Exploring the new opportunities and greater potential in payments

As the technology develops, payments solutions can now offer businesses so much more than simple transactions

With global pandemics, international conflicts, and a looming economic crisis to contend with, agility is critical to business survival today. Against this background, payments systems can play an essential role in enabling enterprise-level and international businesses among others, to drive sales, improve margins and engage with consumers whose expectations for fast, easy and secure transactions are greater than ever.

“Businesses are gradually moving away from large, enterprise-built systems in favour of small, specialist providers that fit together seamlessly in the back-end,” says Colin Neil, managing director of Adyen UK, the global financial technology platform that provides companies around the world with end-to-end payments capabilities, data-driven insights and financial products in a single solution. “This makes it much easier to pivot since these components can be switched out without bringing the whole system to its knees.”

To achieve this, the payments functionality needs to plug seamlessly into a business’s wider tech ecosystem without adding complexity. A single platform solution that can handle all payment needs across all regions and channels is an advantage. This enables unified commerce, another important and growing trend in which all systems are connected behind the scenes to not only streamline business operations but deliver better experiences to the end user.

According to recent research published by Adyen, 47% of businesses say unified commerce improves customer experience. However, only 21% of UK businesses currently connect their payments to other parts of their operations.

“The opportunities for businesses to develop competitive advantage are huge,” says Neil. “And unified commerce paves the way for other innovations such as payment-linked loyalty. The days of wallets bulging with loyalty cards are over. Today, your customer’s credit card can become their loyalty card as well. It can be used to identify the customer, track purchases – across any channel or region – and trigger rewards. This is much easier to manage and a better experience for the customer; something welcomed by 70% of consumers who said that brands need to make their loyalty schemes easier.”

Neil adds: “Payment data is also a valuable source of information. It can help businesses to understand the profile of customers in specific areas. For example, a high rate of Alipay transactions in a specific store might indicate a prevalence of Chinese shoppers in that area. This kind of intel can be used to inform marketing decisions.”

At a more advanced level, payment data can be used to drive efficiencies in the back end to remove friction. It can, for instance, be used to optimise card payments for higher approval rates. It can also be used to beat fraud since payments systems can now recognise known fraudsters across a range of data points and block them before they can act. According to Adyen, the more data that the business puts in, the more value it gets out.

Meeting customer demand for fast payments

As consumers demand a more rapid, seamless experience, fast payments are becoming increasingly important. According to Adyen’s recent consumer research, 67% of UK consumers won’t return to a brand if they’ve had a bad experience either in store or online and 76% expect businesses to maintain the same flexibility that they demonstrated during the pandemic.

“As competition for share of consumers’ shrinking wallets ramps up, it’s critical that businesses remove friction from every part of their consumer journey,” says Neil. “The payment experience is the moment of truth in any purchase and it’s no time to scrimp on customer experience, especially when the likes of Uber and AmazonGo are setting such a high bar.”

As competition for share of consumers’ shrinking wallets ramps up, it’s critical that businesses remove friction from every part of their consumer journey

Similarly, with the rise of Apple Pay and Google Pay among others, consumers shopping on their mobiles don’t need to enter their card details for every purchase. This is thanks to the growth of express payments where the necessary details are already completed. The technology behind this is tokenisation, in which sensitive card data is replaced with a secure token which is useless to any criminal if intercepted. Businesses can offer express payments without worrying about the safety of their customers’ card data.

Neil urges businesses to embrace next generation Strong Customer Authentication (SCA), the mandates for which came into play in March this year. However, the recent Adyen survey data shows that 44% of UK businesses are still not ready for it. “This not only makes businesses vulnerable, since they lose the benefit of a liability shift, it also damages their conversion as more and more issuing banks are declining non-compliant transactions,” he says.

Thanks to easier authentication flows which use biometrics rather than relying on a hard-to-remember password every time, these latest SCA mandates should be seen as means of reducing friction for customers.

Rise of the conscientious consumer

Businesses also need to recognise the rise of the ‘conscientious consumer,’ according to Adyen survey results which show that 26% of consumers want the ability to donate to charity while they’re paying. “That’s why we introduced our Giving feature,” says Neil. “It’s easier than ever for businesses to enable donations at checkout. In Adyen’s case, 100% of the donation goes directly to the charity and we absorb the processing costs.”

