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TS 2022

PAYMEN L U S E P AY M E
N T S TO
TR ANS
FORM G
L O B A L ECO N O
MIES

WI L
AT FORMS
HOW PL

The Payments 2022 Study, a PYMNTS and Stripe collaboration, aims to


better understand digital platforms’ strategic roadmaps for the next three
years and the role payments will play in driving their agendas. To this end,
PYMNTS surveyed 250 heads of payments representing various sizes and
types of business-to-business (B2B) and business-to-consumer (B2C)
digital platforms: B2C services marketplaces, B2B SaaS firms, B2C mer-
chant marketplaces, B2C retailers and B2B platforms/utilities. April 2019
NTENTS
EOFCO
TABL

NOM IES
L E C O
O R M G LO B A
F
S T O TR ANS Welcome to the platform economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 01
YMEN T
S E P A
R M S WILL U The rise of payments PM: Managing payments as a product . . . . . . . . . . . . . . 05
L AT F O
HOW P
The road to Payments 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 09
• Going global: international expansion objectives and plans
• Adding new digital channels
• Expanding payments capabilities
• The platform expansion M.O.

Payments as a central growth enabler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

The elephant in the room: How to improve conversion rates . . . . . . . . . . . . . . 23


• The true cost of fraud
• The rising complexity (and cost) of managing compliance
• Somewhat cost-effective cross-border payments

Vendors, vendors and more vendors: Are bigger teams always better? . . . . . . 31

Payments 2022: The platform payments roadmap . . . . . . . . . . . . . . . . . . . . . . 35

The Payments 2022 Study was done in collaboration with Stripe, and PYMNTS is grateful for the company's support and insight.
PYMNTS.com retains full editorial control over the findings presented, as well as the methodology and data analysis.
01 | Payments 2022 Welcome to the platform economy | 02

WELCOME
TO THE PLATFORM ECONOMY The implications seem clear. Payments 2022 for the heads of
payments we surveyed includes growing and expanding their
payments processing and vendor relationships to mitigate
points of friction — and seize the future opportunities that await.
Digital platforms have changed the world.
HOW PLATFORMS SEE THE FUTURE

T
he convergence of mobile devices, data We learned that payments are a critical enabler
and the cloud over the last decade has and a strategic priority for nearly all of those with The World Economic Forum says the largest digital platforms —
created unprecedented sources of value whom we spoke, but achieving their goals would from Uber and Airbnb to Amazon and WeChat — have outperformed
for digital platform stakeholders and the ecosys- be difficult without making important changes to the S&P over the last decade. Just five years from now, these plat-
tems they have ignited. their current payments operations. forms, and the many others that have emerged, are expected to col-
lectively account for $60 trillion in revenue. That’s roughly 30 percent
Yet many of those platform providers say that Most respondents report that their current pay-
of all global corporate revenue from a segment of the economy that
the payments capabilities that have propelled ment processing and third-party partners cannot
didn’t even exist 30 years ago.1
their growth over the last 10 years won’t support support their plans to expand globally and into
their plans to innovate and scale over the next. new digital and physical channels, or introduce The reasons for that growth are as obvious as they are astounding.
Heightened consumer expectations, combined payment methods and features that can help
There are 5.1 billion unique mobile phone users worldwide, and 4.3 bil-
with the explosion of mobile, new tech and pay- them unlock new business models or payment
lion connect to the internet via their devices.2 Each spends an average
ments innovations over the last 10 years, are cre- flows. Thirty percent say their current process-
of three hours and 35 minutes on their mobiles daily, engaging with plat-
ating new opportunities for platforms and their ing relationships are inhibiting their long-term
forms by sharing content, communicating with others, discovering prod-
customers that go well beyond just payments growth.
ucts and services, making purchases and playing games.3
acceptance.
We also learned that there is perhaps a much
Fundamentally, without payments as an integrated element of many plat-
In Q1 2019, PYMNTS surveyed 250 heads more important driver for their interest in mov-
form experiences, there would be very little — or even no — value generated
of payments representing various sizes and ing beyond the status quo: improving conver-
for those stakeholders or the platforms themselves.
types of business-to-business (B2B) and busi- sions. Only 4 percent of those we surveyed say
ness-to-consumer (B2C) digital platforms: B2C their ability to convert visitors to sales today is Payments remove the friction associated with transacting on digital plat-
services marketplaces, B2B SaaS firms, B2C “extremely” good. Chargebacks/dispute resolu- forms: Uber without the invisible payment experience is just another taxi ser-
merchant marketplaces, B2C retailers and B2B tion (cited by 62 percent) and false-positives (61
platforms/utilities. Our goal was to better under- percent), they note, are key conversion inhibitors.
stand their strategic roadmaps for the next three So, too, are compliance and manual processes,
years and the role that payments will play in driv- with nearly two-thirds reporting the need to ex- 1
Platforms and ecosystems. World Economic Forum. 2019. https://www.weforum.org/projects/platforms-and-ecosystems-enabling-the-digi-
ing those agendas. This research was done with pand their vendor relationships to address com- tal-economy. Accessed April 2019.
2
Tobin, A. 5G will account for 15 percent of global mobile market by 2025. Forbes. 2019. https://www.forbes.com/sites/annato-
the support of Stripe. pliance-related issues and 44 percent citing the bin/2019/02/25/15-of-global-mobile-industry-to-run-on-5g-by-2025/#7a15a6022f9a. Accessed April 2019.

need to reduce manual processes. Wurmser, Y. Mobile time spent 2018: Will smartphones remain ascendant? eMarketer. 2018. https://www.emarketer.com/content/mobile-time-
3

spent-2018. Accessed April 2019.

