Today’s businesses are demanding a wider variety of payment possibilities to meet customers’ needs. Therefore, payment companies need to react to these changes and be ready to offer each online business just the right payment solution. To avoid building this solution from scratch, they form partnerships. Partnerships can be formed between different entities: payment providers, payment gateways, third-party payment services such as risk and fraud management systems, shopping platforms etc. We talked to Jan-Oliver Stück, Corporate Partnerships Director at optile, to find out more about what factors payment companies should consider when forming partnerships and what they stand to gain.
The Role of Partnerships in Payment
Ultimately, forming partnerships is a way for payment companies to complement each other’s capabilities. In an industry where businesses and consumers want to have a variety of payment options along with enhanced usability and security, partnerships can make the payment experience better for all parties.
“Within the payment industry, partnerships are usually formed as add-ons”, explains Jan-Oliver. “For example, let’s say that there is a credit card company that wants to partner with a chargeback or invoice provider. In this sense, both the credit card company and the providers can offer the full package to the client and automatically expand their services without being directly competitive with each other.”
“Besides, partnerships in payment are quite interesting since the payment industry is very fractured and full of barriers”, continues Jan-Oliver. “Partnerships give online businesses the ability to connect with several payment services at once without needing to build separate integrations to each of them. Thus, it improves technical and operational efficiency of online businesses. And conversely, partnerships allow payment providers to acquire a greater number of business clients by using each other’s services.”
In addition, a payment company may seek out a partner in order to expand its geographic reach and give its business clients greater access to local payment methods that are popular in their target countries. While globally active payment methods are promising, there are many regions of the world where smaller, local payment methods are more important for the consumer.
Even with a payment provider that has a global reach, acceptance rates of online business can still be low if the provider doesn’t have a strong payment portfolio in the particular region. Thus, to serve online businesses better, payment providers need to partner not only with globally active payment solutions, but also with those that have locally important payment methods in their portfolio. This way, online businesses that use such payment companies will have a “back-up” provider as a part of their payment strategy, in case one can’t process the payment as efficiently.
What to Consider in Partnerships
Before entering into a partnership, you as a payment company should consider several important facets of what the partnership can potentially offer. The first factor is the exclusivity, or lack thereof, involved in the partnership. Payment companies need to consider what their highest priority is for forming the partnership in order to evaluate whether the conditions bring them the mutual advantages they desire. In some cases, forming a partnership with a particular payment provider or gateway may bring with it the expectation that you will recommend the payment services of your partner to your business customers.
However, some payment providers that have a number of partners on their side, are unbiased, open, and flexible while offering their partners’ services to their business clients and thus treating each partner equally. “Online businesses can greatly benefit from payment solutions that are completely independent and, to bring the most value, set themselves up to be flexible. Therefore, you as a payment solution should always try to remain on the online business’ side rather than defending partners’ interests”, says Jan-Oliver. “The business clients have the highest priority. If the client wishes to use services of a certain partner of yours, you don’t question it. You just give them access to the services of whichever partner they chose. That’s the core philosophy of optile partnerships.”
Another consideration for partnerships is the amount of additional business or market coverage that the partnership can generate. Again, this can vary greatly depending on the terms decided on by the partners and the goals of each party. The big advantage of partnerships is that both benefit from the exposure to a greater number of companies and markets. One example of this is an independent payment gateway, which offers huge benefits for payment companies in terms of the larger number of potential clients it stands to gain. “In this case, the partnership does not imply that you receive any commissions for enriching your partner’s portfolio with another business customer”, comments Jan-Oliver. “It just means that they should be connected to your payment platform and from then on they can access any of your business customers and vice versa.”
“If you are an independent payment solution, there is no guarantee for the partnering provider that they are going to get a certain amount of business. Instead, your partner gets the possibility to easily access your business clients without any technical hurdles for partners or for your business clients, since the partner provider is already technically integrated into your payment gateway.”
A final consideration when entering into a partnership with a payment business is the potential to utilize your open APIs. This technology allows for the development of additional payment features based on the core elements of your original one. While the core can be added onto, it cannot be changed. Such capability is especially important for payments, as it can allow rapid deployment of original payment features or methods for new use cases or global regions.
“Such a capability is very beneficial for the businesses since some e-companies may want to build their own payment logics on top of the integrated payment platform,” explains Jan-Oliver. “This is especially useful for large companies that need extended components or features where one payment provider cannot suffice.”
The Future of Partnerships in Payment
As the payment landscape continues to expand, partnerships are likely to become even more necessary and complex. Even though new payment features have begun to enter the market, it is unlikely that this trend will eliminate the need for partnerships in payment: “I think, there is always room for future enhancement of the payment industry”, comments Jan-Oliver. “Other trends may emerge in the payment industry. One that I can foresee is the use of blockchain protocol to enhance payment capabilities. However, while some payment providers will implement blockchain as their main strategy, the others will stick to individual payment solutions that businesses will want to connect to. Therefore, a fractioned payment landscape is unavoidable and payment partnerships will continue to be important in order to drive online-business’ success.”
Partnerships offer a wide range of opportunities for payment companies to expand their capabilities and offer more to their clients without needing to expand their services. By engaging in partnerships, the payment ecosystem becomes ever more interconnected and efficient in providing a wide variety of payment solutions to online businesses, while also bringing higher returns to the payment companies who partner. Basically, partnerships in payment create a win-win situation, for both payment companies and their clients.