We sat down with Mario Klapsis from Trustly to discuss the rise of online banking e-payments and the role of Trustly in enabling acceptance globally
In the Netherlands, the implementation of iDEAL in 2005, the local payment method for online banking e-payments, was a milestone in the rise of non-card payments. Meanwhile, online banking e-payments have become increasingly important, not only in The Netherlands and Sweden but globally.
Globally, the market share of card-based payment methods is declining, and we see online banking e-payments becoming more relevant. In which countries and regions do you see consumer preference for this method increase?
I think the best way to answer this question is to take a step back and understand what makes this area such an exciting one of growth and change. There are three forces driving the adoption and development of online banking e-payments: firstly, there is the regulatory force, which differs across the world in the way it is impacting the adoption of online banking e-payments. For example, in Europe and Australia, regulators want to foster simple and secure transactions locally, which, in turn, will also bring about more cross-border trade. Secondly, consumers themselves drive change: various segments of consumers have their own preferences, needs, and priorities, depending on what kind of online transaction they want to make. Even though there are many different types of consumers, we see that their preferences are converging globally towards online banking e-payments. For example, we have seen growth in mobile enablement globally, and that, of course, drives online transactions, which in turn drive online banking e-payments. Thirdly, we see merchants driving change to online banking: merchants have clear needs in terms of operational efficiencies and making themselves accessible and relevant to their customers, which can all be met by online banking e-payments. All three groups want simplicity and transparency, and online payments can provide that.Moreover, in places like Europe, we see a combination of these three forces, which is why change is happening very quickly there. In the US, the regulators are lagging behind somewhat, but the combination of merchant and consumer demand is still present, driving change. In fact, we see the consumer being the primary driver of enabling online transactions everywhere from the US to Southeast Asia.
You mentioned the US, a region that traditionally favours card transactions over all others: is the change happening differently there than in Europe?
While the context is slightly different, the factors driving consumers to online payments are the same almost everywhere. We have observed three trends in consumer preferences. Firstly, there is a generational trend: generally, Millennials and Gen-Z, unlike the Baby Boomers, have grown up with fast and reliable online payment infrastructure as part of their lives, so they are accustomed to simple enablement and a direct relationship with the merchant. Secondly, there is a trend away from loyalty: there are some groups in the US that are very attached to loyalty programmes, but due to the changing economic circumstances, loyalty has become very hard to support financially. So even if a consumer is used to a card instrument, oftentimes it can be difficult to use and it is very prone to fraud, so they might consider a faster, safer, and simpler method. Some people will stay with cards because that is what they are used to and they are comfortable with it, but there is a growing segment of consumers that are opting for online payments instead. Finally, we see an almost universal preference for consumers to spend money they have, not the money they would like to have, which is an important driver away from cards and towards online banking e-payments.
What are the benefits of online banking e-payments for merchants, compared to card-based payments?
When discussing the merchant side, it is important to remember that merchants do not think about payments as their number one priority. Nor their number two, or three. Payments are considered at the very bottom of the list, and payment service providers are considered enablers of a business. An enabler needs to provide an operationally efficient solution: it needs to be cost-effective and reliable, as it supports the entire proposition that the merchant offers to its customers. Online banking e-payments provide these operational efficiencies: they remove chargebacks to the greatest extent possible, they provide speed and good UX when implemented well – especially for the consumer segments that we discussed before –, and they are cost-effective.
What is the role of Trustly in online banking e-payments?
Trustly provides a payment ecosystem, a word that people love to use in very different ways. In essence, anyone that provides base services such as payment initiations, authentications etc. can call themselves an ecosystem. At Trustly, we focus on value-added services that we developed on top of this base layer. We are able to help merchants understand their flow of transactions, we enable quick refunds, and we enhance the user experience. We offer these and other value-added services, and we are excited to be at the forefront of this thrilling and evolving part of the payment world.
About Mario Klapsis
Mario is the Vice President Financial Services & Sales, as well as General Manager UK. His team is responsible for setting up the strategy, articulating and distributing the relevant solutions, and driving accelerated growth for our Financial Services business. He has over 20 years of experience in change management and business development worldwide. He has been focusing on the global payments industry for the last 15 years, first with American Express and now with Trustly.