EMBEDDED FINANCE: INFRASTRUCTURE
Power to the merchant! Alternative providers are disintermediating banks and PSPs that have dominated the market and made processes complex and expensive for so long. That can only be good news for merchants who no longer have to accept high-cost, take-it-or-leave-it services, says Søren Mogensen, Chief Growth Officer at Banking Circle A 2021 survey of 1,000 Americans by GoCardless revealed that 39 per cent of consumers overall were willing to ditch traditional banking for peer-to-peer and social media app payments; and that increased to half of Millennials and Gen Z-ers. While every consumer environment has specific payment trends and cultural preferences, it’s indicative of the huge shift in customer behaviours that’s impacting merchants of all sizes. Banking Circle, the payments bank for payment service providers (PSPs), banks, fintechs and marketplaces, is seeing the impact of that multiplication of payment choice. For one thing, it’s put the merchant in an enviable position, according to Banking Circle’s chief growth officer, Søren Mogensen. “COVID-19 did not change the digital finance evolution, but it’s certainly accelerated it and that has led to opportunities, as well as threats,” he says. ffnews.com
“The opportunities are exemplified by all the new and interesting payment methods that have emerged recently; buy now, pay later (BNPL) is a tremendous example of that. As to the threats, competition is increasing. There is an intense battle for the merchant interface, such as we’ve never seen before. At Banking Circle, we see that played out every day.” As to whether banks and payments companies are ready for these changes, Mogensen believes they ‘absolutely’ are. “Payment companies are definitely expanding their service propositions for the merchant: they want to add accounts, including virtual accounts, lending, issuing, BNPL and much more,” he continues. “They want to surround the merchant customer with an ecosystem of opportunities and we see several companies delivering that really well. Banks are doing the same. “But, now, we also see enterprise resource planning (ERP) systems creating an ecosystem of which cash management, transaction banking, and payment solutions form a part; and we see software platforms like Shopify delivering solutions such as payments and capital. Also in this space are the fintech aggregators. So, there are interesting dynamics developing between companies trying to achieve the same objectives.” There are two winners in this battle – and it’s not the providers. Rather, it’s the consumers and merchants, who have a wider variety of payment methods to choose from at lower cost, who benefit. “Each category of provider will need to intensify their game,“ believes Mogensen.
“Each participant in this ecosystem will have to focus on what they are very good at. The payment companies will need to focus on serving the merchants with very strong propositions, and they will need to partner up with others, like Banking Circle, to get those solutions in place. “For example, we deliver the payments, the accounts, the foreign exchange and lending for payment companies, but we see collaboration enabling them to deliver much stronger merchant solutions.” The technology unlocking this explosion of choice, in the main, is APIs and the Cloud. Banking Circle’s open API, for example, enables financial services providers to connect automatically and directly to its payment infrastructure for real-time, cross-border processing. APIs also allow merchants to integrate their systems with third-party payment service providers more easily, and fully automate transaction, accounting and reporting processes by embedding them into the ERP software or accounting system, as Mogensen describes. As a payments infrastructure provider, Banking Circle is agnostic as to which of these many intermediaries is accessing its platform; it works with anyone involved in the payments process, but it doesn’t have direct relationships with corporates or merchants. “Banking Circle is building an ecosystem of propositions aimed at payment companies and banks, but also software platforms and ERP systems,” says Mogensen. “And we are developing strong partnerships that will deliver strong opportunities for all parties.” Issue 22 | TheFintechMagazine
63
