Payment market: Instant Payments – what benefits do online print providers derive from this new service?

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The choice of payment systems is growing.  Instant Payments is set to provide permanent availability and realtime payments in 34 European countries from 2018 onwards. What benefits will online retailers really derive from this?

Acquisitions and consolidations have caused movement in the payments market as well over the last few years and enabled several well-known names particularly in the eCommerce sector to raise their profiles and secure their positions as providers. Only a tiny handful of European countries already have countrywide standardized electronic payment systems in place. The European Central Bank (ECB) in its role as the Eurosystem’s central institution has been working on an alternative for a couple of years now, which is said to have greater capabilities. It’s not long to go now before the plan for the ECB-initiated Instant Payment Procedure for the so-called Single European Payments Area (SEPA) involving 34 participating countries is unveiled. It has targeted November 21, 2017 as the unveiling date. The plan is due to be implemented a year later, in November 2018. Although that still seems like a long way off, it’s actually not, given the infrastructural requirements. And since the launch is scheduled for midway through the 2018 Christmas trade, the realtime payment option could face its first acid test if the banks are ready and the payment service providers and the retailers are willing to operate the new service.

Instant Payments in figures; Source: ecb.europa.eu

What benefits is this new service intended to provide retailers and customers with? Since the procedure is geared towards standardization it should speed up cross-border transactions in the SEPA area in particular by making things simpler. According to the ECB, Instant Payments is not a payment option that needs to be integrated into online stores. As a standardized service it is intended to provide an alternative to the payment method market leaders. In this case Instant means that not only is the payment entry displayed straightaway, it is also transacted immediately, even at weekends, which is designed to make the new service suitable for fast transfers and direct payment of amounts up to 15,000 Euros. Therefore the banks could start competing with private-sector payment systems. Several of the former have to date “only” operated with payment guarantees, which are communicated in realtime and confirm imminent receipt of funds to retailers, without the entry being made ad hoc. What is certain – and you can read that between the lines in the ECB’s press releases – is that the effort and expense involved is very high. That’s because TIPS (TARGET Instant Payment Settlement) is being developed as the implementation concept together with Europe’s banks, in order to implement a “genuine” direct electronic payment procedure practically throughout Europe.

“Only time will tell how attractive Instant Payments is to online retailers and customers, once it has been launched in November 2018. However should the transaction costs quoted actually apply, then the 10-second version could mean real competition for the leading providers.” – Bernd Zipper

As far as costs are concerned, participating banks will incur a maximum charge of 0.002 Euros per transaction for the first two years, while companies will be charged a maximum of 0.005 to 0.1 Euros per order to cover costs, according to recent information. At least this aspect makes Instant Payments attractive, compared to existing systems. We will have to see how implementation of the new service pans out. And what’s the story in the online print industry? Is there still demand for more payment systems? To gauge this, I have taken a look at customer reviews and payment options offered on the websites of more than 30 online print providers in the D/A/CH market. I have included the following types of payment: credit card payment, direct debit, E-Rechnung (Klarna), SOFORT Überweisung, payment on delivery, advance payment, cash payment on collection and PayPal/Paydirekt.

More than 80 % of the D/A/CH online print stores considered offer four or more payment options; Source: zipcon consulting

You can clearly see from the diagram that more than 80 percent of the online print providers considered have already incorporated four or more payment options into their stores. But there are still a couple of print providers, who in my opinion are restricting themselves to too few types of payment (two or less), which could deter the odd customer from placing an order, if their preferred system is not offered. And which are the Top 4 payment systems? In putting together this information I ascertained that payment by credit card and Paypal/Paydirekt (offered by nearly 90 percent of online print providers) clearly lead the way, closely followed by E-Rechnung (Klarna) and SOFORT  Überweisung (each offered by more than 60 percent of online print providers). The D/A/CH online print industry mirrors very closely what you find in the “general” eCommerce sector.

Mind you, the number of payment systems is not directly linked in the online print industry to company size, because there are a couple of major players in the industry that make do with four payment methods.  What’s ultimately important is whether customers, be they B2B or B2C, get the service they require. But there is a trend towards offering a greater choice of methods, made easier by the growing number of payment service providers and which could be encouraged by the adoption of the ECB system.

My take: the level of market acceptance of the new Instant Payments system starting in 2018 will depend to a very large extent on  the real benefits for and integration willingness of online retailers – and they will be eyeing costs and whether customers even “express” a need for it. Initially, Instant Payments will “only” be yet another payment option among the many established ones. But as with the market leader, PayPal, Instant Payments is also suitable for payments between private individuals, and another objective of the ECB seems to be to establish a direct electronic payment system at the PoS, which can be transacted by smartphone. But there is still more than a year to go before the launch – during this time the one or other online print provider will up the ante as far as payment systems are concerned. I will revisit the subject of payment systems at the appropriate time and we will then see if there is still space for Instant Payments, despite its comparatively low costs.

Founder and CEO of zipcon consulting GmbH, one of the leading consulting companies for the print and media industry in Central Europe. The technology and strategy consultant and his team actively support practical implementation in a wide variety of customer projects. His work involves developing visions, concepts and strategies for the players active in the print production process across a wide range of industries. His areas of expertise include online print, mass customization, strategy and technological assessment for print, and the development of new strategies in the print and media environment. Bernd Zipper is the creator and chairman of Initiative Online Print e.V. and, in addition to his consulting activities, is an author, lecturer and sought-after speaker, orator and moderator. His visionary lectures are regarded worldwide as trend-setting management recommendations for the print and media industry. (Profiles also in Xing, LinkedIn).

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