Edgar, Dunn & Company (EDC) was asked by the MPE organisers to chair four different panels during the 2022 event. Volker Schloenvoigt (Director, London), head of the Acquiring Practice at EDC, and Mark Beresford (Director, London), head of the Retailer Practice at EDC, jumped at the chance to support Europe’s leading event about payments acceptance. The four panels covered diverse topics relating to the acceptance and processing of merchant/retailer payments. BNPL and payment orchestration were also featured topics for two of the panels.
BNPL – A generational shift from credit cards?
- Volker Schloenvoigt, Edgar, Dunn & Company – Panel Chair
- Rob Eleveld, Ekata
- Francesco Burelli, Arkwright Consulting
- Zoltan Takacs, PayU
- Ellen Kuder, Arvato Payment Solutions
- Thomas Ficht, myToys
Following a very insightful presentation from Ekata, the panel started discussing the reasons behind the global success of Buy-Now-Pay-Later (BNPL). On the one hand, an argument was presented that BNPL is really filling a gap in the market and meets the needs of both consumers and merchants. A large part of BNPL users either have thin credit files or limited access to credit and, thanks to some strong marketing messages from certain providers, BNPL has become a “trendy way to pay”. Merchants benefit from more loyal customers, increased sales and increased average ticket sizes. Jupiter Research has put a figure of 30% for the increase in sales. On the other hand, panellists were stating that BNPL isn’t really anything new and that delayed invoicing or attaching specific repayment terms to transactions is nothing new at all. In fact, myToys has offered this for the last 20 years to its customers. The difference is that new technologies enable a more seamless process and a far better user experience. You then give it a cool name (BNPL), and the success will come. It is important to recognise local payment preferences and attitudes as well as local regulations, but the success to date has been universal.
On the topic of regulation, there was a genuine recognition that BNPL currently creates a lot of bad publicity. Whilst some providers might push the boat as far as possible and sail close to what is possible, many responsible providers work proactively with regulators or aim to be ahead of any upcoming regulation. This is especially relevant in the context of transparency, customer communication and education. Customers perceive BNPL as a payment product whereas, in fact, it is a line of credit. It is assumed that as BNPL becomes a mainstream proposition, further regulation will come with Australia and the UK being regarded as two trendsetting markets. There was some interesting debate whether regulation will be restricted to providers or whether it extends to merchants too. Still, the initial conclusion was that merchants, despite not having a specific license for it, manage it at their own risk for their own customers only and are unlikely to be impacted by most regulatory developments.
The final part of the discussion was about the future of BNPL. Four trends stood out:
- New business models such as ACI’s BNPL marketplace or BNPL-as-a-Service
- Leveraging data insights to develop alternative (risk) scoring models
- The increasing relevance of banks in the BNPL space – banks are good at regulation and compliance as well as risk management but not good at technology, so short-term consolidation in the market will be driven by banks buying BNPL providers
- And finally, the role of Big Tech, exemplified by the entry of Apple into the BNPL space
Everybody agreed that this is a highly dynamic industry which will create many more interesting discussions at MPE 2023.
Payment Orchestration vs. PSP
- Mark Beresford, Edgar, Dunn & Company – Panel Chair
- Galit Shani-Michel, Forter
- Dennis McNulty, GetYourGuide
- Ralf Krauß, Idealo
- Adam Vissing, IXOPAY
It was the last panel discussion of the event’s final day; honestly, we expected fewer people in the audience than on the stage. Nevertheless, the room was full – payment orchestration may be new terminology, or it could be something old with a new name – there was abundant interest from the audience to learn more about payment orchestration. The topics the panel covered were wide and first started with a definition. We discussed the relationship with other solution providers – such as fraud prevention, customer authentication and how payment orchestration was a new technology that acted as a layer between the merchant and the payment gateways, acquirers, and alternative payment methods (APMs). It was agreed that a Payment Orchestration Platform (POP) must be the merchant champion and be independent of the providers it aims to integrate. Payment processing is confusing for most merchants as it involves many different players, making it a complex ecosystem to understand and implement.
The panel discussed whether a merchant could build their own POP or work with a specialist POP company. This debate could go on. The answer to this question was – “it depends”. It depends on the merchant’s situation, such as the size of the merchant, the geographic coverage, the number of transactions, the number of different interconnections, etc.
The cost of implementing a POP – whether to build, buy or outsource was debated. The return on investment for the merchant – must have positive benefits – better conversation, reduced cost, and greater access to consumer segments and their payment preferences. Management of the transaction routing – reporting KPIs – how do you know it is better with or without a POP were some of the key questions the panel dealt with. Reconciliation reporting, chargeback management, and access to more APMs – including BNPL (direct vs indirect) were also important considerations.
The panel ended with the classic interview question – not “how do you see yourself in five years’ time?”, but “how do you see payment orchestration in five years’ time?”. The panellists all agreed that payment orchestration was here to stay. The concept had some way to go in providing a positive return on investment within a reasonable timeframe. Where its initial effort was on least cost routing, conversion boosting features, or reducing the number of declined transaction authorisations. The future will be improved merchant reconciliation. Consolidation in the market of the number of POPs was also predicted.
The only way to find out the future of payment orchestration in five years’ time is to come back to MPE in 2027, and we will see whether these predictions were accurate.
The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).