What does it take to begin accepting payments outside of the first country your business is operating in? What are the most effective ways to process payments of you're a larger business? How can you optimize your payments stack to solve for expansion?
Chantal de Meere from Connective Payments joins Peter Mollins to discuss the opportunities and unique attributes of accepting payments in Europe.
Watch or listen along as they discuss everything from customer experience at payment, priorities for European merchants, to complexities of transacting between various countries in the European Union.
Peter.M: 00:04 Hello everyone. This is Peter Mullins from Spreedly. Thanks again for taking time to participate in today's payments dialogue. Today I'm joined by Chantelle Demure from connected payments, to welcome you to payments dialogue.
Chantelle.D: 00:16 Thank you very much.
Peter.M: 00:18 Terrific. Well it's great to have you here. First off, I'd love to hear a little bit more about your background, what your experience has been in payments and love to hear how you came into the payments world.
Chantelle.D: 00:31 Well, it's been 14 years ago actually. I started in a commercial role or an acquirer. I think I've seen half of the value chain of the payments starting with the acquiring, have my own merchant platform in Magento. That's where I learned the front end conversion optimization back and reconciliation automation, integrations with different platforms, et cetera. I sold that company and worked for a payment service provider in the Netherlands for three and half years, and that's where I gained my true passion for payments. Truly, some people don't believe it. My friends don't believe it when I say passion for payments but besides a commercial role, I really had the passion for the technique behind it and that's where I grew from RM today. Today I advise a large multinationals in optimizing their payments infrastructure. This relates to integration with several payments service providers, different acquirers, optimizing their costs, but also improving the efficiency of their processes related to payments, subscriptions, infrastructures.
Peter.M: 01:55 Great. That's terrific. Right now you're working with these multinational companies. They must have interesting experiences and requirements because of their international nature, I imagined.
Chantelle.D: 02:08 Most definitely. But what I still see is with a lot of merchants that they have a lack of understanding of what the payments' industry truly is about, and that's where I as a consultant come in to really help these companies to have a better understanding of what is necessary, what is more efficient, if it's better to integrate with the platform in between like yourself or if it's better to integrate directly what is necessary, what is it that they need, set up the right requirements. These are the things, mostly a lot of multinationals but also medium or large merchants are still struggling with.
Peter.M: 02:49 The question of efficiency and optimization that you're talking about, that's something I think is just so important when you say that the merchants aren't aware of many of the things are going on behind the scenes. It just makes me think about how, for some merchants they're looking for simplicity. They want to plug in and just move on with payments. But, when you're dealing with hundreds of millions or many billions of dollars, then the efficiency and optimization becomes important, I imagined.
Chantelle.D: 03:17 For sure yes. It's funny that it's still a late [inaudible 00:03:21]. What I truly see is that most merchants try to improve their front end to get as much customers to where their websites, et cetera, which is great then of course, very important. But, the moment of payment is something they forget sometimes, and how to optimize that customer experience or the last part of where they, click the buy button order, okay button and this is something like even top of mind, quite easy. But especially the part, what happens afterwards, the optimization on recalls creation, optimization on authorization rates, how improved the conversion based on the integrations you have with local acquirers, with local payment methods. These things are very often forgotten and most companies say, just works fine. It works fine, just please don't touch it as long as no one touches it. It's ...
Peter.M: 04:23 Because it's amazing if you're able to get that optimization of the success rate up from 85 to 86%, or just being a 1%. It's amazing what impact that can have on your bottom line.
Chantelle.D: 04:36 Sure. Yes.
Peter.M: 04:37 Now, you're based in the Netherlands and you work all over the world but one of the reasons why we had this chat or decided to have this chat was because of the interesting nature of payments within Europe. As American-based company we're always hearing about American merchants learning from European experiences, and I'd love to hear a little bit more about your thoughts on some of the major priorities for merchants in Europe when it comes to payments.
Chantelle.D: 05:09 Europe is really complex market. If you refer to America with the complexity of a VAT and each state, you could see the complexity in Europe somewhere similar when it regards payments and Europe, we have around 200 different payment methods, including direct debits, Sepa Direct Debit but these are MasterCard, PayPal, American Express are all there of course but we have our local payment methods, and each country has their own. What you see for instance in Asia is that there is a lot of mobile integration. In Europe, it's still local payment methods, which created by, for instance, in the Netherlands by local banks. It's a direct payment, and it's actually like a bank transfer, but then with an e-commerce platform in between. That's you can see it. But these local payment methods have a huge market share in each country and each country works differently, has different way of working, has a different processing engine behind it, different settlements. It's quite complex when it regards the European markets and local payment methods.
