What the payments industry can learn from CompareTheMarket

Peter Keenan is CEO of APEXX, a fintech start-up aiming to introduce greater transparency and competition into the global payments market.

CompareTheMarket and price comparison sites like it can teach the payments industry valuable lessons. In the personal finance space, these sites recognised that despite the choice available, consumers were not switching and were overlooking the huge savings potential from doing so. This stemmed from a lack of awareness as consumers avoided the complex and time-consuming processes of individually comparing and changing providers.

By creating an ecosystem of service providers, comparison sites gave consumers something quite special; easy access to choice. Not only did this provide more options, the enhanced transparency in the market encouraged fierce competition, forcing businesses to innovate and reducing prices as a result.

The global payments market is every bit as complex for merchants. Each year, merchants spend millions of pounds processing credit card, debit card and alternative payments with acquirers. However, in an industry where there are 282 merchant acquirers and 1,073 payment providers, the amount of choice can be paralysing.

Businesses continually try to make themselves more efficient to save money but they are often deterred from trying to navigate the global payments maze. An efficient payments model is vital for business growth. However, businesses are unaware of the wealth of options available to them and, because it’s crucial to have payments capabilities, they usually select providers as quickly as possible. Time is a critical resource that is in low supply for business leaders, especially those growing rapidly and looking to expand internationally.

If these time-poor businesses were able to explore the market, they would discover that integrating with multiple acquirers can generate huge cost saving on FX and basic payments acceptance. Additionally this will dramatically increase the conversion rates of transactions. However, with the market as perplexing as it is, finding time to explore its intricate landscape simply isn’t a reality.

Due to this sheer complexity, the global payments market has become opaque, stagnant and ultimately full of complacent providers. It is unsurprising that once a merchant selects an acquirer, the perceived difficulty of switching often discourages merchants from doing so. As a consequence, the lack of competition continues to breed a culture where there is simply no incentive to innovate, improve services, or drop prices. Services have become increasingly outdated whilst both businesses and consumers lose out. Payment services are not improving fast enough to keep up with consumer expectations for quick and painless transactions, particularly online. As a result, the cart abandonment rate has risen to  77.24% in 2016, up from 71.39% in 2015.

The global payments industry has been crying out for a single and transparent marketplace to expose these issues and improve services going forward. The latest legal battle over interchange fees between Visa, Mastercard and more than 20 high street retailers demonstrates why the market needs to change. And these are beginning to emerge. Just as price comparison sites have done for consumers, a single marketplace takes an intricate world and streamlines it into one clear and simple platform which is easy to navigate. Merchants can see how costs compare, get expert advice on payment providers that will best suit their needs, reduce costs of payments acceptance and in turn increase sales by passing down lower costs onto their customers.

This creates opportunities for beneficial relationships between acquirers, payment providers and merchants. New and innovative payment providers benefit from greater exposure in a market currently dominated by big industry players, giving them access to new business leads in a market where new customers are hard to come by. In turn, merchants benefit from improved prices and services as a result of greater competition. In the single marketplace, merchants can save upwards of 15% on fees – in a rapidly expanding industry where there are more than 426 billion cashless payments a year, the savings potential is enormous.

Related reading