© 2019 PYMNTS.com All Rights Reserved


03 | Payments 2022 Welcome to the platform economy | 04

vice, for example, and WeChat is just another social network without the ability to use WeChat Pay CRACKING THE PLATFORM CONVERSION CONUNDRUM
to buy things both inside its digital ecosystem as well as in the physical world.
Not surprisingly, the platforms we surveyed place a high priority on the payments capabilities that will im-
The digitization of payments provides a monetization opportunity and new business models piv- prove conversions. That includes adding new payment methods, digital wallets and domestic currencies
otal to sustaining and scaling the growth of these platforms, too. Once strictly ad-supported, plat- to support global expansion, with two-thirds reporting these as strategic areas of focus. Adding recurring
forms like Facebook and Instagram are now integrating payments into their platforms to capture billing and subscription options (63 percent) and instant card issuing (62 percent) are also key priorities.
purchases, in context, based on what consumers see or read there.
Topping the charts, though, is the integration of real-time/faster payments, with 75 percent indicating it as
All digital platforms naturally see this opportunity — as well as the strategic importance of pay- their highest priority over the next three years.
ments — in meeting their users’ demands and growing their businesses. In fact, 94 percent of those
we studied see a future defined by expansion, with payments playing a critical role in enabling it.
THE THREE-YEAR PLAN

PLATFORMS GO GLOBAL AND INTO NEW CHANNELS Given how important payments are to digital platforms’ growth and sustainability, it is not surprising that
98 percent of payments leaders in our survey view the organizations they manage as strategic enablers
Global expansion is a big part of the digital platform growth story. This is true not only in the United to that growth.
States, but also in North America, the European Union, the United Kingdom, Mexico and Australia,
where the platforms we studied say they plan to both expand and plant their flags in significant Most also say that the payments systems they have in place today — and that helped them achieve critical

ways. For example, roughly 15 percent of those we studied report having a presence in Mexico mass and scale — won’t support what their CEOs and boards expect of their operations in the future.

today, but 58 percent plan to have a large presence there within the next three years.
More than 60 percent of the payments heads with whom we spoke report a need to expand their current

Global demand for the products and services offered by these platforms is whetting this appetite, processing relationships to deliver their three-year roadmaps. Further, 30 percent even went as far as to

with 68 percent citing it as a reason for their expansions and 54 percent identifying it as the most say that their current processing relationships were an obstacle to their growth plans.

important one for doing so.


The need to enhance what exists is correlated with our finding that nearly all (96 percent) of our respon-

There is another area of growth that these platforms see on the horizon, and that is the opportunity dents say they could be better, much better, at converting visitors to sales. Chargebacks, false-positives

to expand the digital and physical channels into which they acquire and/or service their custom- and manual reporting and reconciliation were cited as obstacles to that performance and to growing their

ers. Our research shows that 82 percent of digital platforms intend to add at least one more digital top lines.

channel to reach their customers, and 57 percent of the companies in our sample say they will
Even more staggering is that only 1 percent of respondents say their fraud detection capabilities are
expand the number of storefront locations they offer. This is especially true of B2C retailers, with
“extremely” effective. Sixty-three percent report that their revised Payment Services Directive (PSD2) and
almost 81 percent indicating they intend to do so.
strong customer authentication (SCA) compliance were only “somewhat” so, representing obvious pain

Platforms also see the future potential of voice as a commerce enabler, with plans to bring it into points as they contemplate global expansion and compliance with regulations taking effect in September

their platforms over the next three years. Approximately 75 percent of those surveyed report that 2019.

they intend to integrate voice into their platforms, up from the 15 percent that currently offer such
options today.

© 2019 PYMNTS.com All Rights Reserved


05 | Payments 2022 The rise of payments PM: Managing payments as a product | 06

S
upporting the expansion of what these The cost of supporting these payments oper-
heads of payments describe as “mul- ations averages 2.7 percent of sales. Smaller
tiprocessor, multivendor payments or- firms tend to have higher costs, and the small-
ganizations” also means expanding the sizes est of those we surveyed — those earning be-
of the teams that support those relationships. tween $21 million and $50 million in revenues
Today, those teams average six to 10 people to — report their cost of payments, all in, as 3.3
support the roughly three processing relation- percent of sales.
ships they maintain, on average, as well as the

S E
Looking ahead, 41 percent report the need to

R I
two or more vendor relationships in place to

THE :
expand their payments teams to support their

M
support functions like fraud and chargebacks.

S P
growth and manage the additional vendor re-

N T
Sixty-seven percent use outside vendors for

M E
lationships required to improve their perfor-

AY
compliance and monitoring, and 53 percent

OF P TS
mance. Additional firepower, they report, is re-

EN
use them to help with fraud detection and

A YM
quired to address risk and fraud (67 percent),

P
monitoring.

IN G
operations and reporting (79 percent) and

MAN AG compliance (46 percent).

R O D UC T FIGURE 1:

AS A P
Digital platforms’ reliance on payments processors
Average number of payments processing partners, by annual revenue

3
2.8 2.8

2.4
2.3

2 1.9

$21M–$50M $50M–$100M $100M–$500M $500M–$1B $1B+

© 2019 PYMNTS.com All Rights Reserved


07 | Payments 2022 On the road
Theto
platform
payments
economy
2022 | 08

When it comes to where digital platforms turn to provide their payments pro-
cessing services, it’s not surprising to see digital-first platforms topping the

61%
charts. The ability to get up and running quickly via easy integrations to pro-
cessing platforms offering a variety of payments acceptance options and
bundled services is why PayPal is being used by 82 percent of respondents,
Braintree by 16 percent and Stripe by 47 percent. Legacy platforms such
as First Data and Worldpay are used by only 8 percent and 3 percent, re- of platforms
spectively.
intend to expand
It’s also not surprising that these same heads of payments now want
more and flag a need to expand beyond the services and capabilities
their payments
that they have today to ones that will take their platforms to the next processor/vendor
level of growth and profitability. Fewer than 10 percent of all respon- relationships
dents cite an interest in switching payments processors, but 61 per-
cent report an interest in expanding their relationships beyond that
in the next
which they have today. three years
A decade into the age of digital platforms, it’s clear that payments beyond what
have become the engine of their growth. Similar to how a product they have today.
manager would roadmap the development of a product, we are
seeing a similar ideology take hold in payments. Increasingly, com-
panies are making payments a competitive differentiator. By build-
ing creative payment experiences, they generate new revenue
streams for their businesses — whether it’s fostering loyalty by
adding subscription services or building hybrid business models
that combine eCommerce with marketplace-like features.

