How eCommerce SMBs are future-proofing their businesses in the wake of payments evolution

Oscar Nieboer, Chief Marketing Officer

As the advent of ground-breaking technology drives the world of eCommerce to continually redesign itself, the pressure on small and medium-sized online businesses to remain competitive with international giants is intensifying. There is a genuine belief globally that online goliaths such as Amazon, with the financial and human resources at their disposal to be at the cutting edge of all and any industry it chooses, have their eyes fixed on running every small competitor out of business; the online businesses that cannot keep pace with the latest innovations in customer experience will fall away as their market consolidates.

Nowhere is this principle of offering the best experience possible more imperative for eCommerce than the checkout. Consumer expectations for paying online on the device of their choice, through the payment instrument of their choice, and in as frictionless a manner as possible, have skyrocketed in the last few years; a trend that is unlikely to take a backward step any time soon.

To discover how businesses are reacting to this threat, we asked over 600 SMBs from across Europe and North America that accepted payments online to tell us how they are planning to future-proof their businesses in the face of a rapidly changing ecosystem and with eCommerce powerhouses looming over their shoulders.

Choice is fundamental at the checkout of tomorrow

One major takeaway from our Lost in Transaction: The future of payments for SMBs research is that online businesses are committed to giving consumers more flexibility when it comes to the method for making a payment.

According to our survey, 75% of online businesses agree that increasing the number of payment methods they offer at the checkout is essential to success. This is a recognition that the payments ecosystem is fragmenting, with consumer payment preferences dissipating beyond traditional card payments to numerous alternative payment solutions.

Online businesses currently offer four payment methods on average, but this is predicted to rise to six within two years. The alternative payment methods we expect to feature more regularly at the checkout after this time include online cash replacement systems (currently offered by 30% of businesses but expected to rise to 45%), in-app mobile payments (which will increase in adoption from 19% to 41%) payments by instalment (predicted to rise from 16% to 28%), and subscription payments (which will be offered by 23% of businesses, up from 9%).

In terms of percentage increase, acceptance of cryptocurrencies is predicted to see the most significant adoption uplift, rising 250% from just 6% current adoption to 21% in the next 24 months.

In the era of seamless payments, security trumps everything else

Online businesses are aware of the pressure to create a seamless payments experience, but over half (52%) of them also believe that reducing friction in the payments process exposes them to a greater risk of facilitating fraud. 74% believe fraudsters are targeting online businesses more than they were this time last year in any case, and 55% acknowledge that online card fraud is an increasing problem for them.

So it’s not surprising that security is now the primary factor online SMBs take into consider when selecting which payment service providers (PSPs) to partner with. 59% of businesses list security as a key consideration, ahead of reliability (49%) and cost (47%).

Increasing the number of declined transactions is not the solution either, which again is where partnering with a PSP with expertise in reducing the number of false positives for fraud detection will have a substantially beneficial impact on the business. On average 9% of transaction are currently declined, with 57% of SMBs seeing this as having a negative impact on their business, versus just 25% who see this as a satisfactory price to pay if it has a positive impact in reducing overall fraud.   

Although this focus on security is trend that has been growing for some time, this is the first year we have security overtake all other factors when selecting a PSP. But this is a direct response to the need to implement friction free payments in a secure way to remain competitive; 81% of businesses place the responsibility for protecting against fraud at the door of their PSP and 70% acknowledge they are finding it hard to determine the balance between improving security processes whilst making the customer journey as seamless as possible. Overcoming this hurdle is the critical step to future-proofing for an online business, which is why it is such a critical consideration factor when selecting a payments partner.     

To discover more about the top SMB opportunities and concerns with payments, download Lost in Transaction: The future of payments for SMBs now.






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