EY: Meeting Consumer Demands With PayTech Investment

In 2024, consumer demand for instant and alternative methods of payment has never been higher. 

Offering payment choices to consumers is fast becoming the norm, and merchants need to act by leveraging payments automation and innovative payments systems to streamline their processes and shorten their invoice-to-cash window.  

We speak to Ernst & Young’s (EY’s) Managing Director of Financial Services Consulting, Patricia Partelow, who says the need for change is driven by demographics, “including age, geography and socioeconomic factors”. 

Indeed, a recent EY survey revealed that Gen Z leads the generational pack in adopting digital payment methods. Notably, Gen Z is up to three times more likely to use an alternative payment method, such as contactless payments, payments apps, Buy Now Pay Later and in-game currencies.

EY: How merchants can meet consumer payments needs

But how do merchants meet these changing payments needs? Partelow says: “The solution to helping merchants offer their customers the greatest number and most relevant payment method choices possible is simple: Payment Orchestration Platforms (POPs). 

“POPs offer solutions that integrate and unite multiple Payment Service Providers (PSPs) and the various alternative and local payment methods they provide. 

“These orchestration solutions deliver unified connectivity to multiple service providers (processors, acquirers, value-added service providers, etc.) through a single connectivity/orchestration layer.”

What’s more, an orchestration unified software layer can “simplify front-end and back-end integrations between a merchant’s website or in-store point of sale (POS) and multiple PSPs enabling the management of multiple capabilities through a single platform,” Partelow adds. 

“Employing an orchestration layer presents many benefits to a merchant. Given choice and configurability, it provides the ability to customise the solution suite a la carte style to tailor to needs. It allows for broader acceptance of different payment methods and increased geographic coverage.  

“All in all, merchants can benefit from the smart routing of transactions to optimise multiple factors including cost and authorisation performance based on priority.”

The importance of fintech partnerships

For most merchants, building and implementing new payments technology is not possible, despite its importance. This is why today, partnering with fintechs and traditional financial institutions is of high importance. 

“Partnering with banks or fintechs who provide payment solutions and services helps companies to offer the latest and greatest capabilities,” notes Partelow, “while ensuring that they will comply with regulations and payment rail operating rules on an ongoing basis.”

She adds: “Understanding what payment service providers offer can also help educate merchants on industry trends and best practices.  

“Leveraging your relationships with your banks and current fintech partners is crucial to keep current on the latest offerings to determine if they can improve your payments portfolio performance.”

Defining a successful payments strategy

However, if you’re a merchant, it may be difficult to know what a healthy payments partnership and broader strategy look like. 

For Partelow, merchants must see payments “as a strategic lever that can help them increase sales and improve customer experience by providing customers with the payment method of their choice as well as designing a secure and intuitive way to capture information."

She adds: “Taking a cross-functional approach to payments, partnering with digital, marketing and technology teams ensures that merchants will get the most out of their payments’ acceptance investment and transition it from a cost-of-doing-business to a strategic enabler to growth and aligns it to company objectives.  

“It makes sense to look at your payments flow from end-to-end. Understanding how the data flows from the purchase through settlement and into your back-office accounting systems, will allow you to design new flows that simplify the overall processing of information and allow for faster reporting and recognition of funds.  

“And lastly, merchants should not only focus on payments acceptance but also look at their payment disbursement processes. Whether you disburse funds to pay suppliers or customers, there are opportunities to optimise those processes and delight customers as well.”

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