Based on the responses from the 250 heads of payments we


studied, Payments 2022 for these platforms will be to move
beyond acceptance to the application of payments as strate-
gic enablers of growth, disruption and transformation.

© 2019 PYMNTS.com All Rights Reserved


09 | Payments 2022 The road to Payments 2022 | 10

D
FIGURE 2: igital platforms have big expansion
Digital platforms’ three-year growth plans
Share that expect to grow during the next three
plans, and all of those we surveyed
years, by amount view payments as critical catalysts to

Much bigger
those efforts. As seen in Figure 2, 94 percent of
24.8% 7900000000
these marketplaces expect to grow by 2022, with
Slightly bigger 25 percent of those platforms expecting to be
69.2%
much bigger than they are now. It is safe to say
7200000000

About the same most are optimistic about their futures.


5.2% 7000000000

Uncertain Among the five digital platform types featured


0.8%
in our study, B2C merchant marketplaces —
640 0 0 0

which allow third-party vendors to sell to end


customers — are the most optimistic about their
growth prospects. Thirty-eight percent of these
Portion that expect to expand during the next three
years, by business type platforms, such as Etsy, eBay, Airbnb and Hotel-
Tonight, among others, believe they’ll be “much
B2C services marketplaces
15.2% 6100000000
bigger” by 2022. That compares to our sample’s
78.3%
6.5%
6100000000

6100000000
average of 25 percent.
0.0%

Interestingly, the segment that is the most mea-


B2B SaaS firms
18.0% 6100000000
sured about its growth prospects is B2C services
80.0% 6100000000

0.0% marketplaces, a category which might include


2.0% 6100000000

such platforms as Uber, Lyft and TaskRabbit.


B2C merchant marketplaces
38.2% 6100000000
As global platforms, these businesses are hy-
54.5%
perlocal in terms of their delivery. Each faces
6100000000

7.3% 6100000000

0.0%
the challenge of building critical mass on both
B2C retailers sides in those platforms, in those local markets
26.4% 6100000000

67.9% 6100000000 and in the face of hyper-competitive conditions


5.7% 6100000000

0.0% which may mute their growth expectations over


B2B platforms/utilities the next three years. In any case, these and other
23.9%
platforms’ overriding visions remain focused on
6100000000

67.4% 6100000000

6.5%
growth.
6100000000

2.2% 6100000000

Much bigger Slightly bigger About the same Uncertain

© 2019 PYMNTS.com All Rights Reserved


11 | Payments 2022 The road to Payments 2022 | 12

GOING GLOBAL: TABLE 1:


Countries platforms are targeting for expansion
INTERNATIONAL EXPANSION OBJECTIVES AND PLANS Portion of those that plan to open or expand operations in select regions

Currently in this region Currently in this region Not currently in this region Not currently in this region
A defining characteristic of digital platforms is
with plans to expand with no plans to expand but need to add and will not add
that they are readily exportable and scalable in
new markets. The internet has made geographic
United States 84.4% 12.8% 2.8% 0.0%
boundaries less relevant than ever, and it there-
fore comes as little surprise that many market- Canada 31.2% 12.0% 49.6% 7.2%

places have healthy appetites for global expan- Eurozone 38.8% 12.4% 28.4% 20.4%
sion — or that many view payments as their
Mexico 4.8% 10.0% 58.0% 27.2%
passport.
Australia/New Zealand 24.4% 7.2% 38.0% 30.4%
Ninety-four percent of our study’s digital plat-
Great Britain 34.8% 16.8% 26.8% 21.6%
forms aim to expand their worldwide reach over
Singapore 6.0% 7.2% 40.4% 46.4%
the next three years, especially in markets close
to home. U.S.-based firms are eyeing Canada’s India 14.0% 7.2% 28.8% 50.0%

established markets, where 81 percent say they Brazil 4.4% 13.2% 36.8% 45.6%

94%
plan to expand. The Eurozone (cited by 67 per-
South America (exc. BRZ) 2.4% 9.2% 31.6% 56.8%
cent) also remains a top priority.
Latin America (exc. MEX) 1.2% 9.6% 32.0% 57.2%
Many are looking to emerging and more distant
China 11.6% 7.6% 20.4% 60.4%
of digital platforms markets, too, such as those in Latin America and
Indonesia 1.6% 5.6% 19.2% 73.6%
Southeast Asia that offer particularly exciting
intend to digital-first opportunities. While only 15 percent Middle East 3.2% 14.8% 17.2% 64.8%

expand into of firms are currently operating in Mexico, 58 South Africa 2.0% 4.8% 14.0% 79.2%

new geographical percent foresee opening operations there within


three years.
Thailand 0.4% 6.0% 15.6% 78.0%

locations within
Singapore and India are also regarded as key fu-
the next three years. ture growth spots, with 40 percent of platforms
planning to expand to the latter and 29 percent
to the former.

© 2019 PYMNTS.com All Rights Reserved


13 | Payments 2022 The road to Payments 2022 | 14

EXPANDING PAYMENTS CAPABILITIES


ADDING NEW DIGITAL CHANNELS Regardless of how or where firms believe they For some segments, expanding processing re-
will expand, a key component of those plans is lationships is a particularly high priority, while
Most platforms view extending FIGURE 3: the need to enhance current processing capa- others are comparatively more focused on bring-
Digital platforms’ forecasts for digital and physical
their digital footprints as equally or expansion
bilities and vendor relationships to support that ing people on board the teams that support pay-
even more important than offline Portion that foresee growth by 2022, by expansion expansion. ments. Sixty-eight percent of B2B software-as-
area
expansions into brick-and-mortar a-service (SaaS) platforms — platforms such as
Sixty-one percent of the platforms we studied
locations. Roughly 82 percent see New digital channels Slack and Tableau — report a higher priority on
75.2% 6100000000
say they have plans to add more payments pro-
themselves expanding or adding 17.6% 6100000000 expanding processing relationships. Very few of
6.4% 6100000000
cessing platforms to the mix in the near future,
digital options, such as new social 0.8% 610 0 0 0
them express an interest in bringing payments
41 percent plan on adding more team members
media or digital marketplace pres- Voice platforms entirely in-house and settling funds directly with
3.2% to their internal teams and another 26 percent
ences, during the next three years, merchants on their platforms.
6100000000

