By Kristian Gjerding, CEO, CellPoint Digital
The shift to e-commerce has changed the game for modern retailers, leading many to shift their attention online and start to plan for international growth. To do so effectively, however, retailers need to optimize their payments ecosystems now to put in place the right framework for expansion in the future. In a digital-first world where consumers are increasingly demanding when it comes to payment flexibility, we explore why Payment Orchestration Platforms are the key to the future of e-commerce.
Going Global: The Future of E-Commerce
The e-commerce market saw unprecedented growth as a result of the pandemic; globally, the market is forecast to be worth $4.8 trillion by the end of 2021, and represents 1 in 5 retail sales by the end of 2024. This is due to a shift in consumer behavior resulting from local lockdowns and social distancing guidelines, which drove customers to explore online shopping channels—71 percent of people reported purchasing more items online since the pandemic.
Consumers also became more open to experimenting with new payment methods, with 60 percent of consumers saying they tried out a BNPL service last year. Significant shifts in consumer behavior have greatly affected the operating models of most retailers. The question is no longer “how can I get a customer into the store?” but rather, “how can I ensure a customer converts?”. Payment flexibility will play a crucial role in ensuring a strong website conversion rate.
Payments: The Next Frontier of User Experience
After driving website traffic, reducing cart abandonment has become one of the top priorities for modern retailers, and delivering complete payment flexibility has become vital to ensure customers actually convert. A complicated checkout process accounts for 18 percent of all cart abandonments, with a further 11 percent of customers citing lack of payment options or payment rejections as reasons they abandoned a site. As consumers become more digitally savvy, and demand for more alternative payment methods (which are particularly prevalent with gen-Z and millennial audiences) increases, payment flexibility and user experience will become synonymous, and online retailers who prioritize this element of their service will reduce friction and streamline the conversion process.
The move towards e-commerce has upended the customer journey for most modern retailers. In sectors such as fashion, for example, the point of conversion no longer happens when the customer clicks “buy,” but rather when the goods have been delivered, tried on, and the customer has made a conscious decision to keep the item. With that in mind, retailers need to prioritize their post-purchase service to protect relationships with customers. In practice, this means streamlining key elements such as returns (despite the rise of returns abuse) and automating processes such as refunds and voucher issuing to offer ultimate customer flexibility.
Creating Backend Efficiencies
Wherever customers choose to convert, they expect a frictionless payment experience on the front end, which requires a simplified, efficient backend. For many international retailers, complex payments ecosystems, which comprise lots of individual partnerships with various Payment Service Providers (PSPs) or acquirers, have proved unable to handle the stress placed on them by the pandemic. This led to a number of challenges for both merchants and consumers, including increased operating costs, failed payments and even downtime.
As a greater proportion of commerce shifts online, the priority for retailers has come to focus on simplifying the backend process wherever possible, including automating or streamlining crucial parts of their business model such as reconciliation and refunds. In doing so, they will not only reduce their operating costs and provide a more stable experience for the consumer, but also free up internal resources to invest in improving their overall site experience.
Preparing for Cross-Border Expansion
For many small- and medium-sized retailers, the shift to digital has unlocked the potential of international custom, but merchants need to ensure their payments ecosystems are optimized to match their ambition. Consumers want to pay in their local currency, and cultural leanings towards different payment methods means that merchants have to prioritize payment flexibility as they move into new markets.
As they look to expand internationally, merchants typically have two options when it comes to managing payments. Some retailers opt to build out their own payments ecosystem manually, developing relationships with individual acquirers on a country-by-country basis, as and when they expand. The resulting ecosystem requires a lot of time and operational budget to manage, can often be cumbersome to navigate and doesn’t leave a lot of room for risk mitigation in the event that an acquirer or PSP suffers a network outage. Alternatively, merchants can work with an international PSP to streamline their payments ecosystem, at the cost of sub-optimal transaction rates.
What is Payment Orchestration?
The opportunities for growth in e-commerce are clear to see, but in order for e-commerce merchants to scale effectively while prioritizing customer experience, efficient management of the payments ecosystem is key. Payment Orchestration Platforms have been designed to make payments easier not just for merchants, but for their customers too, and will help accelerate the global shift to digital commerce.
Payment Orchestration Platform works by connecting merchants with a global network of PSPs, acquirers and payment methods, all through a single point of integration. Integrated directly into existing networks via API or mobile SDK, these platforms allow merchants to unify their payment experience across all channels, including web, mobile, call centers and more, resulting in an optimized conversion process for consumers, regardless of how they choose to purchase.
Once established, merchants are able to process any payment method in any currency they choose, allowing customers the ultimate flexibility to pay how they want. This allows them to mix established payment methods such as cards with in-house loyalty schemes, APMs and vouchers. Merchants can also boost their conversion rate by incorporating value-add services such as stored cards, the ability to pay by link, BNPL offerings and more.
Payment Orchestration Platforms allow merchants to reduce payment friction for the end customer while streamlining their processes internally. Merchants can monitor, optimize and automate key elements of their payment operations such as acceptance rates, chargeback disputes and reconciliation, helping to reduce operational costs in the long term.
Planning for the future of payments
In the digital-first future, streamlining the payments experience will be a key point of differentiation. As merchants look to expand internationally, Payment Orchestration will not only help improve conversion rates in the short term, but also establish a platform for long-term cross-border growth. More importantly, prioritizing payment flexibility will lead to more positive user experiences with the brand overall, turning one-time purchasers in new markets into loyal, returning brand advocates.