Last week saw the first virtual edition of the Merchant Payments Ecosystem conference, the annual flagship event in the merchant acquiring industry that has made many of us travel to Berlin for the last few years. Whilst a virtual event will probably struggle to ever fully replicate the networking opportunities a conference can offer, it was a great event with many interesting speakers sharing their thoughts. Edgar, Dunn & Company is pleased to be continuously involved in the event and both Mark Beresford and myself were moderating sessions on omnichannel and e-commerce strategies on a virtual stage.

It is very difficult to summarise the key take-aways from such a big event that covers everything from technology to regulation to business strategies and local market developments, but there are a few themes that stood out nevertheless. This is our unbiased approach to summarise some of those:

• Right at the beginning of the event, Mastercard presented findings from its Future of Payment Acceptance survey. One of the biggest trends from the survey, and arguably driven by the pandemic, is the acceleration towards in-app payments. The implications of such trend, assuming the hypothesis is indeed correct, were discussed in numerous different ways including the future of POS but nowhere more so than in the context of which mobile app would be the winner in such scenario. Will it be a super-app (such as Singapore’s Grab) that offers numerous different services with different embedded value propositions, or will consumers download a variety of relevant retailer apps and use those on a case-by-case basis? The analogy was made that having 15-20 plastic cards in a physical wallet might be a nuisance for many consumers, having 15-20 mobile apps downloaded onto your smartphone less so. Irrespective of that, there was a consensus that in-app payments will become much more relevant in a much quicker timeframe than was previously expected. PayPal, which is embarking on its own super-app strategy, announced during their recent Investor’s Day that the Total Addressable Market for super-apps is a staggering $110 trillion!
• COVID-19 has accelerated consumer behaviour. This does not come as a surprise and is probably reflected in each of our own purchase behaviours. Contactless is the obvious one and statistics from various European markets do back up that trend. In the UK, 46% of all credit and 64% of all debit card transactions are contactless, France has seen an increase of 128% in value and 63% in volume, and in Spain over 80% of all card transactions are contactless. But it goes wider than that. Paysafe ran a couple of surveys. The first was consumer-based and revealed that 56% of all consumers used a new, alternative payment method for the first time during the first month of lockdown. Six months later another survey, this time with merchants, revealed that 76% of merchants noticed the usage of new payment methods by its consumers since lockdown began. The choice of payment instruments available to consumers continues to expand.
• The development of e-commerce strategies, in particular, needs to be seen in the context of this wider consumer choice. There is so much talk about new technologies and how all these trends are impacting the strategic direction of payment providers on the one hand and merchants on the other. Especially smaller-sized merchants are clearly looking for guidance but the overarching theme is that the consumer/end-user experience is a highly critical component when considering payment strategies. Salesforce reported that 86% of shoppers are willing to try a new payment method if it offers a great user experience, and on the contrary, one in three customers abandon a sale after one bad user experience and 92% of consumers abandon a payment instrument forever after 2 or 3 bad user experiences. In other words, it is quite obvious that a merchant’s decision about payment acceptance needs to be built with its own customer requirements in mind.
• Fourthly the topic of payment facilitation, aggregation, or payment orchestration. There was a lot of talk about this and we have clearly seen payment facilitation as a trend that has impacted the acquiring industry for some time now. It has particular relevance in the context of software vendors, ISVs, SaaS platforms and it has already become quite mature in the US whilst we are still in the early development stages in Europe and other regions. The ability to expand along the value chain and offer a wider, integrated proposition to merchants is the ultimate goal. Mature API technology makes the integration of payments and indeed other services with a single connection/single API integration attractive to merchants. Layering on top some smart routing capabilities that determine how to process transactions or route transactions to acquirers in an intelligent and cost-efficient way, and you have value propositions. There has to be an expectation that this will be a congested and hotly competed market space in the foreseeable future.
• Finally, and this is arguably a bit more forward-looking, was the future of cards, or plastic cards I should say. Certainly, during the final session of the event, a hypothesis was made that whilst there has been talking in the industry for a number of years now about the demise of plastic cards and the replacement for example through an account-to-account mechanism, recent developments around instant payments, Open Banking or indeed the EPI somehow suggest that the industry is getting closer to that point of replacement.

At the end of MPE 2020, 12 months ago, we also looked into the crystal ball of payments. At the time many probably did not recognise that the visit to Berlin was the last business trip for a long time for many of us. Undoubtedly, the last 12 months have changed not just individual lives but the payment industry as a whole. It is clear that some of the changes will become irreversible and we look forward to assessing trends and contributing to the debate, hopefully, face-to-face, at MPE 2022.‍

The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).