabilities. Faster e-commerce is not a futuristic prediction – it will become reality in the very near future.


https://www.linkedin.com/company/beekash-payment-system

Comments

  1. I would highly recommend Mr Pedro loan services to any person in need of financial help and they will keep you on top of high directories for any further needs. Once again I commend yourself and your staff for extraordinary service and customer service, as this is a great asset to your company and a pleasant experience to borrowers such as myself. Wishing you all the best for the future.Mr, Pedro is the best way to get an easy loan,here is their email.. pedroloanss@gmail.com Thank You for helping me with loan once again in my sincerely heart I'm forever grateful.
    You can contact Mr Pedro Jerome for the following financial help such as Home Loan, Car Loan, Business Loan, Personal Loan, Merchant Loan, SBA Loan.

    ReplyDelete

Post a Comment

Popular posts from this blog

Digital & Mobile Wallet System.

The current outlook for adoption of mobile wallets solutions may be a muted one, but there is hope on the horizon – if hardware manufacturers provide truly open and robust access to storing credentials and to interacting with the physical point of sale. One spur to more widespread adoption comes with the continued growth of the cloud as it enables access to all types of transactions across all devices across all venues. The mobile wallet is “more than just a payment method,” according to the white paper, which means that the stakes are high for both financial institutions and retailers, as they need to include mobile shopping in their basket of shopping and banking technology and payment options. The choice is a simple one: to innovate or be disintermediated. The quickest path is to link up in interoperable partnerships that will in turn lead to success at the point of sale. The in-store experience can be enhanced whether mobile wallets are used as part of a standalone pay...

Payment Method With Buyer Protection

Use a payment method with buyer protection Although debit cards ensure you are using your own cash to make a purchase, many do not offer the same robust buyer protection as other options if something does go wrong. A credit card or a virtual wallet option give you more flexibility when it comes to requesting a chargeback. A chargeback is when a transaction is reversed and a refund is given to you as the buyer. It can either be initiated by your bank on detection of fraudulent activity, or you can initiate a chargeback depending on the situation. Check with your bank for details. Another option that you might consider using to add another layer of protection is a single-use credit card number. These are tied to your regular credit card but provide a unique number to be used for one transaction so your actual credit card number is not compromised. This is particularly useful if there is a breach somewhere along the chain that might reveal your credit card details. Aga...