12.0% 6100000000

75.2% plan to expand their relationships with third-party


while 80 percent already have
6100000000

9.6% 6100000000

vendors with particular payments expertise. The relationship between payments capabilities
storefront presences and 57 per-
Physical locations and platform expansion is more than theoretical.
cent plan to expand or add them. 43.6% 6100000000

36.4% 6100000000
FIGURE 4: When asked, most firms state point-blank that
13.6% 6100000000

One channel stands out as espe- 6.4% 6100000000


How digital platforms plan to enhance their they want to expand their processing and pay-
payments operations
cially ripe: voice-recognition tech- New connected endpoints Firms’ strategies for enhancing their processes ments capabilities because they must. In fact,
3.6%
nology, including popularized digi- more than half of the platforms we studied say
6100000000

12.4% 6100000000

34.4% 6100000000 Expand processing relationships


tal assistants like Amazon’s Alexa 49.6% 6100000000 60.8% 7900000000 that they plan on adding additional payments
and Google Assistant. Approxi- processors to expand into new geographical lo-
Currently have with plans to expand Increase the size of the team
mately 75 percent of firms plan to Currently have with no plans to expand 40.8% 7200000000
cations.
Currently do not have but need to add
implement such offerings, repre- Expand relationships with other vendors
Currently do not have and will not add
25.6%
senting a dramatic increase from
7000000000

Firms’ cited reasons for adding new capabilities


the 15 percent that currently sup- Add issuing capabilities Only respondents with plans to add processing
18.4% 6400000000

port voice-enabled commerce.


Expand into new geographies
Change payments processors
84.9% 7900000000
7.2% 7900000000

Add new payment methods to offer buyers more choices


No plan to change our current operations
80.9% 7200000000
5.6% 7200000000

Expand the number of currencies


Settle directly with merchants
64.5% 7000000000
5.6% 7000000000

Develop redundancies by adding new processors


9.2% 6400000000

© 2019 PYMNTS.com All Rights Reserved


15 | Payments 2022 The road to Payments 2022 | 16

TABLE 2: FIGURE 5:
How digital platforms plan to enhance their payments operations Payments processes all firms require for expansion
Different strategies for enhancing payments, by segment Share that view select features as necessary for

75%
growth

B2C services B2B B2C merchant B2C B2B Real-time payments


74.8% 7900000000
marketplaces SaaS firms marketplaces retailers platforms/utilities

New payment methods


65.6%
of firms say
7200000000

Expand processing relationships 56.5% 68.0% 54.5% 64.2% 60.9%


Billing and subscription management
Increase the size of the team 34.8% 42.0% 36.4% 39.6% 52.2% 62.8% 7000000000
implementing
Expand relationships with other vendors 28.3% 22.0% 30.9% 22.6% 23.9%
61.6%
Instant card
6400000000
real-time payments
Add issuing capabilities 15.2% 12.0% 27.3% 18.9% 17.4%
Alternative credit capabilities is
necessary for
47.2% 7900000000
Change payments processors 6.5% 6.0% 9.1% 3.8% 10.9%
Alternative currencies
Settle directly with merchants 10.9% 6.0% 7.3% 1.9% 2.2% 39.6% 7200000000
expansion.
No plans to change current operations 2.2% 6.0% 9.1% 9.4% 0.0% Local payment methods
38.4% 7000000000

Network tokenization
34.0% 6400000000

Card issuing
Yet, expanding into new geographical locations 29.2% 7900000000
plans. After real-time payments, the most-
means competing against all-new overseas com-
Escrow account capabilities commonly cited features needed to promote

68%
petitors on their home turf, and working to grab 26.4%
expansion were greater acceptance of electronic
7200000000

the attention of a whole new batch of consum- Disbursements benefits transfer (EBT) and digital wallet offer-
ers who often have very different expectations 14.8% 7000000000

ings (66 percent), better billing and subscription


from those situated in the U.S. To be successful
management processes (63 percent) and instant
of B2B SaaS platforms in their global expansion efforts, platforms must
issuance and provisioning of cards (62 percent).
therefore invest in the payments capabilities that
intend to expand will appeal to consumers in local markets.
their processing Several priorities top the agenda, starting with
relationships over real-time payments, which is cited by three-quar-
the next three years. ters of payments heads as a feature they would
need to implement to further their expansion

© 2019 PYMNTS.com All Rights Reserved


17 | Payments 2022

THE PLATFORM EXPANSION M.O.


Digital platforms differ regarding where and Other oft-cited global growth moti-
how they expect to expand, but their reasons for vators include meeting licensing and

54%
wanting to do so are remarkably similar: They regulatory requirements (71 percent),
see market demands for their products and want meeting worldwide demand (68 per-
to seize them. Sixty-eight percent of firms cite cent), favorable tax mitigation options
this as a factor in their international expansion (62 percent) and managing financial risk

of firms plan to decisions, and 54 percent indicate it is their pri- (50 percent).
mary motivator.
expand to meet
global demand
for their services.

