Payment services future is fintech – Christophe Bourbier, Chairman & Co-founder, Limonetik

Payment services future is fintech – Christophe Bourbier, Chairman & Co-founder, Limonetik

As a growing number of online merchants are moving to a marketplace business model, the payment services industry needs to shift away from an IT transaction based approach to a finances aware integrated management service.

When I was still undergraduate, selling online consisted in reproducing in the digital world what used to work for decades: one would sell its own products to customers in its own country. Going “international” meant nothing more than selling in neighboring countries. At that time, major brand’s e-commerce shops, where also rightly seen as a competitor of the existing store or franchise network, often diverting existing customers from the shops instead of attracting new ones. Since then, two connected topics have emerged: new products and services are digital, and as a result, they can produce and purchase from anywhere in the world. When a local retailer might only sell in relatively close countries, Amazon, Deezer or Alibaba can sell everywhere in the world. In the digital world, “international” now truly means “global”, and it matches the consumer expectation to purchase anytime, anywhere, from any vendor, through any channel. We’ve entered a new “marketplace business model”.

Let’s look at this trend from behind the payment scene. In the old days, online merchants would connect to a limited number of well-established payment methods, such as Visa, Mastercard, AmEx and Paypal. They collected customer payments in their own name through a single bank account. But things started to change as the number of available payment methods exploded. Each new payment method not only required a technical connection but also a growing financial expertise to manage cash inflow on a daily basis, securing receivables and dealing with local taxes or customer protection regulations. The more online merchants where expanding internationally, the more complex it is. Just imagine trying to figure out what when wrong in a payment status in China or Russia, with the time difference and the language barrier.

To better explain this, let’s see how we deal with a similar issue as individuals. While it’s easy to tell almost real time what’s left after each spending if you only own a debit card, you may need to take a closer look at each credit card statement and do some math to really know what your account balance will be on the month end. Global online brands, payment service providers (PSPs) are facing the same challenge. A key point here is the time scale: cash inflow management is not only a mater of real-time data and IT connections. It requires additional and asynchronous financial work to effectively monitor and manage each payment, dealing with specifics of payment method, regulations, times zones, languages… Some payment methods aggregation service providers now have answers to this challenge, embracing both technical and financial aspects of payment management. But yet, there’s more to come with the rapid development of full-fledged marketplace business model.

From a payment management perspective, marketplace business model raises rather complex issues, starting with currency conversion and associated fees. Being a market place means collecting payments and repay vendors anywhere in the world. Doing so, the marketplace also needs to make sure that it has been paid before paying back, and that no refund request is pending. Not to mention that for each payment, there will be several vendors to pay back, each having its own negotiated fees, taxes, … The marketplace must also take care of its vendors, providing them with detailed information on outstanding payments, payments made, fees, etc.

If we look again at it from behind the payment scene, we see that a full-fledged online payment management increasingly requires bank-like financial knowledge. It also means turning existing transactional IT based payment services architectures to business rules enabled systems, able to aggregate multiple sources of information such as up-to-date conversion rates and local taxes, specific customer protection regulation, … This vision of a one stop shop global payment management service is almost there. But it doesn’t come to life without a significant investment. From a payment services provider perspective, this vision requires moving from a technical partner of PSPs and online merchants to a global payment management specialist, developing a broad financial expertise to implement complex business, regulatory and financial rules into our payment connectivity platform. Failing to do so is not only failing to answer today’s needs of PSP and marketplace customers to deliver their respective internationalization strategies. It is also facing the risk of being, again, led back in times; because we’ve been through this very moment in the past as an industry. Back to my colleges days again, when alternative payment was in its infancy: each online merchant or PSP had no option, back then, but to implement by themselves each new payment method, one by one, slowly and missing a lot of business opportunities… It seems to me that we stand now where we stand then, and that it’s about time to make the right move.

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Christophe Bourbier, Chairman & Co-founder, Limonetik