11 2018 | BUSINESS
"Consumers want to pay the most convenient way"
Todd Linden, Paysafe's CEO Payment Processing North America tells PIN more about Paysafe's North America strategy.
There has been a lot of activity for Paysafe in the US market over the last year. Please explain the reason for this and what has been done to date.
In the past 15 months, Paysafe has significantly extended its scale in the U.S. through the acquisition of two of its U.S. competitors, MCPS and iPayment. These recent acquisitions form part of Paysafe's investment strategy to expand its presence in North America in response to significant growth opportunities, particularly in the fast-growing SMB sector - establishing Paysafe as a top five, non-bank payment processor in the country. By bringing the organisations together, we are able further strengthen our wide-ranging payments processing suite and expose it to a broader audience of merchants and consumers. In addition to our acquisitions, over the last year, we have also entered several very important partnerships in the US including with Verifone, a world leader in payment and commerce solutions, to deploy Verifone Connect with Carbon and Engage devices and we have also launched Paysafe Accelerated Funding, a comprehensive suite of fast and flexible same or next day settlement options for small and medium-sized businesses (SMBs) based in the U.S. We look forward to the more opportunities that the US market will bring.
An FT-article about research by Federal Reserve Banks said that Americans are reluctant to quit cash. What is the reason for this and what are the implications for Paysafe's growth strategy in the US?
Ultimately the truth here is that the ecosystem for payments is fragmented and consumers want to pay in the way that is convenient to them, and cash is finding its place again in that mix. There is no doubt that paying with notes and coins is still the preference of a many consumers, but in our latest research report, Lost in Transaction: The future of payments for SMBs, we are seeing that US consumers, like others, are getting more and more demanding when it comes to payment choices and there is constant pressure to be on top of the latest trends and thinking and to continue innovating. Delivering new ways to pay is now a business imperative. This may go some way to explaining the rise of prepaid cards, online vouchers and cash replacement systems, which can alleviate these issues for both consumers and merchants. It's clear from our findings that US merchants are planning changes to their payments setup in the coming years. When it comes to cash replace systems like paysafecard and Paysafecash, we are seeing that they too are gaining ground in the US even if they hadn't become mainstream. This essentially provides a lot of growth opportunities for payment providers like us in the US as we will be able to help merchants balance security, flexibility, frictionless payments, efficiency and speed.
At the same time new electronic forms of payments are not very widely used at present. Do you see substantial future growth potential in this market as a new generation of consumers (e. g. millennials) is becoming more relevant for payment service providers and merchants?
Millennials came of age during a time of technological change and globalization. Millennials have grown up and matured with mobile technology and expect to be able to use it in every aspect of their life. Because of this, convenience is the driving force behind the way millennials pay. According to our research, merchants are seeing the need to offer more payment option choices to accommodate the growing age of consumers. When it comes to which payment options to offer, over four in five US merchants (82%) believe offering multiple choices is essential, while 82% plan to introduce new payment methods in the next two years. We are seeing significant growth potential in this market, and elsewhere, as millennials are looking to merchants to provide complete trust in mobile and digital payments before they completely abandon traditional payment methods.
»Consumers want to pay in the way that is convenient to them, and cash is finding its place again in that mix.«
Todd Linden, Paysafe's CEO Payment Processing North America
How is the cashless infrastructure affecting the adoption rates for contactless payments in the US?
In the US, instore merchants are pushing to accept contactless transactions - an area where the US currently lags behind compared to global counterparts. Our research shows that 62% percent expect to offer it over the next couple of years (compared to 37% at present). These findings may be symptomatic of a fragmenting payments landscape, with 30% of US merchants reporting a decrease in cash payments in the past year. Research undertaken earlier this year showed 3% of US consumers recently made a contactless payment, but US merchants desire to enhance transaction efficiencies (74%) and speed up in-store payments (58%). This could finally symbolize a step change in the adoption of contactless in the US market.
There's research showing that a significant number of American households are underbanked or even unbanked. Do you think paysafecard and/or Paysafecash will soon become a more often used payment method against that backdrop?
