Many people know Ingenico as a manufacturer of payment terminals. Over years, the company has acquired firms in the digital payment processing space. Our guest on the podcast today, Andrew Monroe, runs the epayments division in North America, helping large multinational merchants accept payments from consumers across the world.
Through his decade at Ingenico, Andrew has seen a lot of payment trends. In our discussion, we talk about the growth of subscription payment models and how firms can effectively implement them. We discuss how to effectively implement data strategies around optimizing conversions online. Andrew shares how firms can enter best new markets with digital payments and services.
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The following excerpts were edited for clarity.
Different payment geographies
I lived in Europe for about seven or eight years prior to coming back to the US about three and a half years ago. There are definite differences in the merchants and the way in which you engage. There are cultural differences, there are professional differences. But there’s also a difference depending on the profile of what a European merchant is looking for, based on what a US merchant is looking for.
Europe is quite unique in that there are so many small countries with so many unique cultures, all huddled right around each other. And it’s not just a kind of a social, cultural type of thing. It’s also a payment culture. So if you can take the word culture and associate it with the way payments are understood, and the preferred payment methods, they vary greatly. And so, what you see from a European merchant is they’re used to the concept of a cross border payment, more so than a US based merchant.
The US is more homogenous from a payment product standpoint. There are fewer choices from a consumer standpoint. If you go state by state, you’re not going to see that much of a difference from a consumer preference standpoint. But in Europe, it’s it’s very different. Payment preferences vary wildly based on country, and European merchants are forced to be up-to-speed on the different payment cultures that are surrounding them.
But all that’s changing due to the increase in digitalization, and also the increase in internationalization of goods and services.
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Payment disruptors
There are disruptors that are in the US market. I believe they’re following more global trends. So what you see is there’s a lot of open banking — making bank-based payments, making them in real-time, and in a more transparent way from a reporting perspective. That’s a trend that you see a lot in Europe, but it’s spreading across mainland Europe. We’re also seeing that here in the US.
There’s always crypto, but I think that’s a less mature payment method. But the technology behind crypto, whether it’s the application of blockchain, or whether it’s actually using crypto as a mechanism to be a payment method, that is still something that is being worked on here in the US as well as globally.
There’s also the digital wallets. The US is moving more towards banking and e-wallets, and less of a credit card intensive payment method mix. If you look at the data, the US is one of the most credit card reliant countries in the world.
Trends behind subscription payment models
We’re in what we see as the hastening of the subscription economy and subscription business model over the past six to eight months. It’s been accelerated by COVID. Because everyone’s lives have been disrupted, things that we were used to accessing either face to face or some point of sale payment aspect, we haven’t been able to do for a long time.
Therefore, people were forced to get those same experiences — get access to those same media or physical goods — through a digital channel by either using a website or using a mobile app. And there are different ways of getting that content. Subscriptions is one business model. There’s one off payments. There is the Free to Play approach where you give some of the content for free, and then you monetize other parts of the content.
What we’ve really seen is the subscription has emerged as one of the fastest growing business models. Historically, subscriptions had been reserved for certain types of goods and services. But now you’re seeing subscriptions applied to banking. You see car companies offering subscriptions, so I can pay a few thousand bucks a month, and then get access to a whole fleet of BMWs or Porsches, and just swap a car at any time. So you see car companies, auto manufacturers turning towards subscriptions. You see pet food companies that understand your buying habits of how frequently your pets eats, and then offering you a subscription service to automatically deliver the pet food based on what they know from your data, based on when they know your pet is going to run out of food.
And the convenience of the subscription payment is why it’s becoming such a preferred method of payments for consumers, because you can set it up from the beginning. And then you don’t have to worry about it. If you set up a subscription for the pet food, it just arrives at your door, and you don’t have to worry. So the convenience factor, the consumer experience, when a subscription payment is set up correctly, is very, very good. And that’s what we believe is driving a lot of the uptick that we’ve seen.
Doing subscriptions right
There’s a whole science behind effectively running a subscription business. And there are a lot of data points that we collect even before the payment process that will allow merchants to effectively convert a consumer from somebody who is just browsing into somebody who’s not just signing up to buy something, but they’re signing up to buy a recurring purchase of the goods and services that you’re offering.
And so it’s really about understanding the customer, it’s creating the right user experience on the website. And then it’s offering the right ways of monetizing based on what you’re offering. And there’s not one way to do this, it really depends on the demographic of the user that is buying, what the goods and services are. But it’s setting everything up to make it as clear and as smooth as possible for that consumer to sign up for whatever you’re delivering from a subscription standpoint.
I think a pitfall that a lot of people do is they look at this more from a finance standpoint — from a revenue standpoint, rather than a consumer experience standpoint. We recommend you flip it: first design it from a consumer experience standpoint. And if you do that right, then you have nothing to worry about the revenue will just start flowing.
Using data to optimize experiences
Companies are now forced to understand and to intelligently use data. And the output of that is is really exciting, because you can use all of these different data points to create the exact consumer experience that you need. And so for Ingenico, we’ve broken down the checkout process, or more specifically, the payment process, into between four and six different kinds of major events, starting with the checkout process, and then ending with either a refund reversal or some sort of anti payment, a reverse payment.
At each one of these stages, we’ve identified a bunch of different kinds of sub segments of areas that can be optimized. Just on the checkout page itself — after a consumer decides to buy something and put it in his shopping basket, and is about to click that Buy Now button. A lot of the work has already been done, yet we found 26 points of optimization to optimize just that checkout experience for a merchant. Behind those 26 are, of course, millions and millions of rows and columns of data that can be analyzed. And then you get into fraud prevention, authorization and converting payments, and then you get into settling and actually getting the funds into your account.
And each one of those different events, there are multiple, multiple areas of optimization. But the only way that you’re going to know is if you have access to the data behind each one of those monetization areas.
Merchant reactions to COVID
I’ve seen a full spectrum of responses to COVID. Some merchants are really struggling. It depends on the industry that they’re in it and depends on the demographic and the goods and services they’re selling. Travel is a tough market. I’ve also seen the opposite: merchants having to deal with an unexpected surge of demand, demand that in January and February of this year, they had no way of forecasting and then you face scalability issues, then you face the ability to actually meet that demand. And that’s a good problem to have, but if there’s not a good foundation set before that, then it can be really challenging for companies to scale their systems and to meet the needs of the increasing consumer demand.
That’s what we’re really helping out with. We’re doing kind of both sides of the spectrum. For the merchants that are now facing a decrease in demand, we’re helping them plan and really get their systems at the level they need to be to hit the ground running and to really take full advantage when things start to recover. And for those merchants that were hit with kind of an unexpected surge, we’re helping them with the structural things they need to do in order to meet that demand, but then doing it in the right way. Because the last thing that you want is a surge of customers that come to your site or come to your app and want to buy your product, and you’re unable to convert them, you’re unable to actually take their payments. It’s a tremendous waste of an opportunity. And so that’s what we’re really helping those clients with.