The pandemic has created  a shift in consumer and business behaviour,  as multiple lockdowns forced people to stay at home and make purchases online.  Online purchases have increased by 75 % during February 2021, while offline transactions have decreased. Customers have become more aware of their payment options as fraud  has increased by 600%. Moreover, new requirements for verifying online payments were introduced in Europe as part of the second Payment Services Directive, also known as PSDS/CA.  In today's blog, we will focus on the international payment methods, while discussing the challenges and opportunities in 2022.
Let's start with the opportunities:

Cross-border transactions

  Recently, Amazon UK stated that it won't accept UK-issued Visa credit cards starting from January 2022. This decision came as a result of a post-Brexit rise in interchange fees on cross-border transactions between UK and EU businesses.

   Nevertheless, this served as an advisory measure to traditional banking institutions, because there are wide alternative payment options ready for customers. Apart from the interchange fees, this applies to overseas transfers as well.   Moreover, Ruth  Wandhöfer, Chief Innovation officer at financial services provider GC Partners, thinks that 2022 will see more companies to move away from big banks to deposit the money in a bid to save costs and increase efficiency:   “Data gathered by the World Bank shows that banks have an average cost of 10.66% per transaction. Non-legacy systems such as ours offer efficiency, savings and value-add services to businesses that need to transact, no matter the hurdles in their way”

Artificial Intelligence will prevent businesses from fraud   

During the pandemic, cybercrime has increased by 600%. Jane Loginova, CCO of BPC Banking Technologies and  CEO of processing payments fintech Radar payments, thinks that consumers require extra protection. She states that customers will see an increased use in fraud detection tools thanks to 5G driving us into a connected era of networked transactions and lot. She also believes that multi-layered real-time fraud solutions will see an increase to leverage machine learning and artificial intelligence to detect fraud. Nevertheless, these solutions will increase the organisation's reactions to fraud innovations.


Sustain charities with profitable payment systems

 40% of charities dipped into reserves at the peak of the pandemic and lost almost £6.4bn of anticipated income. On the positive side, the Banked payment company offered its support. The London-based start-up manages how financial data is accessed between banks, businesses and individuals.Not charging any fees for donation transactions to innovate around how donations are being paid, Banked is passionate about supporting charities in their fundraising efforts and will provide support to even more charities in 2022.Brad Goodall, Banked CEO says: “At Banked, we’ve created Payment Links to enable QR code scanning on a television for taking donations during live events, inserts on mailers for direct instant and secure payment, and the ability for street charity fundraisers to collect simple one-off donations without the need for a card reader.”   
  Moreover, Banked has facilitated a platform to help businesses to support charities, by contributing to some of the cost savings they receive with Pay by Bank payments.

Managing payments as a product

  61% of platforms intend to expand their payments processor/vendor relationships in the next three years beyond what they have today. Nowadays, it is not surprising that digital platforms can provide customers easy integrations to process payment options and bundled services, that's why Paypal is being used by 82% of users, Braintree by 16% and Stripe by 47%.     By building creative payment experiences, companies generate new revenue streams for their businesses- either by acquiring loyalty, through subscription services or creating hybrid business models which combine eCommerce with marketplaces features.    Moreover, 94% of digital platforms intend to expand into new geographical locations within the next three years.  An amazing characteristic of digital platforms is that they are exportable and scalable in new markets as the majority of marketplaces  tend to create a global development, using their payment methods as their passport.
Now let’s take a look at the challenges:

How to improve conversion rates  

  As we all know, conversion is a priority for any business and for many eCommerce businesses, it is even a struggle. As consumers' expectations of digital experiences, including the checkout process, have increased in recent years, Amazon has set-up its one-click checkout and its various sets of products. Many digital platforms are struggling to reproduce that experience,  while reducing the fraud risks that are imminent for the online experiences.   When asked  the question “How do digital platforms view their transaction conversion performances?”, only 4% of the respondents answered “very well”. This leaves plenty  of room for improvement and therefore it is a challenge still to be earned. Improving the payment process to gain more conversions is a must-have.

The rising complexity of managing compliance  

   Did you know that only 63% of companies are “somewhat” effective at complying with PSD2/SCA? Nowadays, conducting compliance audits are still an important eCommerce aspect, as regulations towards technological innovations, increased fraud and money laundering persist.   Nevertheless, digital platforms are facing less noticeable challenges in optimizing their payment systems, as they are building their three-year roadmaps. This is 100% true regarding global expansion. For example, Foreign- Exchange (FX) management which is operating internationally requires accommodating a wide range of different currencies that have fluctuating values. Yet, only 24% of companies believe that their FX management strategies are “very” or “extremely” cost-effective, while 63% view that it is only “somewhat” so. In this regard, it's worth mentioning that England's possible exit from the EU is a considerable concern for few digital platforms, but most are not affected by this.

Vendors, vendors and more vendors   

80% of platforms have two or more vendor relationships to support manage chargebacks. eCommerce companies foresee that the costs for payments processing are 2.7% of their annual revenues, on average. Therefore, a new eCommerce platform strategy should be put in place so that it improves their payment operations for expanding their vendor and process relationships.About 61% say that they must do so to achieve their three-year growth goal.

 2022 will be a challenging year for the eCommerce business, as the Coronavirus situation is still uncertain. Therefore, companies will need to improve their payment systems in order to cope with the demand and improve their conversion rate. Nevertheless, the eCommerce business will face many opportunities and challenges, which we will consider on our Kooomo blog.