What PSPs can learn from the property market

Tony Craddock, Director General of the Emerging Payments Association, Comments on Credorax’s Latest Whitepaper, “PSPs Why Does Your Choice of Acquirer Determine Your Future Success?”

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Payment Service Providers (PSP) servicing global e-commerce merchants are often stuck between the devil and the deep blue sea.

Their lovely merchants are crying out for more, while internal compliance and commercial teams are screaming for them to do less. And, circling ominously, their shark-like competitors are promising merchants heaven and earth at every turn.

It’s not a great place to be.

In response, it’s tempting to try and keep the merchants happy, and end up doing more. For less. More acquirer integrations, product development, code writing, compliance and platform building in more markets with more variables. All for less short-term return, but in the hope of securing a competitive advantage and future revenue stream.

In the world of property, investors have experienced similar problems, but solved them in a different way. So how can PSPs learn from the property market?

In property, the larger the portfolio, the more time it takes to manage it. Finding tenants, maintaining the property, replacing tenants, and dealing with utilities, finance and insurance all takes time. This puts a cap on the size of the portfolio an investor can manage.

To maintain growth while minimising the pain, property investors often deploy a strategy called, ‘let and forget.’ What this means is, shell out the initial investment up front. Then sub-contract to the best management company in town. You can then, literally, let and forget about the property. Just focus on growing the portfolio or sitting back and counting the money.

PSPs can avoid falling into the ‘do-more-for-less’ trap by deploying the payments equivalent of ‘let and forget.’ Having developed the proposition, committed to a global strategy aiming at securing greater revenues and selling it in to a merchant, instead of building the capabilities itself, the PSP can recruit a company to integrate and manage the ongoing technology and acquiring capabilities on its behalf.

With this strategy, PSPs avoid the costs of setting up multiple acquirer integrations. Consult Hyperion has mapped the journey from front-end integration through account management, report harmonisation, on-boarding and KYC to back-office integration. The costs vary from, at one end, €400,000, to €800,000 at the other.

The rapidly expanding global e-commerce market makes this an increasingly relevant problem. In their recent White Paper, Credorax, an EPA Member and dedicated PSP partner operating around the world, comments, “The market is rapidly expanding, presenting an unprecedented opportunity for PSPs to move beyond their traditional roles by providing cross-border options . . . which will reduce churn, while significantly expanding revenue sources.”

Perhaps the payment equivalent of ‘let and forget’ should be called, ‘sell and outsource.’ Sell in the solution and then outsource the delivery. It looks like a way of navigating out of the deep blue sea into the bright blue horizon for PSPs.

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About Tony Craddock

An enthusiastic business leader of the UK’s most influential trade association in payments, a lively public speaker and avid networker, Tony is passionate about advancing payments innovation. He’s an evangelist for the difference emerging payments can make to lives everywhere. Whether writing blogs, chairing panel sessions at conferences, writing White Papers or enrolling CEOs in his mission, Tony shares knowledge derived from over a decade in payments. He is a director, investor and adviser to several payments companies and works with the UK angel and VC investment community to help them access the rising stars of the payments industry. He conceived and launched the Global Prepaid Exchange and Gx in 2004, and the Emerging Payments Association (EPA) in 2012, of which he is Director General. The EPA advances payment innovation for its 76 members that range from MasterCard and Visa to Vocalink and First Data, Amazon and Subway, and Judo and Pannovate.