Two-thirds of businesses plan to cut the number of payment providers they use

A challenging macroeconomic environment is prompting businesses worldwide to cut their supplier list, with payment service providers (PSPs) in the crosshairs.

Two-thirds (66%) of businesses in a five-market survey across the UK, US, and Eurozone say they are looking to consolidate the number of PSPs they use — and a third (34%) plan to end these relationships within the next 12 months. The top motivator for doing this, chosen by 31% of merchants, is to reduce operational costs.

However, it’s not all doom and gloom for PSPs. Despite a cost-cutting mindset, the research reveals that modern businesses are still willing to open their wallets if they see value in what a PSP can offer — providing a clear way forward for those that want to remain off the chopping block.

The insights, published by bank payments company GoCardless in its new report “Embedding a Competitive Edge”, indicate that merchants care most about protecting their hard-earned revenue and offering payment choice.

The greatest proportion of businesses surveyed (34%) say they would be willing to pay more for fraud prevention solutions, and a quarter (25%) would do the same for tools that increase their payment success rates. Three in 10 (31%) say they would be willing to pay more for a wider range of payment methods, rising to 38% in the US.

Account-to-account payment methods are especially popular. Over a third (35%) of merchants indicate they want their PSP to offer bank debit, while 27% call for open banking or other bank payment options.

The report also contains insight from a survey of more than 200 PSPs in the same five markets. The top priority for this group over the next 12 months is increasing customer satisfaction and retention, chosen by 58% of respondents. In a similar vein, 44% also say they want to become more competitive.

Many are focusing on what their customers have asked for: a wide range of payment options. Eight in 10 (86%) PSPs are looking to add one or more payment methods within the next 12 months. Of those, the most popular method to add is digital wallet, chosen by 58%, followed by credit or debit card (48%) and bank debit (47%).

Globally, the proportion of PSPs that plan to add real-time bank payments, including open banking payments, is 35% — but this increases to more than half (53%) of PSPs in the UK, perhaps reflecting the continued growth of open banking in the market.

The challenge for PSPs, however, is managing the amount of time and effort required to improve their offering. When asked about the concerns they have in adding a new payment method, “taking a long time to deliver” took top billing, chosen by 45% of PSPs.

This was closely followed by fears around complexity: 40% say they’re worried about the complications for their engineering team when integrating or building a new solution, and 37% are concerned about the complexity of managing the new payment method on an ongoing basis.

Deepak Colluru, Director of Product Management for GoCardless Embed, said, “In today’s challenging environment, businesses are looking for every supplier to deliver value. PSPs are no exception. One simple way to demonstrate this is by focusing on the areas that merchants care about most, including anti-fraud solutions, features to boost payment success and a range of payment options.

“PSPs that want to add or enhance any of these must grapple with the classic ‘buy versus build’ dilemma. When we’ve spoken to PSPs that are interested in adding bank payments, for example, they are all too aware of the time and resources required to not only build but also maintain a new payment method in-house. If staying competitive is a priority, payment providers may find that the best — and quickest — way to satisfy customer demand is to enhance their offering through a third-party expert.”