News, Education and Events Decoding Digital Payments & Fraud

News, Education and Events Decoding Digital Payments & Fraud

How Value-Added Services are Redefining the Role of the Payment Gateway

By Michael Doron, Managing Director, PAY.ON, an ACI Worldwide company

Guest Perspective: How Value-Added Services are Redefining the Role of the Payment Gateway For merchants seeking to take advantage of the opportunities the globalization of e-commerce presents, partnering with a payment gateway has long been a logical approach.

But, merchants considering global expansion must move quickly. The last thing they want or need in a highly competitive space is a payment gateway provider that restricts their growth or forces them to work with multiple payment providers (PSPs) in different regions. This rapid rate of change is, therefore, rewarding those payment gateways that are most agile and adaptive. From a technological standpoint, this means open platform architecture and streamlined processes, including automated merchant onboarding and self-service options. The ability to build additional services on a platform, supported by APIs and SDKs, also has become more important.

Increasingly, strategic partnerships with specialist technology providers are the answer, as payment gateway providers cannot build all these services alone. As a result of these partnerships, payment gateways get immediate access to the agility and flexibility their merchants are demanding. This is also changing the nature of the payment gateway model, as these partners bring a range of value-added services to the table. These “on top” services are the key to a PSP enhancing its proposition and, consequently, increasing merchant “stickiness.” [hide for=”!logged”]

Value-added services in a cross-border context

Payment service providers support merchants as they expand internationally, by offering front-end card processing and relevant alternative payment methods through a single payment gateway, and enabling local and international acquiring. The proliferation of payment gateways has led to commoditization of gateway services and value-added services increasingly are the differentiator.

Real-time fraud prevention backed by expert risk analysts, business intelligence, one-click and recurring payments, consolidated reporting and analysis, tokenization, loyalty and gift card programs and mobile SDKs. These diverse value-added services have one commonality—they simplify and streamline merchants’ business operations by reducing the number of solution providers they need to deal with when going cross-border. Because PSPs work in different verticals with different payment and risk needs, the value-added services that are most suitable or fit best within each’s proposition will vary substantially.

Another increasingly important differentiator for payment gateways is their integration with e-commerce or shop plugins. Whether SaaS-based (e.g. Shopify) or self-hosted (e.g. WooCommerce, Magento), plugin integration is another factor driving changes in the payment gateway space.

Omnichannel is magnifying the challenge

Omnichannel increases the complexity around payments and, by extension, the complexity around fraud management. The complexity is due to certain payment methods being more prone to fraud in different channels, increased risk exposure when entering new markets, or rules and regulations that can shift fraud from one channel to another (i.e. EMV). As a consequence, consolidated fraud management is seen as one of the most important value-added services a payment gateway can now offer. In 2015, ACI Worldwide commissioned Forrester to conduct research on the topic of omnichannel fraud, which revealed that 65 percent of retailers believe they lack adequate fraud management for an omnichannel environment. They also found that only 46 percent have consolidated fraud management solutions across all channels, although another 40 percent have this on their immediate roadmap, indicating that it is a high priority.

One of the challenges of omnichannel is that multiple customer touchpoints create more data, multiple channels demand more payment options and consumers are demanding convenient checkout and fast fulfilment. Merchants are being pushed to deliver a frictionless experience, which brings real-time fraud management to the fore. Real-time decisioning can help merchants ensure a seamless checkout (maximizing conversions) and also help with the goal of faster fulfilment. The human touch is still needed to interpret trends and fine-tune real-time decisioning. For this reason, support from expert risk analysts is preferable to a plug-and-play solution.

Omnichannel, however, is just a waypoint on the journey towards the so-called ‘Internet of Things’ (IoT), so the complexity around payments and fraud will only multiply. Consequently, value-added services will become an ever more crucial part of the payment gateway proposition, although they will continue to serve their traditional function as intermediaries between consumers, merchants, card schemes, alternatives and a range of financial institutions both traditional and disruptive. In the next few years, many more value-added services will emerge out of big data analytics, used for both business insights and to manage fraud.

A PSP that brings together the most flexible and secure payment gateway solution, a full suite of sophisticated real-time fraud management solutions, consolidated reporting across all channels and payment devices, and interoperability (i.e. through open APIs) will be well positioned to respond to this incredible complexity. In this environment, don’t expect to see the current trend towards strategic technology partnerships running out of steam any time soon.

Guest Perspective: How Value-Added Services are Redefining the Role of the Payment Gateway Michael Doron leads commercial efforts in North America for PAY.ON, an ACI Worldwide company , and a leading provider of white label global payment gateway solutions. Prior to joining PAY.ON, he held executive roles as Director of Sales at Ogone, Inc. (an Ingenico company), as VP Americas at ClickandBuy (a subsidiary of the Deutsche Telekom’s Business Unit Payment BUP), and as Co-Founder and VP of Business Development at Broker Processing Services (BPS). PAY.ON’s solutions allow payment service providers, ISOs, acquirers, ISVs, and VARs, to fully outsource payment transaction processing or integrate a gateway-to-gateway solution, enabling clients to rapidly increase international revenues, reduce costs and risk, and accelerate market expansion. [/hide]

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Daniel Leibovitch