Financial news

A challenging macroeconomic environment is prompting businesses worldwide to cut their supplier list, with payment service providers (PSPs) in the crosshairs; according to GoCardless‘ latest report.

The GoCardless report, ‘Embedding a Competitive Edge‘, reveals that 66 per cent of businesses in a five-market survey across the UK, US, and Eurozone say they are looking to consolidate the number of PSPs they use. At the same time, 34 per cent have planned to end these relationships within the next 12 months. The top motivator for doing this is to reduce operational costs (31 per cent).

However, it’s not all doom and gloom for PSPs. Despite a cost-cutting mindset, the research reveals that modern businesses are still willing to open their wallets if they see value in what a PSP can offer – providing a clear way forward for those who want to remain off the chopping block.

The greatest proportion of businesses surveyed (34 per cent) say they would be willing to pay more for fraud prevention solutions, and 25 per cent would do the same for tools that increase their payment success rates. Three in 10 (31 per cent) say they would be willing to pay more for a wider range of payment methods, rising to 38 per cent in the US.

Account-to-account payment methods are especially popular. Over a third (35 per cent) of merchants indicate they want their PSP to offer bank debit, while 27 per cent call for open banking or other bank payment options.

Can PSPs keep up?

The report also contains insight from a survey of more than 200 PSPs in the same five markets. The top priority for this group over the next year is increasing customer satisfaction and retention (58 per cent). Meanwhile, 44 per cent also say they want to become more competitive.

Many are also focused on customer requests: a wide range of payment options. Eighty-six per cent of PSPs are looking to add one or more payment methods within the next 12 months. Of those, the most popular method to add is digital wallet, chosen by 58 per cent, followed by credit or debit card (48 per cent) and bank debit (47 per cent).

Globally, the proportion of PSPs that plan to add real-time bank payments, including open banking payments, is 35 per cent – but this increases to more than half (53 per cent) of PSPs in the UK, reflecting the continued growth of open banking in the market.

The challenge for PSPs, however, is managing the amount of time and effort required to improve their offering. When asked about the concerns they have in adding a new payment method, ‘taking a long time to deliver’ took top billing, chosen by 45 per cent of PSPs.

This was closely followed by fears around complexity: 40 per cent are worried about the complications for their engineering team when integrating or building a new solution, and 37 per cent are concerned about the complexity of managing the new payment method on an ongoing basis.

The next step for PSPs

As it becomes clearer that merchants prioritise protecting their hard-earned revenue, the report explains the importance that PSPs ensure they offer the best value.

Deepak Colluru, director of product management for GoCardless Embed, explains: “In today’s challenging environment, businesses are looking for every supplier to deliver value. PSPs are no exception.

“One simple way to demonstrate this is by focusing on the areas that merchants care about most, including anti-fraud solutions, features to boost payment success and a range of payment options.

“PSPs that want to add or enhance any of these must grapple with the classic ‘buy versus build’ dilemma. When we’ve spoken to PSPs interested in adding bank payments, for example, they are all too aware of the time and resources required to not only build but also maintain a new payment method in-house.

“If staying competitive is a priority, payment providers may find that the best – and quickest – way to satisfy customer demand is to enhance their offering through a third-party expert.”