Does Your Business Need Multiple Payment Service Providers?

For online businesses, managing the payments process is a critical component for continued success. Not only are payments the lifeblood of your venture, but the effort and expense of processing them— especially in a global e-commerce environment—can make or break your business.

As your company grows, you may find yourself relying on multiple payment service providers to provide all the preferred payment methods and currencies for your global customer base. A single PSP may not excel in every area; for most businesses, working with several is the way to provide all the payment options. And yet managing many PSPs is challenging.

Fortunately, there are other ways. A new generation of merchant service providers offers an alternative solution for companies who are unable (or unwilling) to dedicate an entire team to managing payments. Under these models, companies benefit from an outsourced payments team plus software platform that handles the online payments process, allowing you to focus on your business.

Payment options make a difference

To access a global market of customers, you need to offer the preferred payment methods appropriate for each geographic area. For instance, digital wallets remain the preferred form of payment in EMEA, while North American consumers prefer credit cards, according to Worldpay’s 2019 Global Payments Report.

Providing local payment methods increases conversion rates—and that’s what you want. Consider that a quarter of online buyers say they didn’t complete their transaction because the business didn’t offer their preferred payment method.

Many growing businesses end up working with multiple payment service providers to improve their payment options. The conversion may increase, but in the meantime, managing the payments becomes that much more complicated.

The case for multiple PSPs …

Each PSP has its strengths. These depend on the PSP’s primary market, the currencies they specialize in, and the payment methods they provide. For instance, a merchant looking to optimize conversions in Germany needs to offer bank transfers, which account for 27% of online purchases there, according to WorldPay. In China, however, e-wallets represent 65% of transactions, while bank transfers account for only 11%.

Finding that appropriate combination of country, currency, and payment methods in a PSP is essential. Contrary to what most PSPs claim, the quality of their coverage isn’t even—some are better in specific regions than others. Beyond coverage issues, you also want to consider which vendors provide cost-effective services, evaluate payment acceptance rates, and investigate downtime percentages.

In reality, for most businesses, no one PSP is perfect — instead, a mix of a few provide everything needed for successful, global e-commerce.

… and the drawbacks

Much like other aspects of your business, diversifying your PSPs is key. You don’t want all your eggs in one basket when it comes to fees or potential outages. However, the challenge of managing various providers remains.

For example, managing multiple payment service providers means:

• Staying up each product’s integration and maintenance requirements.
• Paying attention to numerous contracts and RFPs.
• Reconciling multiple PSPs by country, currency, and payment method with your accounting systems.
• Adding new payment methods as needed.

This is no small feat, requiring a dedicated team of people across your IT, accounting, product, and legal departments. It’s an expensive endeavor, from both a personnel and cost perspective, but it’s what’s required to manage the demands of a growing payments infrastructure.

When is it worth considering multiple PSP?

Working with multiple PSPs becomes more imperative as your revenue grows. Here is some guidance for evaluating if multiple PSPs would work for your organization:

• Below 1 M € online annual revenue. Don’t bother. Instead, get an integrated e-commerce and payment solution such as Shopify + Stripe.
• Between 1 and 25M € online annual revenue. If you address a domestic market, stay the course. Otherwise, it might be worth comparing the performance of PSPs in your targeted geographies.
• More than 25 M € online annual revenue. If this is a big part of your total revenue, regardless of your geographies, working with a second PSP for contingency would be smart.
• More than 100 M €. At this point, your payments are worth optimizing.

A next-generation solution

For companies that don’t have the revenue to justify an internal PSP team or those that want to outsource the management process, new service models provide appealing alternatives. These solutions allow you to reap the benefits of having multiple PSPs, without actually having to manage them.

They offer a combination of e-commerce platform features plus payment management. The services include checkout, billing, subscription management, customer retention, order fulfillment, payments, fraud management, and even customer care.

The technology plus service approach reduces the workload on your internal teams, while still ensuring you have the global payments capability to capture opportunities and continue your business growth.

Would a next-generation model make sense for your organization? Contact us to learn more.

The Nexway Team