Peter.M: 06:33 I see, okay.
Chantelle.D: 06:34 [inaudible 00:06:34] Alone you cannot conquer the European markets.
Peter.M: 06:37 Right. Great. Now, you mentioned that many of these payment methods were driven by banks. Are there merchants that are driving these as well, or consortium of merchants, or is it largely driven by the banks themselves?
Chantelle.D: 06:52 Currently there's a movement in the payment industry. For instance, here we see companies driving a certain payment methods, towards their consumers. Therefore, then retailers need to accept them as well but this is still very small. Mostly it's related to the banks, and a different way of paying with a mobile or with a bank transfer or ...
Peter.M: 07:25 Okay and now those local payment methods that could be peer to peer. Me paying you or a individual consumer paying a merchant as well in both cases. Is that right?
Chantelle.D: 07:37 These payment methods are not peer to peer. It's really involved mostly merchant to consumer.
Peter.M: 07:45 Okay.
Chantelle.D: 07:47 Of course, there are payment methods in Europe where this is possible with peer to peer, and you see this more and more. We have a local payment we would just call Tikkie this is going, it's used by a lot of consumers and it's peer to peer payments and now merchants are adopting it as well.
Peter.M: 08:07 Now with the rise of those alternative payment methods, merchants I imagine are feeling a lot of pressure to bring, to make those available to their consumers. Has that, was there a tipping point when it just became essential for merchants to offer those payment methods? And are we well past that where every merchant basically has to have those alternative payment methods on their further e-commerce.
Chantelle.D: 08:36 Well if you're in the local markets, the adoption of credit cards is not that big in each country. In the local markets, you really need to have the right payment methods, because we just don't have enough credit card adoption in some countries. Look at Germany for instance, Germany it has a huge market share with PayPal, which is also an alternative payment method. But, it's because they don't have a lot of credit cards there. In the Dutch markets around 10 12% has credit cards. The rest is all to do alternative payment methods. If you want to come to the Dutch market or to the German market, you need to have something else besides credit cards. Otherwise, you will not have as much coal as conversion as you can.
Peter.M: 09:25 I see. In terms of share in for retailers, do you have any data about what kind of share of payments are going through alternative payments. Perhaps in the Netherlands as an example or any other country?
Chantelle.D: 09:40 In the Netherlands there is a company who's doing research every year, old market share of each payment methods. However, unfortunately in Europe it's, we don't have that same kind of research.
Peter.M: 09:53 Right.
Chantelle.D: 09:53 And you're in the report. But it is possible if you work closely with your payment partner or, with us as consultants, we can help you with this to have the highest conversion rates based on each payment method. Some payment service providers even offer a host payment page where in based on the IP address, they rank the payment methods in the right order because based on the adoption rate.
Peter.M: 10:22 Okay. That's interesting. For a merchant that's preps based elsewhere outside of Europe, and is looking to enter into the European market. Is that, are they able to simply offer one alternative payment method per country or is it essentially required that they're going to have to offer multiple. For instance, is a consumer likely to themselves have multiple payment methods where they could pick and choose depending on availability? Or do you suggest to retailers that they must have a broad array of those alternative payment methods in order to cover the market?
Chantelle.D: 10:59 That depends on the market share of each payment method. For instance, in Belgium you have, Bancontact that has a high percentage of market share. However, you also have like a local banking buttons and they still have like four or five, sometimes even more percent of market share. The question is the adoption rate as high if you don't offer these or do you really need these buttons in the local market to make sure that you have as much conversion as you would like there?
Peter.M: 11:32 Okay
Chantelle.D: 11:34 And so like a good partner is really important with this because if you are integrated with the right partner who offers these payment methods, it's just a question of, how do you integrate with this partner? Well, in case which Spreedly, that's an easy answer. But then it's the question, how many payment methods do you offer on your website? You don't want to confuse customers by offering like 20 different payment methods.
Peter.M: 12:01 Right.
Chantelle.D: 12:02 Sometimes maybe one is even enough, but in some countries it's better to have two or three.