Another interesting innovation in payments that Adyen is helping to drive is embedded finance. For consumers this comes in the form of buy now, pay later methods such as Klarna and ClearPay.

“From a business perspective, embedded finance can be found within your commerce platform,” says Neil. “Platforms are increasingly looking for ways to remove operational burdens and cash flow restrictions from their users. That’s why we can expect to see the growing use of issued virtual and physical cards in order to streamline money flows and speed up payouts.”

Pre-approved capital loans based on business users’ previous performance on the platform will also help to keep the wheels of commerce moving during difficult times by quickly unlocking capital for businesses when they really need it.

Adyen recently announced that it is expanding its services beyond payments into embedded finance products for its platform customers.

Neil says: “Payments must play their part in ensuring the customer comes away happy. Now’s the time for you as a thriving business to invest in the technology that will ensure that buying from you is as easy as it can be.” As the cost-of-living crisis ratchets up, businesses must think carefully about the experiences they’re offering and ask whether they’re providing real value in exchange for people’s hard-earned cash.

How payments can build customer loyalty

The challenge in developing payments systems that deliver greater customer loyalty is real. Over a quarter (26%) of consumers stopped using or buying from a business in the past year, a figure that rises to 32% among Gen Z, according to PwC’s Customer Loyalty Survey 2022. On the other hand, the survey also revealed that more than half (51%) of respondents said that they’re less likely to be loyal to a brand if its online shopping experience isn’t as easy or enjoyable as shopping in person.

Connected payments enable brands to build a complete picture of their customers and create cross-channel loyalty and rewards programmes. Adyen’s recent research found that 61% of consumers would download a retailer’s app to receive better loyalty rewards. And 63% want brands to connect their loyalty to their payment method.

Adyen customer Joe & The Juice knows first-hand the power of connected payments. “By linking our app to the credit card terminal, customers get greater transparency of their purchases, messages, and rewards in the app,” says the company’s VP of strategy & business development, Thomas Evald. “On the other hand, we gain a clearer understanding of who our customers are and how we can provide them with better service and products.”

Payments technology is also helping the brand by enabling it to connect its online and in-store channels in one system. By centralising its payments, Joe & The Juice can provide a consistent experience across both channels; a key factor for engaging customers, improving personalisation and building loyalty.

“We’re unifying the ecommerce and physical store experiences,” says Evald. “You can preorder from your home, or you can order in store. You can pay via the terminal or in-app. It doesn’t matter. We’ve created this flexibility by connecting our payment data in the back end. It lets us connect the best of both worlds to deliver an even better service. It also lets us see the whole picture in one place and evaluate our performance. That’s amazing for us.”

Embedded finance – providing tailored financial experiences

Increasingly, platforms are looking to create their own payments and financial experiences in order to meet demand from underserved SMBs thereby growing loyalty and unlocking new revenue streams.

To meet this demand Adyen has been building out its capabilities in all major markets. “Our goal is to remove the limitations of legacy financial systems and deliver the power of a bank combined with the adaptability of fintech,” says Thom Ruiter, VP of banking and financial products at Adyen. “We want platform customers to enjoy unparalleled flexibility so that they can meet the evolving needs of their users without the barriers of regulatory complexity, lengthy product development or sponsor bank restrictions.”

The process started with Adyen for Platforms, a product that allows platforms to embed payments into their services and to deliver a unified commerce experience across sales channels and geographies. “Over time, it became clear to us that platforms needed more control over the payout experience and so we launched Issuing,” says Ruiter. “This has enabled platforms to offer their users virtual and physical cards for business transactions and to directly receive funds faster.”

Going forward, Adyen will include Issuing in a full suite of embedded financial products. These include Adyen Accounts, which allow platforms to build out different types of accounts to solve their users’ treasury needs such as receive payments, initiate pay outs, and safely store funds, all in one place. Another new product, Adyen Capital, allows platforms to extend business financing to their users directly from their interface. Funding offers are based on historic payments data allowing platforms to proactively offer business financing to users who qualify, and automate repayments based on incoming revenue.

Adyen clients like the fact that its data-driven risk-scoring capabilities means that users don’t have to go through lengthy and complicated application processes and can have fast access to capital right at the point of need. Platforms will be able to solidify their relationships with their users, while providing the traditionally underbanked segment of small businesses with the funds they need, which is especially important during the current economic climate, when cash-flow is an ever-growing challenge.

For more, please visit adyen.com

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