First Annapolis recently completed a survey of 18 leading European PSPs and acquirers on the topic of omni-channel capabilities and proposition development.
The research confirmed that omni-channel capabilities continue to be a high priority investment for payment acceptance providers and that many of these providers already provide elements of an omni-channel proposition to their customers, but also face ongoing challenges (mostly internal roadblocks) to achieving the ideal end-state – writes Marco Mazzonetto, Manager specializing in Merchant Acquiring and M&A in Europe at First Annapolis.
Profiling the proposition, historical context, and platforms of the research participants
Our research included participants originating from differing starting points: 45% as e-commerce PSPs, 33% acquirers, and the remaining from other beginnings (Figure 1). 90% of the respondents already provide both POS and e-commerce services, however the breadth of their product set is somewhat limited with none of the respondents fully achieving the one-stop-shop positioning. The two most common product gaps of our survey participants are loyalty and financing both at POS and in e-commerce. In-house development is almost always preferred to partnering with third parties or leveraging licensed solutions (Figure 2).
Figure 1: Categories of Payment Companies that Participated in the Survey
Total Sample 18 Respondents
(very first product offered)
Sources: First Annapolis Consulting research.
Figure 2: Which of the Following Products/Services Do You Offer and How are They Enabled?
(% survey respondents)
Sources: First Annapolis Consulting research.
Enabling omni-channel use cases
Half of the respondents today enable baseline cross-channel functionality including: providing merchants with a single view of data across channels, cross-channel tokens, and buy-online/instore pickup. More than three-quarters of the participants expect to have these capabilities by the end of 2017. More complex use cases such as channel optimization analytics and payments split across channels are less common today, but also an area for investment in 2017. Enabling more advanced analytics that help merchants to better measure and optimize channel performance was the single most mentioned area for investment in 2017 (Figure 3).
Figure 3: Which of the Following Cross-channel Payment Use Cases Do You Currently Support or Plan to Support in the Next 12 Months?
(% survey respondents)
Sources: First Annapolis Consulting research.
Investments into omni-channel capabilities will continue to accelerate in 2017 with 61% of respondents indicating this as a high-priority area for investment this year.
Penetration and cross-sell potential
Consistent with a perceived lack of demand, actual penetration of omni-channel propositions remains somewhat disappointing. Almost half of participants indicated that less than 10% of customers are currently using omni-channel product (i.e., purchase both POS services and e-commerce services) (Figure 4). First Annapolis Consulting estimates that 20% of all card accepting merchants in Europe are omni-channel (operating online and offline) which suggests significant potential for continuing to penetrate this demand.
Figure 4: Which Percentage of Your Merchants are Using Both your POS and Your E-commerce Front-end Services (Excluding Acquiring)?
(% survey respondents who offer both POS and e-comm solutions)
Sources: First Annapolis Consulting research.
Respondents described several ongoing challenges to omni-channel enablement, with many of these roadblocks being internal. Lack of coordination across different distribution channels (i.e., POS services sold via different channels than e-commerce) was described as the single greatest challenge. Surprisingly, 39% of the respondents reported lack of merchant interest in omni-channel payments.
Conclusions
European payment acceptance providers are well along the journey to enabling omni-channel payments. However, there is still work to be done to further improve product offering and penetrate the demand, including overcoming internal organizational and distribution constraints. Omni-channel capabilities will remain a key investment priority for 2017.
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