Peter.M: 12:07 Okay, there was something I was going to ask you, was from a users experience. There's user experience in terms of do you accept my payment method? There's user experience in terms of will the transaction process successfully? And there's user experience in terms of I don't want to have 50 different methods that are jumbling up the checkout page and I can't pick which one. There must be a balance I imagine for a merchant or maybe they're just new methods of user experience to tell people choose, and without being overwhelmed by those options for alternative payments. I imagine.
Chantelle.D: 12:47 Well, if you look at, and that's the complexity of Europe. If you have these local payment methods, and the people are used to seeing multiple payment methods, because that's the offering in their country. It's not strange to offer maybe even four or five payment methods, in countries where there only one alternative payment methods. Such as, the main ones such as in the Netherlands with ideal, then why would you offer all these other payment methods if this is the main payment method?
Peter.M: 13:14 Right.
Chantelle.D: 13:16 But for instance, in Belgium it's not rare that you have the other payment methods as an option as well.
Peter.M: 13:21 I see. Okay. Great. So maybe I'll just take a step back and ask you just to define what an alternative payment method is. Could you just describe what that is? I know it can be a very broad term but it would be helpful for our listeners if you could give a perspective on that.
Chantelle.D: 13:39 Well, it really depends on each market gillette for instance, you have alternative payment methods is actually everything except to credit cards or even PayPal is a alternative payment methods if you may say so. But alternative payment methods are, it could be a bank transfer, a direct debit in the Dutch market it's ideal. Ideal is like a bank transfer, but then automated, and it has a guarantee for the merchant, which is a good thing. There is no risk on charge backs. There's no risk on fraud. In Norway, you have like with mobile they pay with their mobile instead of, and that's withdrawn from their statements of their mobile. In Belgium, you have local payment methods. It's all, most of its bank transfer but in a different way and then with an immediate confirmation of the transaction. Based on this, like normally with a bank transfer you have to wait until the money's on the bank, and you're not sure if you can send the product or deliver your digital goods. With these payment methods, you have an immediate reaction of their approval of the payments, which prevents the legs.
Peter.M: 14:59 I see. Okay.
Chantelle.D: 15:00 That's, and it could be a whole variety of different solutions, which is common in each market.
Peter.M: 15:06 Okay. Now, because of the linkage to banks. Does that hinder cross border alternative payment methods? Do you see do you see other alternative payment methods that are bank related, that cross borders? Someone in Germany and Norway, and Italy could use a used one payment method or is it so linked to a bank that just depends on where the bank is operating?
Chantelle.D: 15:38 Ideal is, mostly is Netherlands and in Belgium customers do not work with the same banks. That's why it wouldn't work in Belgium or Germany. There's been, so forth [inaudible 00:15:54] That's the German ideal, but it's a different way of integrating it and with the PSD 2. I'm not sure what the future of that payment method will be, but that's a solution actually every bank in use. It's direct payment or a direct bank transfer, but this platform is in between the customer and the bank and related to PSD 2 in the future that wouldn't be possible anymore. But, that's possible to be used by different countries and different banks, but so far I haven't seen a payment method besides PayPal and credit cards, which are able to be used cross boarder.
Peter.M: 16:37 Okay, Great. Earlier you had mentioned about to be the ability to with APM is to have that direct and immediate approval because the funds are in that account. I mentioned that has a big impact on fraud for merchants and both be a big benefit.
Chantelle.D: 16:53 For sure. It's a huge benefit. That's also the reason why, the Dutch market doesn't want to go forward towards credit cards or any other payment methods. Even though, the customer is less protected. The customer is still, has this as a preferred payment method and the funny thing is that for the merchant, there's only win win situation with this, there's no risk on fraud. They get the money instantly and the customer is not protected. If they want the money back, they have to negotiate with the merchant, but they don't have a way just like PayPal or credit card too to get the money back with a charge back or anything.
Peter.M: 17:35 Okay. Got It.
Chantelle.D: 17:35 I'm not sure about all the different payment methods in Europe to be honest. When it regards fraud, but alternative payment methods especially if it's like an instant bank transfer. Then there is a zero or two limited risk with fraud.
