Following the top five predictions for the payments industry made in 2014, this new article offers an interesting review of the forecast trends, a short analysis of the facts recorded last year, and a discussion around what we consider to be the upcoming trends with direct impact on the evolution of merchants, PSPs, and acquirers around the world.
More market consolidation (video minute – 00:06)
In 2014, we saw that most of the large players became part of the strategic groups (e.g. the M&A of Ingenico or Worldpay), getting a broader perspective on the payments market, making it harder and harder for the smaller PSPs to keep a good market position, good margins, or maintain their merchants’ portfolio. The larger groups will become more aggressive and take more market share and put pressure on pricing by offering a better quality of service to the merchants. This trend will continue in 2015 and in the years to come, leading to less payment companies present in the market in the next 5 years.
However, niche companies bring a real opportunity in operating independently within the payments industry as they offer much more flexibility and personalized service. Payvision is positioned in between these two categories by being one of the really few independent players that can offer both the quality of service as a high company value and the personal touch and flexibility, keeping up with the big groups in terms of new products and fast integration.
More legislation around card transactions (video minute – 05:20)
This trend slowed down in 2014, as it is not easy to change regulation around payments, and we’ve only witnessed a continuation of the initiatives that were already on going. Today we see a lot of changes with Visa and the requests of the European Commission to lower their fees, leading to the development of a new program which started 1st of January 2015. If one fulfills certain conditions such as detailing reporting, interchange reporting, processing secure transactions, then one is able to process payments at a really low rate. This represents a big game changer for cross-border ecommerce, as now acquirers from all the countries within Europe can compete in each other’s market.
From the PSPs margins evolution perspective (video minute – 07:14) the interchange requirements are actually the most challenging issues for merchants. For instance, they feel they are paying high prices for going cross-border and selling in Europe, and this is not a consequence of the fast-paced market consolidation but it’s mainly due to the domestic interchange from the card schemes. Another example is Asia – still an independent market, dominated by the banks with a strong local culture that keeps innovation a couple of steps back, just like what happened in Europe ten years ago or in the US fifteen years ago. As Payvision is not a traditional player within the Asian market, we can bring innovation easier and implement it faster through our global acquiring platform, overcoming the local barriers.
The rise and dominance of iPSPs and payments’ facilitators (video minute – 09:54)
As I said in 2014, payment service providers have to think more than payments! The more added-value and aggregated solutions you can offer to your merchants the better. Aggregation is the word of the year and the payment service providers have to think holistically in order to provide complete solutions to handle the whole back-end work on behalf of their merchants, and to help them with local regulations and financial measures, such as the new European VAT measures. Merchants can then have a smooth and effective entrance in different markets.
Alternative and card payments will continue growing (Video minute – 11:50)
When we look at the growth rates of alternative payments, we have to take into consideration the market growth, which varies from country to country. There is a lot of space for alternative solutions to grow compared to card payments and as long as there is innovation in the market, the alternative payments will also grow. However, nobody has beaten the major card brands yet in offering a global solution with good cross-border payments options. This segment is getting a larger market share with mobile payments as well, as most of the new initiatives such as Apple Pay are based on card payments. It draws a thin line between alternative payments and card payments; cards have the advantage of being the real global solution, and they will maintain this position in the near future.