Collaboration ‘inevitable’ for the payments industry
MAJOR payment service providers (PSPs) emerged during a time when the payment ecosystem was not nearly as vast and complex as it is today. They addressed a significant problem in the industry, paving the way for innovations that continue to shape the landscape.
In the earlier days, the payments industry was fragmented, existing in silos with companies racing to become the biggest and best within their domains. Each PSP developed its unique infrastructure, adding services and functionalities to cater to their customers and their evolving needs. This model proved successful, given the context of the time.
However, today we find ourselves in a rapidly evolving payments ecosystem. The past 10 to15 years have witnessed a proliferation of payment providers, not to mention a vast array of alternative payment methods, such as digital wallets that are predicted to make up over 52 per cent of transaction value by 2025.
The payments industry must now keep up with the multitude of payment options and fast-changing customer preferences. In particular, the silos that have been in place since the early days of electronic payments need to shift to meet the needs of businesses aiming to expand their payment offerings into new markets. Here in South-east Asia, cross-border e-commerce revenue is estimated to grow by 70 per cent to US$148.1 billion by early 2027, outpacing domestic e-commerce revenue growth.
These businesses are eager to tap into the emerging generations of consumers and the growing middle classes who are adopting new payment methods. They recognise that effectively managing payments can add substantial value to their operations and they are investing more in integrating and managing payments options.
In response to market demand and as an anticipatory measure, our industry is undergoing a significant transformation. Enterprises are increasingly recognising the limitations of relying solely on a single PSP model. They seek infrastructure designed specifically for their unique needs, capable of scaling with their growth and moving in tandem with their strategic directions, all while providing customers the flexibility to transact as they prefer.
Consequently, the market now leans towards anti-exclusionary payment services, favouring open and versatile infrastructures that can seamlessly integrate payment and commerce services for businesses. At the same time, enterprises are seeking data visibility to understand payment performance across multiple providers and analyse customer behaviour to make informed decisions about future plans.
It is becoming more evident that merchants want to work with more than one acquirer, as reports suggest that 85 per cent of businesses observe an increase in conversion rate and reduced operational costs with a multi-acquirer strategy.
Payments today extend beyond mere transactions; they intertwine with a network of services that increase payment success, maximise performance and capture revenue growth while looking at key services such as fraud protection, identity verification, alerts, payment insights, loyalty programmes and communications.
Thus, a modern payments infrastructure needs to be open, scalable and capable of connecting to this array of commerce services. It must also demonstrate the agility to anticipate and accommodate the unforeseen, to ensure it remains relevant and future-proof.
Importantly, this shift towards an open, commerce-focused infrastructure model is not a setback for traditional PSPs. In fact, PSPs are starting to recognise that their all-in-one business model comes with specific constraints, prompting the need for diversification. We are already seeing this play out with providers decoupling their services, in a start of a growing trend.
This trend paves the way for new opportunities for collaboration and partnership. It opens doors for previously isolated providers to access customers they may have been locked out of without such alliances.
As we navigate the complex ecosystem of payment providers, we are actively creating an environment that is straightforward, impartial and tailored to the needs of the merchant, thus shifting the focus from the provider to the businesses they serve.
In this evolving landscape, the industry is embracing the potential for greater synergy and cooperation, thus ensuring that the payments evolution remains aligned with the ever-changing demands of the market.
The writer is founder and CEO of Primer