TABLE 3:
Factors for firms considering going global
Factors firms weigh when expanding to foreign markets, by rank of importance

Most important Least important

1 2 3 4 5 6 7 TOTAL

Meeting licensing/regulatory requirements 15.2% 41.2% 11.6% 2.0% 0.8% 0.0% 0.0% 70.8%

Meeting global demand for products/services 53.6% 7.6% 4.0% 1.6% 0.4% 0.0% 0.8% 68.0%

Tax mitigation using local systems 9.2% 15.6% 21.6% 12.4% 2.0% 0.4% 0.0% 61.2%

Managing financial risk 4.8% 5.2% 16.0% 16.4% 5.6% 0.8% 0.8% 49.6%

Being able to compete well against local competitors 6.0% 11.2% 8.8% 4.4% 0.4% 1.6% 0.0% 32.4%

Finding a processing partner 1.6% 4.0% 7.6% 2.4% 0.8% 0.8% 0.0% 17.2%

Finding a bank sponsor 3.2% 2.8% 3.6% 2.4% 0.8% 0.4% 0.4% 13.6%

No global expansion plans 6.4% 2.4% 0.0% 0.4% 0.0% 0.0% 0.0% 9.2%

© 2019 PYMNTS.com All Rights Reserved


19 | Payments 2022 Payments as a central growth enabler | 20

F
or digital platforms, in particular, pay-
ments have evolved from a cog in the

98%
machinery to the linchpin of strategic
growth. Nearly all digital platform providers
in our study (98 percent) say their payments
operations are either “very” or “extremely”
important components in meeting their ex- of platforms say
pansion plans and executing their three-year
roadmaps.
their payments
operations are
FIGURE 6: “very” or “extremely”
important to their
Payments systems’ importance to platforms’
strategic growth
Portion citing various levels of importance for their
payments capabilities
broader expansion
77.6%
Extremely important
7900000000
strategies.
Very important
20.0% 7200000000

Somewhat important
2.0% 7000000000

Slightly important
0.4% 70 0 0 0 0

Not at all important


0.0%

Payments’ significance looms especial-


ly large for the smaller firms in our survey.
They are almost universally regarded as
“extremely” important among those gener-
ating between $21 million and $50 million
in annual revenues, with 86 percent of these
companies indicating so compared to the 74
percent cited by those earning more than $1
billion.

© 2019 PYMNTS.com All Rights Reserved


21 | Payments 2022 Payments moves from plumbing to central growth enabler | 22

The flip side of this outlook is that lacking payments options or implementing the wrong ones can inhibit
growth — and digital platforms know this. Thirty percent of those we studied report that their current
FIGURE 8:
processing relationships are the greatest impediments to their success. They indicate that they affect
Digital platforms’ greatest impediments to success
them more than data security and cross-border payments, flagged by 19 percent and 11 percent of re- Portion that consider select payment process aspects
as hurdles
spondents, respectively.
Payment processing
Understanding the ground-level implications of having inefficient payments processing systems is also 30.0% 7900000000

important. The customers of platforms with inefficient services often have a hard time completing their
Data security
purchases. These marketplaces may not support their users’ preferred methods, or customers may find 19.2% 7200000000

it too difficult to pay via the offered options. Cross-border payments


10.8% 7000000000

Authentication
8.0% 7000000000

Regulatory requirements
FIGURE 7: 7.2% 7000000000

The importance of payment systems to strategic growth Chargebacks


Share that consider payments important to their growth plans, by firm size 6.0% 7900000000

100% Technical issues


3.2% 7200000000

86.4% Cyberattacks
3.2% 7000000000

80% 77.6% Payment methods


75.0% 74.4% 3.2% 7000000000
72.6%
Extremely important
No impediment
2.8% 7000000000

60%
Complicated navigation of real-time payments
2.0% 7900000000

Currency conversion
1.6% 7200000000

40%
Hidden fees
0.4% 70 0 0 0 0

27.4%
Synchronization with APIs
0.4% 70 0 0 0 0
21.4% 20.9% Very important
19.0%
20%

11.9%

3.4% 3.6% 2.3% Somewhat important


1.7%
0.0%

Slightly important
$21M–$50M $50M–$100M $100M–$500M $500M–$1B $1B+

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23 | Payments 2022 The elephant in the room: How to improve conversion rates | 24

C
FIGURE 9: onversion is the lifeblood of any busi-
How digital platforms view their transaction
conversion performances
ness and, for many digital businesses,
Share indicating select levels of success in doing so often a struggle. Consumers’ expecta-

Very well
tions of frictionless digital experiences — includ-
4.0% 7900000000
ing checkout — have been set by Amazon with its
Well one-click checkout and diverse array of products.
84.4%
Digital platforms, whatever their product or ser-
7200000000

Neither poorly nor well vice, strive to replicate that experience while mit-
11.6% 7000000000

igating the fraud risks that are endemic to these


Poorly
online experiences. It is a delicate balancing act,
0.0%
one that gets a big assist from new tech that re-
Very poorly
0.0% moves authentication and checkout frictions.

It says something that only 4 percent of our re-


spondents report doing “very well” here. That
Portion considering select factors in evaluating their leaves substantial room for improvement, and
rates suggests a massive opportunity to be gained

Checkout flow
by optimizing the payments process to improve
87.6% 7900000000
conversions. Eighty-four percent report convert-
Site visitors/sales/by channel ing transactions “well,” something that one might
84.0% 7200000000
optimistically interpret as faint praise for the per-
Fraud formance of their payment platforms.
43.2% 7000000000

Local processing options Our study defines conversion as converting vis-


28.8%
its on a digital platform into sales, including the
7000000000

Compliance management of fraud and disputes and the asso-


25.6% 7000000000

ciated authentication or regulatory requirements


of that process. A closer examination of the spe-
cific payments frictions affecting conversion re-
veals firms struggle the most with chargebacks
and dispute resolution. Sixty-two percent cite
this as a problem, followed closely by false-posi-
tives (61 percent).

