For companies selling products or services online, the struggle to create a slick, customised payments process for customers is real. Things like offering different payment methods to customers in different markets or protecting against fraud when making transactions around the world, haven’t been easy. Payment failures are also a big challenge, which can result in lost revenue.
This is changing, though. As “unbundling” — the process of splitting out specific services, as seen in the wider financial services and software industries — picks up pace in the payments space, merchants could find themselves with more options to expand into new markets faster, while optimising costs.
“Payment providers have built horizontal business models to provide a one-stop shop for merchants. But that’s not what merchants want because a single payment provider cannot satisfy the needs of business selling globally. Some markets are more nuanced than others, so a one-size-fits-all approach doesn’t work,” says Gabriel le Roux, the cofounder of Primer, a startup that has built an open payments infrastructure that makes it easy to integrate services from different providers. “That’s why we’re starting to see an unbundling of the ecosystem.”
Could unbundling be the next revolution in payments?
Europe’s payments ecosystem today
Europe’s payments ecosystem has long been dominated by a few large players, including Stripe, Adyen and PayPal. The trio offer fully comprehensive solutions, taking care of everything across transactions, fraud detection and payouts.
But over time, Europe’s payments landscape has become more fragmented and complex, as new payment services have emerged and localised players have strengthened solutions in their niches. The likes of Klarna and ClearPay have made buy now, pay later commonplace at checkout, while newer entrants such as Swedish startups Trustly and Brite are using open banking to create seamless checkout experiences where customers don’t even have to enter their card details.
A single payment provider cannot satisfy the needs of business selling globally.
Regulations like the Payment Services Directives in Europe kickstarted a new wave of fintech innovation, while customers are increasingly expecting all aspects of their lives to be as easy to use as their smartphone apps.
“That’s been the key driver for why unbundling has emerged. You get this real pressure from your customers for better, slicker and faster experiences, and that includes financial services,” says Piers Marais, head of product at Currencycloud, which was acquired by Visa in 2019. “There’s now this ecosystem that’s a combination of [that] plus regulatory frameworks that have allowed certain types of business models to come to the fore.”
However, it’s not all plain sailing. It’s difficult for businesses to use all these services without taking on additional complexity. Integrating and managing numerous services at once can be painful — and this doesn’t include cost, fees and how to optimise them in different markets.
“The merchants are looking for all of these services and they end up with a payments roadmap which will take them 12-24 months to achieve and will have to be done with loads of people they need to hire,” says le Roux.
The walled garden
Regardless, these shifts in behaviour, regulation and merchant needs are forcing the unbundling of services.
For example, in April, Stripe (the biggest fintech still in private hands) announced that it would be unbundling its own payments service, allowing customers to mix and match them with other providers.
The market has evolved and the merchant is a lot more educated. They know that using a payments service provider for everything doesn’t make sense.
While the company previously took the platform one-stop shop approach, it’s now opening up its walled garden so customers can pick and choose the services they actually need and want to use. According to an article by TechCrunch, Stripe’s president of product and business, Will Gaybrick, wanted to open up the company’s walled garden for some time, but it has been delayed due to technical difficulties.
“They are a payments service provider at the end of the day. The market knows they have never been agnostic, so it’s hard to have people buying that vision,” le Roux says. “The market has evolved and the merchant is a lot more educated. They know that using a payments service provider for everything doesn’t make sense.”
To unbundle, or rebundle?
As a business model, the unbundling opportunity is compelling because it presents more opportunity and revenue streams to the providers in the ecosystem. For example, Primer works with Berlin-based travel marketplace GetYourGuide and home furnishings company Conforama — unbundling gives other providers the opportunity to work with these companies when they may not have had the opportunity otherwise.
For their customers, on the other hand, an increase in the number of unbundled services risks becoming overwhelming. In the same way the advent of productivity and workplace communications tools has led to bloated and wasteful SaaS stacks at companies — it’s thought 53% of SaaS licences remain unused — the process of managing payments can become overly complex the more services that are flying around.
We built Primer to solve this problem. To provide a unified payment infrastructure, designed to meet their exact needs in order to accelerate growth.
For niche service providers along the payments lifecycle, “the challenge is going to be making their service interoperable,” says Christo Christodoulou, head of strategic partnerships, EMEA, at global fintech Airwallex. Airwallex launched in 2015 as a payment service provider for small businesses, and now offers a suite of solutions including cross-border payments, financial infrastructure, expense management, payroll and corporate cards. It also allows customers to integrate other services like QuickBooks, Xero, Shopify and WooCommerce.
And that’s where Primer comes in.
Its theory is that it can provide an open infrastructure layer where any payments-related services, such as payment service providers, wallets or fraud solutions, can be plugged in and used as part of a merchant’s payments stack.
This integration process is something that merchants can find themselves spending a year or more building out — but with Primer, it’s essentially a matter of plug and play.
“The reason that merchants can’t do this themselves is because the more they focus on payments, the less they focus on their core business,” le Roux says. “We built Primer to solve this problem. To provide a unified payment infrastructure, designed to meet their exact needs in order to accelerate growth.”
For more information about Primer click here.
Read the orginal article: https://sifted.eu/articles/unbundling-the-next-evolution-in-payments-brnd/
