Mike Goodenough, General Manager for the EMEA region at Ingenico ePayments, spoke to PaymentExpert about a range of subjects from entering the Chinese market to the impact of PSD2 and SCA.
PaymentExpert: What role has PSD2 and SCA had on how firms continue to offer payments?
Mike Goodenough: Ever since the second Payment Services Directive (PSD2) was implemented at the start of 2018, it has driven innovation throughout Europe. Regulations such as this will continue to be the main force driving change across the continent for the foreseeable future, with strong customer authentication (SCA) and PSD2 forcing companies to re-evaluate how they provide payments to their customers.
As a result, many businesses are seeking out cheaper alternatives to card payments and are considering P2P payments and Open Banking as a means of reaching customers. With this, we’ve seen retailers increasingly adopting alternative payment methods (APMs).
What’s more, similar regulation changes will influence how businesses use APMs. With legislation limiting card payment costs and making international payment methods across the continent more expensive, eCommerce businesses should be looking to high growth markets, such as Russia and China, to increase their revenue and grow. In these markets, APMs are popular among consumers and will allow retailers to cater to the market in an affordable way.
PE: Can you tell us more about the importance of testing customer adoption when expanding into new markets?
MG: When expanding into a new market it’s not so much about testing the adoption of a product, rather it’s about fully understanding the market before moving into it and knowing whether customers in that region want what you’re offering when it comes to payments. Customers in different regions around the world interact differently with eCommerce businesses in regards to payments, so it’s absolutely critical that they cater to the payments needs of these customers or risk losing sales and revenue.
Preferred payment methods in a location develop over time as a result of local circumstances and are strongly ingrained in a culture. This isn’t going to change overnight if you offer customers something different. For example, did you know that 42 per cent of British customers won’t finalise a payment if their preferred payment method isn’t available? The same can be seen throughout Europe and around the world.
PE: How challenging is it to adapt to the continually growing payments market in China?
MG: Historically, China has been a difficult market to enter for any eCommerce business, as its unique domestic eCommerce ecosystem often demands specific solutions that differ than what is traditionally seen across Europe.
Despite this, the market is a massive opportunity for European businesses that shouldn’t be missed – it’s the world’s largest and most dynamic eCommerce market. What’s more, with 82 per cent of the local Chinese population being unique mobile users and an internet penetration rate of 57 per cent, representing 25 per cent of internet users worldwide, China is a pioneering force in digital and mobile culture.
However, if businesses are to enter it, they must be prepared. To be successful it is essential that retailers are able to partner with local Chinese card schemes and offer payments in customers’ preferred methods, in Chinese Yuan (CNY).
Such methods include leading mobile payments platforms such as Alipay and WeChat Pay, with the offer of real-time payments on both desktop and mobile.
PE: How can payment platforms ensure they maximise the reach of the growing market in Russia?
MG: With the ninth largest consumer market in the world, like China, Russia is a huge opportunity for European merchants. What’s more, Russian consumers have developed a taste for western products, with many looking across Europe to buy goods and services.
But again, like China, it has traditionally been difficult for eCommerce businesses to provide their services to Russian consumers. This is because, without a Russian legal entity, payments are usually processed as a cross-border transaction by acquirers that are situated outside of the country. This significantly impacts authorisation rates meaning that eCommerce businesses are losing out on conversions and loyal customers.
As a result, businesses looking to enter the region must have the means to partner with domestic acquiring banks in order to increase approval rates and assure their success in the region.
PE: In terms of Ingenico ePayments, are you able to detail some of the more challenging aspects that clients have faced when engaging new markets and how they have overcome this?
MG: Before partnering with Ingenico, the biggest challenge that clients faced when entering new markets was understanding how to cater to customers’ needs and what they want in different regions. Partnering with payment service providers (PSPs) helps them to gain this knowledge, as their expert teams have developed expertise and understanding of consumer demand in different regions by working for many years in countries across the globe.
What’s more, with high growth markets becoming essential to European eCommerce businesses looking to expand internationally, they must learn how to enter these markets with the greatest chance of success. At Ingenico, we’ve launched two solutions that help with this – our Russian acquiring solution and our suite of payment methods catered to the needs of Chinese consumers.
We’ve experienced great success with both solutions, which are helping our clients break into these rapidly expanding markets.
PE: What are some of the global trends you predict will take place within payments in 2020?
MG: Throughout 2020, we’ll continue to see regulation impacting innovation throughout the payments industry. APM’s will continue to grow in popularity and businesses will use them to their advantage to enter high growth markets such as Russia and China. eCommerce businesses should be quick enter the market early or risk losing a competitive advantage.
In addition, transactions on mobile devices are set to increase for higher value payments, while the travel industry will see traditional online payments such as WeChat Pay move into face-to-face (F2F) payments, feeding into an omnichannel future across Europe.
To make the most of this change throughout the year, there are a number of strategic decisions businesses should be taking. At Ingenico, we will be continuing to develop partnerships that reinforce the high touch model we already have in place, while we stay ahead of regulations.