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Many proclaim the importance of a single omnichannel payment services provider (PSP). The argument goes something like this: all consumer journeys begin online (true), and consumers need choice as to whether they buy online or in person (true), therefore everyone needs a single PSP that delivers omnichannel payment (false). And it’s that last part which really irks me.
Omnichannel versus modular payment stack
Let’s break this down. A single “omnichannel” payment provider – that allows your customers to pay online, over the phone, in person, by mail order, on an airplane, underwater, while skiing – is unnecessary, inefficient, and generally unrealistic.
Importantly, the false promise of the single omnichannel payment provider is epitomized in the word, “single”. More often than not, it’s just bad economics! The giants of the digital economy would never run their entire payments operations using only one PSP. Shrewd payments leaders at large-scale enterprise businesses maintain connections to multiple PSPs. When you think that the pursuit of any payments team is in search of “Performance” as “acceptance rate / costs,” it makes sense to maintain sufficient optionality; only through comparison and competition can you identify the highest-performing PSP. Then you can route your traffic to the processor which delivers the best acceptance rate strategy for your business. See debate on process orchestration.
A payment processor that’s exceptional at in-person payments would not necessarily excel at online payments. These are very different worlds; it’s not enough to glue them together and pretend they require the same skills and technology. It’s the quality of payment optimization technology which makes a difference to your revenue. And that technology is optimized for every payment channel.
We know more and more businesses will run multiple payment service providers alongside each other. They should. That’s a smart move. So perhaps it’s time the payment industry called time on the need for a single payment provider for all channels. After all, you don’t make all of your purchases from one shop. Why not choose the best payment provider for the channels, regions, and payment methods your business needs to excel at? Why not take advantage of great innovation?
What you really need are specific solutions for specialized business models. Of course, payment products should be flexible to adapt as your business scales, expands internationally, pivots strategy, and launches new verticals. That’s why the modular payments infrastructure is so much better than the omnichannel one. Modular means you integrate the pieces of the payments puzzle that your business truly needs – without paying for anything superfluous. It signifies a carefully crafted, deliberate investment with cost-efficiency and scalability at its core. Otherwise you’re paying for an entire car – when all you really needed was a steering wheel. When you select partners and products based on specific capabilities – for instance, offering payment processing in MENA, activating effective authentication flows, or improving your tokenization strategy – you can optimize your payments performance with a laser focus.
Why digital matters more than any other channel
Plenty of savvy and successful brands don’t offer in-person payments (or payments underwater, for that matter). They don’t need to. Global players such as Uber, Spotify, Shein, AirBnB, and Booking.com are purpose-built for the digital economy. Their innovation, competitive edge, and differentiation are borne of their compelling online or in-app experiences. Such companies capitalize on the fact that digital payments are exploding in popularity worldwide; the digital payments market transaction value is estimated to increase at a CAGR of 16.3% between 2017 and 2027. Market size of mobile wallet transactions (using mobile payment apps such as Apple Pay) is set to double between 2020 and 2025 in North America. This shows that consumers are eager to pay with internet-enabled devices now that life admin, shopping, and fund management tasks increasingly take place online. It’s known as the digital takeover – and it goes hand-in-hand with digital payments.
By 2028, the number of digital commerce users is expected to reach 4.76 billion. By comparison, use of cash fell 8% in 2023, and is forecast to shrink by -6% CAGR to 2027. It’s clear that shoppers are increasingly hungry for digital payment methods – even if products, services and experiences are still provided in-person.
Meeting consumer demand for digital payment channels
Purchasing and paying online has become a preferred shopping method for many since the pandemic. Consumers now expect to find what they want online and pay instantly within the app or browser. The proportion of day-to-day transactions made online increased from 6% in 2019 to 17% in 2022, according to the European Central Bank. The share of the number of payments using mobile apps more than tripled in the Euro area during this same period.
The Asia Pacific (APAC) region is also witnessing an explosion in digital payment popularity. Consumers in this part of the world want to pay using QR codes – the favorite choice of in-store shoppers by share of transaction value. Digital payment channels are particularly important for peak season sales, such as Singles Day (November 11). Our report into Peak Season Trends 2024 found 37% of adults in China usually make non-essential purchases online using a QR code. That means if you're trying to expand your ecommerce business into the Chinese market without offering QR codes as a payment method, then you could disappoint almost two in five customers.
Digital wallets are projected to grow at 13% CAGR through 2027, when they will make up 66% of APAC Point-of-Sale (POS) spend. By then, consumers in 11 out of 14 APAC markets will prefer digital wallets over any other payment method (including plastic cards or cash).
Digital technologies are delivering radical and transformative change to in-person payment experiences. As well as holding all your digital payment methods, your phone can also act as a payment terminal, i.e. a “POS in your Pocket”. That means you can set up shop wherever you take your phone. But perhaps that’s another blog post.
Yep, digitization is transforming the in-person, physical shopping experience. Today’s customer expects to order burgers by scanning a QR code, pay for drinks using a digital wallet or verify their identity using just their phone camera.
Digital payments are great for modern life because of their convenience and increased security capabilities. One-click checkout is a recent innovation which removes the awkwardness and frustration of manually entering personal details for every purchase.
It’s also much harder to make unauthorized payments via digital wallet – particularly on mobile – compared with credit cards, cash and checkbooks (remember those?). Smartphone payments have frictionless authentication methods built-in, primarily because they require unlocking using passcodes or a face scan. These benefit merchants as well as customers; alternative payment methods such as Apple Pay can actually reduce chargebacks thanks to built-in biometric authentication methods.
How Checkout.com maximizes payment performance
At Checkout.com, we believe the best way we can support commerce is to provide better data transparency than our competitors. We do more than deliver the issuer’s basic response to a transaction request; we offer more granular detail, and provide Recommendation Codes to help you decipher API response codes. That’s actionable payments data; it lets you make informed choices about your chances of success on a retry. That saves you racking up costs on resubmitting a payment that would never be accepted.
As a full-stack payment service provider, we own and operate more stages of the payment processing lifecycle than our competitors. That means we can retrieve data from more places. That means we can specify the precise reasons for payment failures: whether it was an authentication problem, suspected fraudulent card use, or the card network needs to see more customer data to validate the transaction.
Our data engineers run experiments on payment traffic to discover tiny modifications that reduce payment failures and increase merchants’ revenue. They draw billions of data points from across our global payment processing network, and teach our custom machine learning engine, Intelligent Acceptance, how to format payments for the best chance of success. In collaboration with our merchants, we apply these “Optis” (a.k.a. optimizations, or payment traffic modifications) in line with their individual business goals. This is our perpetual mission; we’re relentlessly obsessed with performance.
We even speak with issuers directly to address false declines, and help them work on technological solutions to improve transaction success rates. Thanks to our intimate knowledge of global scheme rules, we’re often able to inform smaller issuers of the actions that card schemes need them to take. Our issuer outreach work improves the quality of the payment acceptance network for everyone, contributing to higher acceptance rates for merchants, too.
The reason that Checkout remains focussed on digital payments is just that. It’s our focus. With this focus, we can put all our investment into creating the best possible digital payment experiences. We put all our smarts, all our tech, all our R&D into delivering the acceptance rate that’s right for your business. All while fighting fraud, automating compliance, and helping you expand internationally.
This is how we ensure you thrive in the digital economy. And it’s a pursuit that’s never over. Every ounce of energy we have is dedicated to the performance of payments in the digital channel, because when we get that right, you probably perform better in any channel.