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25 | Payments 2022 The elephant in the room: How to improve conversion rates | 26

FIGURE 10:
Top friction factors in the payments process
Share of firms that consider select issues as friction

62%
points

Current chargeback/dispute resolution process


62.0% 7900000000

Approximately 32 percent of firms consider These various payments inefficiencies can add Number of false-positives
false-positives their biggest operational pain up to produce high, but avoidable, hidden costs. 60.8% 7200000000

of firms cite
points. Another major area of concern is the need To understand just how they add up — and how Cost of fraud

for manual intervention in payments processes, to fix them — we must examine how platforms
39.2% 7000000000
chargeback/dispute
with 44 percent identifying it as such and 26 per- measure the cost of processing and supporting
25.6%
Data security/tokenization
7000000000
resolution as
cent stating it is their biggest pain point. payments.
Customer authentication an operational
pain point.
20.4% 7000000000

TABLE 4:
Foreign exchange (FX) exposure
Top payments operational pain points 16.4% 7900000000

Portion of firms that consider select issues as pain points, by rank


Merchant onboarding
14.4% 7200000000

1 2 3 4 TOTAL
Issuer declines
14.0% 7000000000

Regulatory compliance and monitoring


Too many exceptions that require manual intervention 26.4% 14.4% 3.6% 0.0% 44.4% 13.2% 7000000000

Decline too many good customers 32.0% 5.2% 1.6% 1.2% 40.0% Third-party integrations
12.0% 7000000000

Reporting and reconciliation processes are cumbersome 14.0% 8.0% 1.2% 0.0% 23.2%
Too many providers
11.6% 7900000000
Takes too long to get new features into the market 9.6% 10.0% 2.0% 0.8% 22.4%

Unable to settle with merchants on chosen platform


Checkout process is not optimized for for easy checkout 8.0% 7.6% 1.2% 0.8% 17.6%
10.4% 7200000000

Can’t settle transactions for merchants on our platform 8.2% 4.0% 0.4% 0.4% 8.0%

Too complicated to manage multiple vendor relationships 2.8% 3.2% 1.6% 0.0% 7.6%

Providers are unable to serve our needs 1.6% 2.0% 1.6% 0.0% 5.2%

Lose too much money in fraud 2.4% 1.2% 0.4% 0.0% 4.0%

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27 | Payments 2022 The elephant in the room: How to improve conversion rates | 28

THE TRUE COST OF FRAUD THE RISING COMPLEXITY


(AND COST) OF MANAGING COMPLIANCE
FIGURE 11: It is clear why many firms see payments-related
The cost of fraud and the fight to curb it fraud as their biggest growth hindrance. In ad-
How much fraud costs digital platforms, according to Managing compliance also remains a signifi-
the portion of revenue generated outside the U.S. dition to attacking margins, detection systems
cant hurdle, especially as regulations shift amid
have the potential to turn away legitimate cus-

63%
100% of revenue technological innovations, heightened fraud and
1.8% 7900000000 tomers. Just 36 percent of platforms feel their
money laundering concerns. This is illustrated
fraud detection operations are “very” to “extreme-
81%–99% by the fact that just 21 percent and 19 percent
2.5% 7200000000
ly” effective, and just 1 percent regard them as
of firms consider their current payment sys-
“extremely” effective. While 40 percent of re-
2.4%
61%–80%
7000000000

spondents report that fraud costs are somewhat


of firms say they tems “extremely” effective at complying with
know-your-customer (KYC) and anti-money laun-
2.3%
41%–60%
7000000000
lower this year than last, most surveyed leaders are only “somewhat” dering (AML) regulations, respectively. Moreover,

21%–40%
believe there is definitely room for improvement.
effective at complying 63 percent of digital platforms report that their
1.8% 7000000000
The cost of fraud, they report, is roughly 2.2 per- with PSD2/SCA. systems are only “somewhat” effective in ad-
dressing PSD2 and its associated SCA require-
1%–20% cent of annual revenues on average. Those earn-
2.5%
ments, as these new European regulations shake
7000000000

ing between $500 million and $1 billion annually


0% of revenue
pin the figure at 2.8 percent, something on the or- up the banking industry and its clients.
2.1% 7000000000

der of between $14 million to $28 million a year


for each of those platforms.
TABLE 5:
Current payments operations’ effectiveness in complying with regulations
The need for manual review and processing (cit- Portion that consider operations to be effective in dealing with select regulatory systems
Share that consider their fraud detection strategies ed by 44 percent) and false-positives (40 percent)
effective, by level
are reported to be trouble spots. On the latter, the
Not at all Slightly Somewhat Very Extremely
Extremely effective cost of turning away good customers may pose effective effective effective effective effective
1.2% 790 0 0 0

incalculable, possibly unrecoverable costs.


Very effective
34.8% Anti-money laundering (AML) 0.0% 0.0% 9.2% 71.9% 18.9%
A related fraud challenge is chargebacks and dis-
7200000000

Somewhat effective pute resolution, a process that not only results in Local regulatory requirements 0.0% 0.4% 10.0% 68.7% 20.9%
62.4% 7000000000

canceled sales but can also be a drain on time Know-your-customer (KYC) 0.0% 1.6% 9.6% 67.6% 21.2%
Slightly effective and money. Chargebacks are what the greatest
1.6% 7000000000
Money transmission 0.0% 2.0% 12.4% 70.3% 15.3%
portion of platforms struggle with, and 62 per-
Not at all effective
0.0% cent cite it as a key friction point. General Data Protection Regulation (GDPR) 5.0% 1.4% 11.4% 44.3% 37.9%

PSD2/SCA (Strong customer authentication) 0.7% 0.7% 62.7% 14.8% 21.1%

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29 | Payments 2022 The elephant in the room: How to improve conversion rates | 30

SOMEWHAT COST-EFFECTIVE CROSS-BORDER PAYMENTS


FIGURE 12: Digital platforms face less conspicuous — but FIGURE 13:
Platforms’ effectiveness at accommodating local The Brexit effect
and foreign payment types
no less vexing — challenges in optimizing their Portion that believe Brexit would have a disruptive

63%
Share that consider their handling of different payment systems as they plot their three-year effect on payments operations, by level
payment types to be cost-effective
roadmaps. This is especially true regarding glob-
Extremely disruptive
Extremely cost-effective al expansion. Chief among their concerns in this 3.2% 7900000000

