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E-commerce in Central Asia is ready to go mainstream. One of the snags holding it back is the absence of streamlined merchant solutions.
The various methods to accept the online payment from the client and process the transaction are collectively called the merchant solutions.
According to the website Carat, to accept online payments, both small and large eCommerce merchants need three things:
Merchant Account: A type of account that allows merchants to accept electronic payments from their customers. After transactions have been authorized and settled, the funds from customers’ credit and debit card companies are deposited into this account. The money is then transferred to the merchant’s business banking account usually within 1-2 days. To obtain a merchant account, businesses need to establish a relationship with a merchant services provider, like First Data.
Payment Gateway: A technology platform that connects your ecommerce web site to a merchant services provider. It transfers the data between the payment processor and the website or mobile device to continue the payment lifecycle.
Payment Processor: A financial services institution, such as a credit card services provider, that facilitates the transaction data between the merchant account, the issuing bank, and the acquiring bank. The processor basically administers the entire transaction lifecycle. First Data is a payment processor that supports both issuing banks and merchant acquiring.
https://www.carat.fiserv.com/en-us/resources/ecommerce-credit-card-processing/
How eCommerce Credit Card Processing Works
Whether purchasing a gift, paying a bill, or making an online donation, customers begin the eCommerce transaction by entering their credit or debit card numbers into the checkout page or form on the website or app. Once they click the button to submit the information, the encrypted payment details are sent to the payment processor via the payment gateway. The payment processor notifies the card-issuing bank to ensure the customer has available funds, and the transaction is approved or rejected.
The payment processor then communicates the authorization or decline back to the payment gateway. The gateway sends the approval or decline back to the merchant’s website. If approved, the customer receives a receipt or order confirmation, and the funds are deducted from customer’s available credit or bank account and settled into the merchant’s bank account.
The problem arises when a lot of sellers and buyers are interacting through different platforms. Naturally, this is chaos but there is the need to standardize the chaos.
Clover has shed some light on the basic structure of the merchant solutions.
According to Clover, any business unable to offer secure, convenient eCommerce payment processing is missing out on significant sales revenue.
With an eCommerce merchant account, you can accept credit and debit cards and ACH payments on your website. Simply put, a merchant account is a contract between a retailer and a credit card processing company that allows you to offer fast, flexible, and secure payment options.
Depending on your eCommerce merchant account provider, you may receive the following:
- Integrated shopping cart functionality
- Enhanced security with PCI-compliant payment processing solutions
- Advanced fraud monitoring capabilities with customizable parameters
- Shopping cart and software integrations for your eCommerce merchant account
- When setting up an eCommerce merchant account, consider processing solutions that integrate with the shopping carts and online storefronts that align with your business.
If you use a specific accounting, CRM, or business management software, consider a merchant account provider that offers integrations with these platforms to help reduce manual entry, prevent data entry errors, and save time.
Reduce PCI scope with secure eCommerce payment processing
If your goal is to safeguard your customers’ payment information and protect your online business from fraud and abuse, consider an eCommerce merchant account provider with solutions built using a PCI DSS-certified payment gateway and the latest in fraud protection.
A secure online payment gateway:
- Accepts all major credit and debit cards
- Encrypts card information from point of entry through authorization
- Uses advanced security measures, such as tokenization, to reduce the risk of data breaches, payment fraud, and identity theft
To reduce your eCommerce site’s PCI scope, your merchant account provider should also host your online checkout form on a secure server. Doing so removes the need to capture or store any credit card details within your payment environment. Not only does this help decrease your fraud exposure, but it also helps to reduce your merchant liability.
Some providers allow you to customize your hosted payment form and brand it with your eCommerce store’s colors, logo, and formatting. This helps to ensure that your customers enjoy a truly seamless shopping experience.
The Asset has explained some of the issues in the sphere of merchant solutions. The title of their article is ‘Capturing the e-commerce opportunity in Asia – Why merchant solutions are a game-changer for companies looking to expand their online presence.’
We are reproducing here a slightly truncated version of the article. This article, of course, is anchored at Deutsche Bank but the general principles are the same and universally applicable.
Growing from strength to strength, the global e-commerce industry offers enormous opportunities as consumers and businesses increasingly look online for goods and services. This is particularly true in Asia where the middle-class segment is growing and businesses are becoming more sophisticated. Already, the region represents the world’s largest e-commerce market, with revenue this year (2023) projected to reach US$1.81 trillion or 31.6% of global total, according to data from Statista. Driven by the high-growth markets of China, India, Indonesia and Vietnam, e-commerce sales in the region are forecast to reach US$2.81 trillion by 2027.
https://www.theasset.com/article/50235/capturing-the-e-commerce-opportunity-in-asia
Realizing the huge prospects, both traditional businesses and nascent digital marketplaces have sought partners to support and improve their transaction flows. These partners include banks such as Deutsche Bank which offer merchant solutions to enable businesses to nurture a better e-commerce customer experience with new payment acceptance tools and global electronic payments processing, for instance.
