Merchant Payments Ecosystem (MPE) and Arkwright Consulting have partnered on a joint research project – Payments from a merchant’s perspective.
During Q4 2023, MPE invited merchants within its community to participate in the survey, Arkwright then performed the research through online questionnaires and a sample of deep-dive interviews.
Overall, the European merchant industry appears to be facing a variety of challenges. For example, the general characteristic of the economic environment is that the region has managed to avoid recession, yet consumer confidence and the propensity to spend are, in certain areas, noticeably restrained.
Many merchants are facing the challenge of a business that is technically growing in revenues due to price inflation instead of by an actual increase in the volume of goods sold.
Online payments show a varied set of changes across markets. E-payment solutions (e.g., wallets) are increasing their share in France, Italy, and Spain.
In line with that, further investigation revealed that German merchants indicate a growing preference towards wallets and other e-payment solutions for online transactions.
However, card payments continue to be the dominant online payment method in most countries included in the sample, except for the Netherlands.
Pricing Payments
One growing concern that the report notes is a perception that certain payment services may not be priced at a level considered as fair by many merchants. In particular, mobile wallets were mentioned as a payment type that is unfairly priced due to a lack of competition.
When asked expressly about the perception of acceptance cost, nearly all surveyed merchants mention cost as a cause for dissatisfaction. Mobile apps are deemed fairly priced by less than half (41%) of the polled merchants.
Buy now, pay later (BNPL), on the other hand, is perceived as priced fairly by 55% of respondents. Cash handling and deposit is considered to be too expensive by 21% of respondents, while card payments are regarded as priced fairly by 62%.
Fraud Challenge
Unsurprisingly, fraud is a challenge that continues to plague the industry. Online merchants are mainly concerned about customer authentication being a point of friction that may lead to cart abandonment. In-store challenges include the handling of returns and refunds originating from online sales and the complexity of integrating them within the in-shop payment infrastructure.
While online fraud is mainly related to payment fraud, in-store fraud also refers to the risk of robbery/shoplifting (relevant in countries with a relatively higher share of cash payments), as well as untrustworthy employees at checkout and the acceptance of compromised payments, such as counterfeit bills.
When questioned during the interviews, merchants admitted that there is a gap between actual in-store payment fraud and the perception of the problem with the perception being actually higher than the actual losses.
Standardized and low-friction Open Banking payments are scoring high on merchants’ wish list for payment innovation, together with a demand for data and analytics solutions.
Overall, there appears to be an untapped demand for services and support that may enable payment providers to differentiate their services, moving away from price competition to an advantage based on improved value propositions and services.
Ultimately, the success of the payment industry is very much the outcome of the success of the retail community it serves. The survey not only provides a snapshot of a sample of the retailing industry in Europe, but also points to potential areas of focus for the improvement of acquiring and acceptance value propositions alike.
Download a copy of the report HERE
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