Our research indicates that customer demand is changing rapidly with 56% of merchants saying consumers are looking to pay with online cash. This is partially because of people simply not having access to a bank account, this is as much as 7% of the population in the US. We are seeing cash replacement systems are gaining ground in the US even if they hadn't become mainstream. This creates market potential for paysafecard and Paysafecash as 79% of merchants believe accepting prepaid cards gives access to new customers, and 44% say they will offer online cash replacements in response to consumer demand, and to service the unbanked, in the next two years.
In Europe paysafecard has a lot of experience with gambling merchants. Will we see a Goldrush in the gambling sector now that individual states can decide if they want to legalize sports betting? How do you see the role of payment providers in this situation?
The appetite for sports betting in the US is such that there is little doubt that the industry as a whole will be successful. But with so many operators being focused on the potential goldmine a legalised online sports betting market offers, there is also little doubt that competition for market share will be fierce. And whilst odds and number of markets do vary slightly, for an essentially homogenous product offering such as sports betting sites and apps, user experience is a vital differentiator for operators. And payments - for consumers that means making deposits and withdrawals - is one of the cornerstone components of the user journey. If bettors cannot put money into their betting account or realise pay outs efficiently, they'll quickly abandon the operator in favour of a competitor. For operators entering this new market, partnering with a payment service provider with the highest level of experience and insight of the gaming industry is critical. Payment service providers with a deep-rooted history in online gambling will be able to lean on the transferrable key learnings they have acquired in other markets, whilst simultaneously harnessing their developed expertise to identify and overcome the unique challenges of the US market. For instance, through a single platform, Paysafe is able to ensure US iGaming operators receive connectivity to best-in-class payment service providers, and customizable, cutting edge reporting for seamless reconciliation. This ultimately means that their customers would be able to make deposits at all times, whether it is cash, credit or debit, prepaid, and / or digital wallets.
You put a special focus on merchants in the SMB businesses sector. Can you tell us, how Paysafe can help them hold their ground against the big players in the market via payments solutions? Do they really make a difference?
It is estimated that SMBs represent over 95% of businesses in the US with some 50% still not accepting credit cards - an underserved market with much potential. Our latest acquisitions of both iPayment and MCPS has allowed us to further our relevance in the US market as it presented considerable opportunity in the fast-growing SMB sector: We know that brick-and-mortar businesses have ambitions to truly innovate when it comes to the intersection of payments and the in-store experience; our research indicates that 28% of the businesses want to be innovators in the payments field as they feel this gives them a competitive edge and a further 39% like to offer new payment methods as soon as possible. With over 20 years' experience working with SMBs, Paysafe is one of the few payment companies in the industry catering to both consumers and businesses. Paysafe is able to support the under-served market by helping them better their businesses with payment acceptance, business solutions and value-added services including point-of-sale through our partnership with Verifone, and cash advances.
How important is the aspect of security for American merchants and consumers? Do you think paysafecard especially can meet the demand?
When selecting a Payment Service Provider (PSP) online SMB merchants now rank the provider's ability to offer secure transactions above other key factors. In our latest research, most (59%) said security was of greatest importance, followed by reliability (45%), cost (49%) and ease of transactions (45%). US SMBs are also wary that these concerns may hamper the buyer journey for consumers. Four in five (80%) believe that longer verification processes during the payment stage - which could potentially combat these issues - runs the risk of losing consumers. Yet, 75% - a global high - admit they don't know how to balance security with an acceptable customer experience, a global high amongst respondents, highlighting the trade-off faced by US online merchants. paysafecard meets this demand as it is a long-standing, award-winning method of pre-paid payment that is a popular choice amongst both merchants and consumers for being a very secure and safe form of payment. In particular, consumers around the world like it because it allows them to shop online without having to share any sensitive financial data or bank account details over the internet. To further our reach, relevance and scale within the US market, we look forward to supporting the company's overall growth strategy by bringing more payment products, like paysafecard into the US market as it is a payment method that meets customer demand. More details to come as paysafecard looks to expand its awareness in the market.