The coronavirus pandemic brought about a year of momentous change for the global payments industry. Years of transformation occurred within a few short months causing accelerated shifts in both consumer behavior and commercial expectations. Within the first six months of 2020, payment revenues dwindled 22 percent compared to those in 2019, pushing business models to rapidly adapt to the changing landscape.
Rise of Online Marketplaces
Of all the trends we see emerging from the COVID-19 pandemic, perhaps the most visible is the dramatic acceleration towards seller platforms which can be seen across almost all sectors of commerce. Widespread health concerns and federal travel limitations in 2020 placed the commerce industry in uncharted territory with traditional brick-and-mortar stores needing to shift their attention to digital marketplaces as a way to keep their businesses afloat. As the digitization of commerce accelerated, online marketplaces have become the clear choice for sellers wanting to stay competitive. In fact, according to a 2020 report, platforms like Amazon, eBay, Etsy, Flipkart, and Shopify have seen seller sign-ups increase from 70% to 150% since the start of the pandemic.
As online marketplaces adapt to this wave of payers and payees, focus on platform investments is key. The rapid shift to e-commerce has created pronounced digitization needs at all points of sale, such as enhancements in diversified payment methods and fraud mitigation solutions. But platform investments are only a small part of the major change drivers. With 63% of marketplace sellers interested in switching marketplaces for faster access to sales proceeds, it’s clear that speed continues to be a big driver of change.
Need for Integrated Infrastructure
As traditional sellers begin to step foot into the digital landscape, many find it difficult to compete with integrated players. Businesses, even in conventional industries, are reconsidering their business models to stay relevant in today’s market. Already we can see a gradual shift towards more digitally-based integrated software vendor models or ISVs. Within the restaurant sector, for example, food-delivery apps like Uber Eats gained scale during the pandemic as transaction volume shifted from in-store to ISV applications.
With a dramatic need for “de-cluttered” platforms, old-school players need to rethink their partnership approaches and software models to deliver more value propositions to consumers and merchants. With traditional payment revenues under pressure, businesses need to shift their focus to scaling integration investments within the digital landscape.
With integration investments in mind, there’s also a growing need for businesses to integrate their software on the back-end. Integrated payment gateways offer incredible value by providing frictionless checkout, fraud protections, and more. Whether paying vendors overseas or managing mass payments for international employees, software integrations that can connect a business ERP or accounting system to global payment providers could offer the competitive edge needed to stay relevant.
Bank Operations Take a Hit
Driven by changing consumer preferences, digital payment volumes have significantly soared. However, many professional services, like banks, failed to keep pace. With exuberant credit card losses, historically low interest rates, and increased competition of cross-border payment fees, revenues for banks within the payments ecosystem have steadily declined.
In today’s highly competitive market, banks are being challenged to assess their current capabilities to determine the future role that payments will play in their strategies. Payments remain a substantial factor in the bank’s overall operating cost, approximately 30 to 40 percent, but with the majority of resources pushed towards maintaining current infrastructure, there is little left over to cover the investments needed for new digitization efforts. This means that to offer effective value propositions to their customers, banks will be required to reanalyze their strategic roles within the payments landscape to determine what level of investment they are willing to commit.
State of the Payments Ecosystem in 2021 and Beyond
Power dynamics in the global payments industry are changing, and with the role of technology in the market increasing, enterprises are looking for innovative ways to infuse payment technology into their business models. Working with a payments provider can do just that. In order to capitalize on the changing market trends, it's essential that businesses partner with a payments provider who can share both insights and expertise that optimize business performance. In a post-COVID world, prioritizing payment technology as a growth sector of your business is key not only to survive but thrive.
About Vince, Director of Payment Solutions Integration and Implementation:
Vince is a 35+ year veteran in the international payments and foreign exchange industry holding senior positions at Bank of America, Travelex, Cambridge Mercantile, Continental Currency Exchange, and Currencies Direct, where within each organization he was instrumental in building and delivering e-commerce payment platforms and back-office integrated solutions.
Since joining Moneycorp, Vince has been leading the technical development and implementation of mass payment solutions as well as aligning the team for best practices. Vince will also be responsible for helping drive business growth by helping build out integrated solutions.
Vince is acknowledged and respected throughout the international payments industry as a deliverer and driver of unique payment solutions to a vast variety of customer segments and industries.
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