This paragraph describes how internationally trading merchants could work with multiple Payment Service Providers across the globe. Naturally, it is important to understand the need for multiple PSP connections and the business implications.
Is there a need to work with multiple Payment Service Providers?
Basically, there are three reasons for merchants to use multiple Payment Service Providers:
- The merchant requires support for specific (often local) payment methods that are not supported by one (current) Payment Service Provider.
- The Payment Service Provider is not connected to local acquirers which are known to increase conversion rates, provide the option to use additional features like installments and local currency settlement, and allow the merchant to get better pricing (if the volumes allow for it).
- For business continuity purposes the merchant does not want to rely on one PSP connection.
Ad 1. Even the globally operating Payment Service Providers do not cover all countries around the globe, or provide the full payment method offering for a particular country. Merchants aiming for maximum conversion and adapting their payment pages to local preferences in terms of methods (and language) often need to connect to other (locally oriented) Payment Service Providers.
Ad 2. Especially in respect to the major international card brands MasterCard and Visa, there can be great differences in approval rates when processing through a non-local acquirer. In addition, specific markets require additional card-processing features, such as installments. In some cases, only local acquirers are able to support for these types of transactions (please note that in some countries installments are must-haves for conversion). Merchants looking for maximum conversion should be able to tap into local acquirers – and if not supported by the current PSP – use the services from a local or regional PSP.
Besides approval rates and support of market specific features, merchants could also be driven from a cost-perspective point of view. Sometimes, merchants can profit from lower commission rates by connecting to a local acquirer. Transactions originating locally will be seen as domestic transactions, instead of routing through a non-local or maybe even inter-regional acquirer which is deemed more expensive.
Ad 3. Even in case the current Payment Service Provider relationship leverages the right set of payment methods, settlement currencies, pricing etc, a merchant could still decide to connect to another Payment Service Provider for business continuity purposes. In case the primary PSP has an outage, the merchant is able to route traffic through the other PSP to provide a keep this in mind and take precautionary measures.
Connections with multiple Payment Service Providers will have impact in the following areas:
- IT development: integration and maintenance
- Legal: contractual arrangements
- Compliance: some countries (PSPs) require local presence
- Finance: reconciliation, currency management and settlement
- Operations (fraud, customer service)
A way to effectively work with multiple payment service providers is to outsource the management of these providers and the optimisation of your payments from conversion to reconciliation to an external agency. Additionally, there are provider-independent payment platforms, that can not only flexibly connect its client to an unlimited number of Payment Service Providers and Acquirers worldwide, but also provide a consultation and benchmarking. Payment gateways and other open, flexible players in the payments ecosystem will become increasingly important as the future of payment promises to become even more complex with the advent of payments via the Internet of Things (IoT), instant payments, P2P payments and other innovations sweeping the payment landscape.