Payment service providers and the difficult choices merchants face.

By Marco Conte

The volume of global digital payments is set to triple this decade. That’s according to research from PwC.  

For merchants, this growth creates opportunities as well as new business pressures.  

The choice of the payment service provider (PSP) and payment methods is not simply a requisite for doing business. It has become a strategic decision that has real, bottom-line business impacts — impacts that will only grow in the coming years. 

The global payment landscape

The APAC region will lead the way in future digital payment volume through 2030, PwC writes. Europe is the second-largest region by volume and will account for more than 500 billion such transactions annually by the end of the decade. 

Some of the top merchant acquirers in Europe include: 

• J.P. Morgan Payments, which has been the largest acquirer of card-not-present transactions in Europe since 2016. The next largest acquirers include Adyen, Worldpay, Sberbank and Barclays. 
• Sberbank, which is No. 1 in total processed transactions and Europe’s largest Mastercard and Visa merchant acquirer, according to the Nilson Report. Sberbank holds a dominant position in the Russian market by a large margin. 
• New, consolidated groups that are emerging. These include Worldline, which acquired SIX Payment Services, PaySquare, Bambora, and Ingenico. These also include Nexi Payments, which acquired Nets and SIA. 

Some of the top merchant acquirers in the US include: 

• J.P. Morgan Payments. 
• Worldpay from FIS.
• Fiserv. 
• Global Payments. 
• Wells Fargo. 

But payment services are not consolidated around a group of top companies — not in Europe, nor in any other region. Merchants are spoiled for choice in the offerings available to them. This is what makes it so hard for those businesses to develop a payment strategy. 

Selecting a payment service provider is complex 

Merchants have to consider several factors when vetting PSPs: 

• The markets in which they operate. Imagine a small eCommerce merchant based in Munich. That company has to navigate decisions regarding currencies, payment methods and local acquirers if it wants to sell to neighbours in Switzerland. 

• The merchant’s business model. A digital merchant has different needs than a merchant with both a digital storefront and brick-and-mortar locations. The latter will likely opt for an omnichannel strategy that combines physical retail and online retail. 
• Customer needs. Imagine a high street retailer in a popular London neighbourhood. That merchant would probably accept Alipay and WeChat payment methods to satisfy the needs of Chinese visitors.    

Selecting payment methods is its own challenge 

There are hundreds of payment methods available worldwide. Here is a broad overview of some of those options:   

• Payment cards. Mastercard, Visa and American Express are generally the first brands that any European and North American merchant would think about. A Chinese merchant would look to UPI, a Japanese merchant would look to JCB, an Indian merchant would look to Rupay, and a Russian merchant would look to Mir. 
• Digital wallets. PayPal is often the default option for many online merchants. For mobile checkouts, Apple Pay and Google Pay are important in certain regions. Then, of course, there are country-level options such as Grabpay in Singapore, BLIK in Poland or Vipps in Norway. 
• Buy now, pay later. BNPL has emerged as a must-have for many merchants in recent years. Again, the options depend on the country or region, but BNPL providers such as Klarna, Affirm, and Afterpay operate globally today.  
• Solutions from local banks. Dutch customers will be comfortable paying with iDEAL. Many European customers will be familiar with Trustly. Traditional solutions such as ACH and SEPA direct debits are still very common in many markets.  
• Open banking. Brands like Trustly and Sofortüberweisung (now part of Klarna) were the predecessors of open banking in Europe. The PSD2 directive accelerated its adoption. We are already seeing merchants leveraging payment initiation services from providers such as TrueLayer, Tink and Volt. 

Keep in mind the local context of these decisions. Some payment methods are global. Some are specific to regions or national markets. Before expanding into any new market, merchants must understand what options are locally available. 

Merchants must protect their payment setup, too 

Protection requires a proactive, strategic approach. Having 3-D Secure alone is insufficient, and merchants cannot rely on card providers’ fraud and chargeback monitoring programs.  

Further, merchants need to know how vulnerable they and their products are to fraudsters and customer complaints.  

For many merchants, it makes sense to have a dedicated solution for fraud prevention or to enable similar tools if PSPs provide them. 

A multi-PSP strategy is the best option for most merchants—but that creates new challenges 

Most merchants find that they should have at least two PSP integrations in place to avoid any business disruptions.  

Some businesses might find that any two or three of the biggest PSP brands — Stripe, Worldline, Adyen, Worldpay, JP Morgan — plus other direct integrations is enough for their needs, and they can do that in-house. Other merchants might conclude that a better solution is to have a payment orchestration layer to facilitate switching among providers, and implement routing and retry logic.  

Once the merchant’s payment stack is live, a new challenge emerges. The merchant must then have processes in place to monitor payment data so that the business can optimize its revenue. 

Again, complexity can make this incredibly labour-intensive. Most merchants have to rely on someone on the team who can spend hours collecting payment data from all of those PSPs just to reconcile sales and incoming transfers. That person likely has no access to an analytics tool or even industry benchmark data to assess the performance of those payment systems.  

This means the majority of merchants have no meaningful way to determine whether the payment systems they’ve strategically and meticulously assembled are actually working optimally. 

At Congrify, our mission is to support these merchants by:  

• Simplifying that work.  
• Giving them easy access to payment data.  
• Helping them make better business decisions.  
• Serving as a reliable partner during the coming years of digital payment growth.