Peter.M: 17:54 Okay. Terrific. Now, it must be interesting because if different countries in across Europe are having different approaches to EPMs, there must be a lot of learnings that must go on. A lot of, Norway sees something that's interesting that has happening in Germany, that sees something interesting happening in Spain, and so being able to pull examples. Do you see that where there's experimentation happening in one markets that other markets learn from?
Chantelle.D: 18:23 And maybe this is starting now, but we're still talking about banks and they're not as agile as we all wish they would be. Like experimenting I do see that they're changing their behaviors regarding this. However, there are two new payment methods in the Netherlands and this is, they've been developing for two, three, maybe even four years, and it's still not fully adopted because, it's not fully supported or delivered by the banks. They need to do different marketing, i wish the banks would be more agile and adopt more solutions from different markets. There are some banks who are doing this, but we're still talking about huge companies, banks.
Peter.M: 19:11 Right.
Chantelle.D: 19:13 It takes time. It's all, I wish there would be more experimenting, but this is most of the time the FinTech companies doing the experimentation.
Peter.M: 19:20 Right. Now that makes sense. Speaking of the experimentation with payments companies and FinTech companies there's also a lot of alternative payment methods that are paid later or, micro loans for act before purchasing. That's something that's now we're seeing increasingly in the US, but that's been established in Europe for some time now. Is that something that you see quite a bit?
Chantelle.D: 19:49 Yes, for sure. Especially in retail. When you deliver goods, it's really important to have a solution where you can offer the person to receive the product first and then do the payment. However, there's a cost related to this for the merchants. The cost for the merchant around this payment methods are quite high and most of the time the merchant can do a surcharge to the consumer to make sure that he doesn't pay the whole cost of the specific payment method.
Peter.M: 20:21 Okay. Terrific. So now as we're, as for American companies that are looking to learn from the example of Europe, are there any lessons that a that you would hope that American companies could pick up from the experiences in Europe?
Chantelle.D: 20:38 I think it's really good to partner together with the right payment partner, ask advice from consultants. The European payment market is really complex and if you want to start here in Europe, or want to grow, or want to improve your conversion rates, ask for help not only from your payment partner but from actual experts, because just like I said, is as complex as the texts with all the states in America. That's the case with the payment methods in Europe.
Peter.M: 21:15 Right. Now that makes sense. Just speaking of that complexity, are there events or publications, or where should someone go that's outside of Europe, where should they go from a conference or a learning perspective to learn more about the European market? Other than of course speaking with the folks such as yourself. Of course
Chantelle.D: 21:37 Me and my colleagues can give a lot of information.
Peter.M: 21:40 That's right.
Chantelle.D: 21:42 But for sure money 20/20, this is also based in Europe. We have MPE Berlin, is really interesting. ISE in London, but ISE is mostly related to fraud management, risk and compliance. So I think these are a really important but ...
Peter.M: 22:09 Terrific. Well Chantelle this has been a terrific conversation. I really enjoyed it. I got to learn a tremendous amount about EPMs and how they relate to the European market. Chantelle can you give me a bit of a bit more information about connect with payments and what your group does?
Chantelle.D: 22:26 Yes, for sure. Very happy to tell you a little bit more about it. I joined connected payments last year, however they started in 2014. Connected payments is a consultancy firm specifically in payments. They do not only strategic consulting, but also the rollout of each project and what I think the strength of our company, and what I like the most about it is the fact that it started with two consultants who are self employed, have extended knowledge and the expertise around payments and they joined forces and bit by bit in a few years. Now we have 10 colleagues because we keep having our individual responsibilities. We have ownership of our projects. However, we shared the knowledge with each other around the payments. We have very complimentary towards each other, especially when we are working in a project our knowledge is shared, our thoughts are shared about each individual issue and together we come to solutions. We are working as a team on each project and I think this is where our strength is. Our network is really big and very happy that I joined last year. It's been a huge contribution to my type of work
Peter.M: 24:03 That's great. Well, thanks [inaudible 00:24:05]. Where can people go to get more information about connected payments is?
Chantelle.D: 24:10 To our websites connectedpayments.com, of course to LinkedIn to my personal profile, or company profile.
Peter.M: 24:18 Sounds great to all our listeners will be joining you again soon and We'll bring you another interesting topic for payments dialogue. Chantelle again, thank you very much.
Chantelle.D: 24:30 You're very welcome. Thank you. It was very nice.
Peter.M: 24:32 Great.