By Pétur Pétursson, MD Domestic & Partnerships Acquiring, Valitor.
Around fifteen years ago, Payment Facilitators (or PayFacs as they are often referred to) entered the commercial fray with seriously underestimated potential. Now, with almost 22 percent of all retail sales in the UK occurring online, the growth potential for Payment Facilitators is immense. The sharp increase in internet sales has provided Payment Facilitators in particular with a much larger pool of customers. Whats more, thanks to their innovative technology and way of working, they are now changing entire business models and drastically improving customer experience.
The new disruptors on the block
You don’t have to look too far around the payment industry to see that it is setting the pace for business innovation, and Payment Facilitators are at the forefront of it. Take Stripe as a key example of how Payment Facilitators are shaking up whole industries. It’s recent partnership with SplitIt, a global payment technology solution that enables no-fee installments on credit card purchases, sees Stripe serving as the Payment Facilitator for all new merchants who accept Splitit. This makes merchant acceptance of Splitit easier and faster to on-board and automates the acceptance and movement of money. Merchant’s that are able to accept SplitIt payments give their customers greater flexibility in how they pay, which better meets their needs. This has since resulted in an increase in average order value, decreases in shopping basket abandonment and returns. All benefits they have only been able to see due to Stripe’s innovative technology and service.
Payment Facilitators like Stripe, are not just transforming the customer experience through making payments more seamless. The huge success of businesses like Klarna makes it clear that Payment Facilitators are also influencing consumer attitudes towards payments on a larger scale. Klarna lets retailers offer a ‘buy now, pay later’ experience, enabling them to appeal to a larger audience of customers. In fact, it has changed the way many people think about and budget for larger ticket items. For retailers, the business case for using Klarna extends beyond diversifying their customer base. In its recent research, the organisation reported that merchants offering four interest-free loans installments in the US had a 68 percent increase in average order value and a 44 percent increase in conversion compared to those just offering card payments. These retailers also reported a 21 percent higher purchase frequency. The numbers sell themselves and it therefore comes as no surprise that in 2019, Klarna partnered with a new merchant every eight minutes.
Innovating at the start of onboarding
There is no doubt about it, the next generation of Payment Facilitators are becoming huge influences in business. Besides disrupting the customer experience, the Payment Facilitator model is also a key enabler in helping merchants spend less time on admin, and more time innovating. To start with, businesses can onboard at speed and therefore scale fast. By building and supporting their own onboarding technologies, Payment Facilitators can offer a process that is much quicker than other payment service providers which outsource the onboarding process.
The benefits don’t stop there. Payment Facilitators can also act as a single point of contact for businesses so there is no need to deal with multiple providers. This enables them to spend less time on paperwork and more time building success. Payment Facilitators are also responsible for managing card scheme regulations, another burden taken off the merchant’s shoulders. Combine these practical benefits with Payment Facilitator’s innovative payment offerings, and it is easy to see how they empower businesses to excel at innovation.
Finding the right partner
Payment Facilitators are shaking up the payment industry, but to be successful, they need an acquiring partner that enables them to grow and succeed. The best partners will offer single acquirer agreement, faster settlement and instant onboarding in the background, allowing Payment Facilitators to focus on their customer’ needs. Besides the practical requirements, a partner also needs a depth of experience in the payments industry. Payment Facilitators should also look for access to senior support to help realise opportunities for growth. This kind of investment is critical if Payment Facilitators and their customers are to realise huge success in the long-term.
Finally, Payment Facilitators need a partner that can offer them tried and tested technological solutions that create a resilient and seamless payments experience. The best acquiring partners will incorporate the functions of payment gateways and have the capacity to handle a Payment Facilitator’s large volume of transactions. Getting this seamless technological integration is critical for Payment Facilitators scaling at speed.
The next generation of Payment Facilitators are booming. Not only have they been a huge game changer in the payments industry, but are setting the pace of business innovation at-large. Businesses that want to be at the forefront of innovation, will need to look at how the Payment Facilitator model has transformed the payments space to find the key to their success.