PSP trends: Adapting to change

According to a recent GoCardless research, a difficult socioeconomic climate is forcing companies all over the world to reduce their supplier lists, with payment service providers (PSPs) being targeted.

According to the GoCardless report “Embedding a Competitive Edge,” 66% of companies in a five-market survey conducted in the US, UK, and Eurozone stated they were trying to reduce the number of PSPs they work with. Meanwhile, 34% of respondents said they intended to break up with these people in the upcoming year. Reducing operating costs is the main reason for doing this (31%).

But there is some good news for PSPs as well. According to the report, modern organisations are receptive to investing in PSPs if they recognise the value they can bring. This indicates that there is still hope for individuals who wish to avoid being severed from the organisation.

The majority of organisations surveyed—34%—state that they would be willing to pay more for solutions that prevent fraud, and 25% say they would pay more for instruments that improve their payment success rates. In the US, this number jumps to 38% of respondents, or three out of ten (31%) who say they would be willing to pay extra for a larger variety of payment methods.

Payment mechanisms across accounts are very common. Thirty-seven percent of merchants want open banking or other bank payment options, while thirty-five percent want their PSP to offer bank debit.

Are PSPs able to keep up?

Insight from a poll of over 200 PSPs in the same five markets is also included in the paper. For this group, improving customer happiness and retention (58%) is the top goal for the upcoming year. In the meantime, 44% of respondents claim they wish to increase their competitiveness.

Many also concentrate on what customers want, such as a variety of payment choices. In the upcoming year, eighty-six percent of PSPs plan to implement one or more payment alternatives. Among them, digital wallets are the most often used form of adding money, selected by 58% of respondents. Credit or debit cards are next, at 48%, and bank debits, at 47%.

Around the world, 35% of PSPs intend to offer real-time bank payments, which includes open banking payments. However, in the UK, this number rises to 53% of PSPs, indicating the market’s ongoing expansion of open banking.

Nonetheless, PSPs face difficulty in controlling the time and effort needed to enhance their service. Out of all the concerns PSPs had regarding adopting a new payment option, “taking a long time to deliver” ranked highest, selected by 45% of PSPs.

This was closely followed by concerns regarding complexity: 40% of respondents were concerned about the challenges their engineering team would face while integrating or developing a new solution, and 37% were anxious about the difficulties of continuously managing the new payment method.

What comes next for PSPs

The survey highlights the significance of PSPs making ensuring they provide the best value, as it becomes increasingly evident that merchants place a high priority on safeguarding their hard-earned cash.

According to Deepak Colluru, director of product management at GoCardless Embed, “businesses are looking for every supplier to deliver value in today’s challenging environment.” PSPs are not an anomaly.

Focusing on the areas that merchants worry about most, such as anti-fraud solutions, features that increase payment success, and a variety of payment alternatives, is one easy approach to illustrate this.

PSPs who wish to improve or add any of these have to consider the age-old “buy versus build” conundrum. PSPs that are interested in integrating bank payments, for instance, are well aware of the time and resources needed to develop and manage an internal new payment mechanism.

“Payment providers may find that the best – and quickest – way to satisfy customer demand is to enhance their offering through a third-party expert if staying competitive is a priority.”