By Aran Brown, Co-Founder and CEO of Paytrix
There was a time that managing financial services around international trade was a simple affair. You had one financial services provider, probably a high street bank, that would handle all your requirements, whether it was paying suppliers abroad, managing foreign exchange or the huge volume of documents required. The downside? It was costly and slow, and a lack of real-time business information entailed significant risks.
Things have changed a lot since then, but despite the many improvements, there still remain considerable challenges to solve when trading internationally, particularly when it comes to payments.
An explosion of choice
The story begins over 20 years ago, when the emergence of the internet initiated a great unbundling of financial services, including international payments services. Today, merchants and marketplace have more options than ever when it comes to making international payments, thanks to specialist offerings that cater to discreet business operational needs and are faster, cheaper, and more convenient than traditional alternatives. Banks’ long-standing monopoly on international payments has been well and truly broken.
Concurrently, ecommerce businesses and marketplaces have been buffeted by never ending waves of innovation. From a technology perspective, we’ve seen the advent of smartphones, social networks and APIs, which allow machines to talk to each other without human intervention; in terms of the retail user experience we now have social commerce, streaming commerce, and Google Lens as a window to buy objects people have seen while out and about.
The complexity dilemma
And yet, amid all this creativity and invention, when it comes to finances and the movement of money, infrastructure for international payments is lagging behind the user experience
This situation is exacerbated by the choice of providers that businesses now have when they want to receive and make international payments in a global market. Businesses with international ambitions are left with no option but to stitch together an inefficient, costly and convoluted patchwork of payment service providers.
This complexity is going nowhere. In fact, it’s only likely to get worse. Regulations are constantly evolving, new payment options keep arriving, and increasingly it seems that geopolitical tensions will also have a role to play, perhaps splitting the world into rival systems.
The challenge for marketplaces
And these challenges become particularly acute where ecommerce marketplaces are concerned — where, when trading at huge volumes, even minor differences in percentage points or friction in the checkout process can have outsize consequences. There’s also the need to cater for changes in consumer preferences for payment options in markets around the world, as well as multilayer payouts to merchants via their preferred channels.
How then do online marketplaces and ecommerce businesses manage this complexity to run their businesses profitably as well as meeting the expectations of merchants and buyers?
While there is no returning the genie to the bottle – complexity is now endemic in the payments ecosystem – there are ways in which marketplaces can shield themselves from this complexity. One particularly promising approach is through leveraging a payments curation layer as part of the payments tech stack.
A return to simplicity
A payments curation layer means that marketplaces can replace their patchwork of networks with a single platform, contract, and API. This layer abstracts the intricacies of working with multiple payment providers and facilitates a seamless integration of best-in-class payment methods. The approach also ensures compliance with local regulations and provides transparency by offering real-time exchange rates and cost comparisons.
At a stroke, the simplicity and convenience of the consumer experience is brought to international payments processes. A payments curation layer streamlines the payment process and reduces friction for cross-border transactions, ultimately enhancing the customer experience and simplifying operations for ecommerce marketplaces.
Significantly, these are benefits that marketplaces can pass on to their merchants. Leveraging the curation layer, for example, marketplaces can offer merchants a tailored selection of payment options, taking into account factors such as location, currency, and customer preferences. Payments curation can thereby deliver a significant differentiator to marketplaces in what is an increasingly competitive sector.
A more agile approach to payments
They say that as soon as the maintenance crew has finished painting Scotland’s Forth Bridge they need to start again immediately. For too long the same has been true for ecommerce marketplaces and their payments systems. New technologies, new jurisdictions, new regulations, new merchant requirements, and new customer demands mean that the work is never done.
Payments curation at last provides a payments framework that is agile enough to cope with this unending change. With a curation layer in place, marketplaces can easily anticipate and adjust to shifts in preferences and technology, enabling them to win the loyalty of merchants and consumers alike, while managing costs. For marketplaces serious about international expansion, payments curation is fast becoming an operational imperative.