“Global merchants have two large overarching challenges to tackle nowadays, one being the requirement for enhanced agility and flexibility. We have local wallets and global wallets; we have local instant payment rails and direct debt rails. It is a very fragmented and ever-changing payments landscape especially in Asia-Pacific,” shares Oliver von-Quadt, head of merchant solutions, APAC and the United States, corporate bank, at Deutsche Bank. “The classic check-out processes and payment processes, which are a traditionally operational-driven process, now need to be customer-friendly, seamless and in a good design.”
Other areas CFOs and treasurers should pay attention to when looking to enhance their e-commerce flows include being able to coordinate different departments to ensure a smooth transaction flow for the online business.
“At the end of the day, of course, data and reconciliation, which are always a challenge for treasurers with various e-commerce shops globally. You have different data streams, you have Excel sheets – they all need to be put into one bucket and reconciled. That agility has to come into play, and even more so and even more critically, is the need for multi-disciplinary teams,” highlights von-Quadt. “Treasury teams today, for example, are stretched into a new world of technological solutions to accept payments for collections. At the same time, if you look at the sales team, that has now stretched into the e-commerce challenge away from classic channels. If you look at the technology teams of merchants, they have to get used to working with external technology providers.”
Marketplaces are growing exponentially, with many of the large companies creating proprietary platforms or marketplaces for their ecosystems
Tech-loving experts
Looking to solve the fragmented payments landscape and operational pain points facing their merchant clients, Deutsche Bank has been a key adopter of technology and partnership model to better understand how the bank could add value to the business.
“We have built a technology-loving team of experts in the house that engage actively with all our merchants in order to understand the digital journey. We need experts who not only know enough about banking but also understand the revenue model and implications for collections, and think beyond classic banking and treasury,” says von-Quadt.
One area the bank has been successful in is working with external parties and forging partnerships to streamline the whole payments flow for merchant clients. “Right at the start, we had a determined mindset towards partnerships. We look into three different technology providers who are nimble and have the agility that only a fintech could have and a large bank has challenges with,” explains von-Quadt. These include regional and country specialists who know what is happening on the ground not only from a regulatory point of view but also from a payments landscape point of view. The third type of partnership involves payment instrument specialists, the fintechs that focus on special instruments such as QR codes.
“The value proposition cannot just be only partnerships. It should be on creating an end-to-end solution that is very simple for our clients to connect to and invisibly enable a very specific wallet in a very specific country in APAC without the difficulties of reconciliation of the different payment methods. That’s the value proposition we bring to the table all across APAC,” ” he stresses.
Earlier this year, Deutsche Bank acquired a strategic stake in Australian paytech company DataMesh Group, which can help the bank enhance its services to merchant clients in the region.
With DataMesh’s Unity payment orchestration layer, the bank can operate seamlessly with individual acquirers in different countries, enabling merchants to accept payments through online methods within individually regulated currency zones.
“We take away connectivity to local PSPs (payment service providers), aggregators or even different ones in one country. That is done by us. Aside from that, onboarding a PSP even for a global merchant is a challenging issue. They have governance frameworks they need to adhere to. We take care of that. The client doesn’t need to worry about picking the right partner that ticks all the boxes that a properly governed global company has to take,” says von-Quadt. “We take away the complexity out of entering Asia with all the different payment methods and regulations. At the same time, we keep the local flavour by having those local partners. We keep the local flavour but take away the pain points the local flavour usually brings along.”
Data insights
Aside from taking care of merchant reconciliation through the use of partners, the bank is adding value by providing data insights to users on the platform, whether they pay on time, and the frequency of transactions on the merchant marketplace. “Merchant solution is extending from a banking perspective. Cash is usually managing money that is already in the house. Merchant solutions take care of the collection. This is a new area in the sense that it comes before the actual treasury part happens. On the lending side, we are working with products that provide lending capabilities upon checkout such as ‘buynow, pay later’ for corporates,” he says.
Demand for merchant solutions is expected grow in Asia as the competitiveness of marketplaces is expected to intensify. “In general, corporates look at a marketplace mostly because they understand that owning the customer lifecycle is very relevant. There is no better way of doing that than having a marketplace and continuing to have a commercial relationship with the client post the initial sale. The challenges for marketplaces are defining the right business model that is appropriate it needs to be attractive for sub-merchants to join the marketplace,” he says.
Going into the future, von-Quadt believes solutions around cross-border payments – whether it be involving global or local wallets – will be something that the industry needs to keep an eye on. /// nCa, 7 June 2024