2.0% 6100000000

4.4% 6100000000
realm is foreign-exchange (FX) management, as Very disruptive
1.2% 610 0 0 0

operating internationally requires accommodat- of platforms say 22.4% 7200000000


1.2% 610 0 0 0

ing a range of currencies with fluctuating values. Somewhat disruptive


76.4%
72.4%
Very cost-effective
6100000000

6100000000
Yet only 24 percent of firms consider their FX
their payment 21.2% 7000000000

67.2%
22.4%
6100000000

6100000000
management strategies to be “very” or “extreme- systems are only 13.6%
Slightly disruptive
7000000000

19.6%
Somewhat cost-effective
6100000000
ly” cost-effective, while the lion’s share (63 per-
cent) view it as only “somewhat” so.
“somewhat” Not at all disruptive

cost-effective
39.6% 7900000000
21.2% 6100000000

30.0% 6100000000

62.8% It’s worth examining Brexit’s impact on cross-


when it comes to
6100000000

Slightly cost-effective border commerce, particularly in Europe. While


2.0%
2.0%
6100000000

6100000000 England’s possible exit from the EU is a major FX management.


1.6% 610 0 0 0

12.4% 6100000000 concern for some digital platforms, the largest


share are largely unperturbed. Approximately 40
Not at all cost-effective
0.0% percent say the measure is “not at all” disruptive,
0.0%
0.0% while 26 percent say it is “very” or “extremely” so.
1.2% 610 0 0 0

Domestic processing
Local payment options
Low-cost routing
FX management (local currency settlement)

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31 | Payments 2022 Vendors, vendors and more vendors: Are bigger teams always better? | 32

T
he digital platforms we surveyed cur-
rently employ an average of six to 10

80%
people to support payments func-
tions across an average of 2.7 processing
relationships that enable roughly six payment
methods. This figure is slightly greater for
larger firms and those that receive more than of platforms have
half of their revenues from outside the U.S.
two or more vendor
In addition, 80 percent of platforms have two
or more vendor relationships to help manage
relationships to help
chargebacks (73 percent), compliance and manage chargebacks.
monitoring (67 percent) and fraud detection
and monitoring (53 percent).

FIGURE 16:
Digital platforms’ reliance on payments processors
Average number of payments processing partners, by annual revenue

2.8 2.8

2.4
2.3

1.9

$21M–$50M $50M–$100M $100M–$500M $500M–$1B $1B+

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33 | Payments 2022 Vendors, vendors and more vendors: Are bigger teams always better? | 34

FIGURE 17: Companies estimate that the costs associated


Plans for enhancing current payments operations
Share planning to pursue select strategies to support
with payments processing represent approxi-
their product roadmaps mately 2.7 percent of their annual revenues, on Of the companies that intend to expand their FIGURE 20:
Areas in which digital platforms hope to expand
average. Smaller firms earning between $21 processing relationships, 85 percent say they with vendor support
Expand processing relationships
60.8% 7900000000
million and $50 million annually pay roughly 3.3 need to do so to expand geographically, 81 Portion planning to expand vendor relationships that
seek to improve select processes
percent, while those operating globally — which percent to accept new payment methods
Increase the size of the team
40.8% 7200000000
94 percent of those surveyed indicate doing — re- and 65 percent to expand the number of cur- Chargebacks/dispute resolution
62.5% 7900000000

Expand relationships with other vendors port payment processing fees that approximate rencies they support.
25.6% 7000000000 Compliance and monitoring
to 3 percent. In addition, 26 percent of platforms report a
53.1% 7200000000

Add issuing capabilities


18.4% 7000000000
A central thrust of platforms’ strategies to im- need to add more vendor relationships be- Fraud detection/monitoring
53.1% 7000000000

Change payments processors prove their payments operations is to expand yond the two they currently manage to ad-
7.2% 7000000000 Foreign exchange
their vendor and processing relationships. About 34.4% 7000000000

No plans to change our currency operations


six in 10 (61 percent) say they must do so to FIGURE 19: Settlement/payout
5.6% 7000000000

meet their three-year growth goals. Support provided by vendors 25.0% 7000000000

Settle directly with merchants Share that use third-party services for select
5.6% 7000000000 processes Issuing
23.4% 7000000000

Chargebacks/dispute resolution
FIGURE 18: Tokenization
72.5% 7900000000
20.3% 7000000000

The cost of managing payments processing relationships


Average cost and costs for payments overall and for processing as percentage of revenue and total cost, by size Compliance and monitoring
Merchant onboarding
66.7% 7200000000
15.6% 7000000000

4%
Fraud detection/monitoring
Encryption
53.3% 7000000000
7.8% 7000000000

3.3% Tokenization
32.1% 7000000000

3%
Settlement/payout dress chargebacks and dispute resolution
18.3%
2.5%
2.6% 2.6% 7000000000
(63 percent), fraud detection and monitoring
2.3% Average cost Customer authentication (53 percent) and compliance and monitoring
17.5% 7000000000
2.0% (53 percent).
2%
Foreign exchange

1.5% 1.5% 1.5%


9.6% 7000000000
Supporting digital platforms’ multiprocessor,
1.3%
Amount spend Merchant onboarding multivendor payments organizations also re-
7.1% 7000000000

1%
quires adding members to their teams, and
Payments processing 41 percent of all surveyed firms intend to add
6.3% 7000000000

personnel to their existing groups.


Encryption
5.4% 7000000000

$21M–$50M $50M–$100M $100M–$500M $500M–$1B $1B+

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35 | Payments 2022 Payments 2022: The platform payments roadmap | 36

PAYMENTS 2022:
THE PLATFORM
PAYMENTS ROADMAP

P
latforms are among the most compli- their growth objectives, they also believe that in place today to something new. Only 5.6 percent
cated businesses to start, and are even their current operations aren’t sufficient to sup- of the platforms we studied express an interest
more difficult to ignite and scale. Creat- port those plans. in intermediating payments for their platforms,
ing value for stakeholders involves both the art and 7.2 percent report contemplating a wholesale
As we’ve seen, the average digital platform has
and science of acquiring end users and suppli- change to providers.
2.7 processing relationships. Sixty-two percent
ers and keeping them on board. Increasingly, in-
consider chargebacks and false-positives to be Herein lies the opportunity for digital platforms and
tegrating and enhancing payments functionality
major problems, and while nearly two-thirds of those with which they work to process and manage
have become standard operating procedures in
firms say they are “somewhat” effective at de- their mission-critical payments operations.
delivering the valuable platform experiences that
tecting fraud, only 1 percent say they are “ex-
drives their growth. The status quo won’t deliver the ambitious Payments
tremely” so.
2022 roadmaps that each of these platforms have de-
The digital platforms we studied are no less am-
Maintaining regulatory compliance is a problem signed. The focus on payments acceptance to establish
bitious.
for nearly two-thirds of the platforms we sur- their footprint and build a base of customers has now
As our Payments 2022 Study finds, 94 percent veyed, but expansion into new geographies and given way to a more strategic look at how payments can
expect to be larger in three years’ time across flows is a top priority at the same time. fuel their future growth. The heads of payments for the
both their physical and digital terrains. Platforms platforms we studied are being challenged by their CEOs
What’s more, only 4 percent believe they actually
are eager to broaden their presence in digital and boards to deliver the next phase of growth and scale
convert the visitors they have invested time and
channels — in particular voice commerce — and — and they need payments capabilities that add value for
energy into attracting into customers and sales.
they want to expand globally in North America, their customers, while reducing their risk of fraud and com-
Europe and emerging markets in Latin America Not surprisingly, fewer than 10 percent of these pliance missteps.
and Asia. platforms say they intend to keep their payment
One path forward is to add more, including more processors,
operations as is in the coming years. Fewer yet
The key to this growth, they report, is payments. vendors and personnel to the headcount — as well as costs.
believe the path forward is about bringing pay-
While the platforms we studied overwhelmingly ments in-house to manage them as part of their The other way is to ask more of the relationships they already
view payments as strategically vital to achieving business operations or moving away from what’s have.

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37 | Payments 2022 Methodology | 38

DOLOGY
METHO INDUSTRY SEGMENT

DEMOGRAPHIC DATA N Percentage


B2C services B2B B2C merchant B2C B2B
marketplaces SaaS firms marketplaces retailers platforms/utilities

F
or the Payments 2022 report, we surveyed approximately 250 payments heads from digital pay- N 46 50 55 53 46
ments platforms located both in the U.S. and abroad. Our survey was conducted during March
Percentage 18.4% 20.0% 22.0% 21.2% 18.4%
2019, and respondents hailed from five, distinct platform types, including the following:
Share of annual revenue derived from non-U.S. customers

0% 64 25.6% 28.1% 6.3% 32.8% 28.1% 4.7%


• B2B software-as-a-service (SaaS) firms: We asked respondents a variety of questions
1% - 20% 38 15.2% 23.7% 21.1% 13.2% 18.4% 23.7%
SaaS companies that sell services to busi- designed to help gauge the state of their current
21% - 40% 51 20.4% 7.8% 37.3% 11.8% 23.5% 19.6%
nesses (e.g., Slack, Tableau, Greenhouse, Go- payments operations, and the role they foresee
Daddy). those systems playing in supporting their future 41% - 60% 52 20.8% 9.6% 26.9% 19.2% 26.9% 17.3%

growth and expansion. Our assessment consid- 61% - 80% 34 13.6% 23.5% 14.7% 26.5% 5.9% 29.4%
• B2B platforms/utilities:
ered factors on a number of different payments 81% - 99% 3 1.2% 33.3% 0.0% 0.0% 0.0% 66.7%
Companies that provide web-based business
methods and functions, including but not limited
100% 8 3.2% 12.5% 0.0% 50.0% 0.0% 37.5%
services (e.g., Shopify, DocuSign, Square-
to chargeback/dispute resolution, FX manage-
space).
ment, voice-recognition capability and real-time Annual revenue

• B2C retailers: payments functionality. We also considered ad-


$21M - $50M 59 23.6% 16.9% 20.3% 15.3% 25.4% 22.0%
Companies that sell consumers retail prod- ditional factors, such as overall cost of operation,
ucts through their own websites. They may the number of each respondents’ payments ven- $50M - $100M 58 23.2% 24.1% 20.7% 13.8% 25.9% 15.5%

also have physical stores (e.g., Apron, Warby dor/processor relationships and payments func- $100M - $500M 62 24.8% 16.1% 29.0% 22.6% 14.5% 17.7%

Parker). tionality according to geographic locale. $500M - $1B 28 11.2% 28.6% 14.3% 7.1% 21.4% 28.6%

$1B + 43 17.2% 9.3% 9.3% 51.2% 18.6% 11.6%


• B2C merchant marketplaces: The majority of platforms in our sample operate
Third-party companies that allow merchants primarily in the United States: 61 percent of com-
Number of people in payments processing operations
to sell products and services to end custom- panies we surveyed earn less than 40 percent of
ers (e.g., Etsy, eBay, Airbnb, HotelTonight). their annual revenue from non-U.S. customers. 1-2 19 7.6% 10.5% 26.3% 15.8% 26.3% 21.1%

3-5 69 27.6% 18.8% 11.6% 29.0% 27.5% 13.0%


• B2C services marketplaces: The distribution of platforms in our survey sam-
6 - 10 112 44.8% 21.4% 25.0% 11.6% 17.9% 24.1%
Third-party companies that allow service ple was also balanced in terms of size, with their
providers to sell services directly to end cus- distribution representing companies in all reve- 11 - 25 40 16.0% 17.5% 20.0% 40.0% 12.5% 10.0%

tomers (e.g., Uber, Lyft, TaskRabbit, Fiverr). nue brackets. These included firms generating 26 - 50 8 3.2% 0.0% 12.5% 25.0% 37.5% 25.0%

annual revenues ranging from $21 million to 51+ 2 0.8% 0.0% 0.0% 50.0% 50.0% 0.0%

more than $1 billion.

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39 | Payments 2022 Introduction | 40

Disclaimer

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