As online payments become ever more deeply embedded in the business and consumer landscape, the European digital payment market is projected to grow by 13.64% year on year, resulting in a market volume of €1,621bn in 2027. Digital networks are breaking down the borders between countries and national payment schemes, creating a significant opportunity for domestic payment providers to capture new customers beyond their traditional markets.
Online payments enable payment platforms to engage with merchants anywhere, on a range of new systems and payment formats, taking advantage of new value-added services and creating stronger relationships based on tangible business results. In this increasingly competitive environment, revenue will accrue to providers who can deliver the most convenient, valuable and cost-effective services. For many, this will come down to a question of systems.
As merchants and consumers look for solutions that align with their evolving needs, legacy tools risk slowing the scaling journey in this increasingly technology-driven market, giving more agile competitors the chance to gain competitive advantage. Here we explore five challenges payment providers need to solve in order to win in the modern payments landscape.
1. Cross-border compliance
As we’ve covered elsewhere, European regulators face the twin challenge of encouraging payment cooperation in the bloc while also ensuring robust protection for consumers, businesses and tax authorities. Regulation such as General Data Protection Regulation (GDPR), the Payment Services Directive (PSD2) and upcoming PSD3 set a high bar for data protection, reporting and customer experience across the market.
Meanwhile, individual countries add their own stipulations, such as the Austrian Data Protection Act (DSG), German Federal Data Protection Act (BDSG) and Swiss Federal Act on Data Protection (FADP), which can go beyond the levels of consent and security outlined in cross-Union rules.
In order to operate across borders, providers need to ensure targeted compliance in every region where they have a presence. However, adapting legacy systems to new requirements can be slow, time consuming and expensive, adding risk to entering a new market and slowing expansion. To scale effectively, providers need to invest in payment infrastructure that can be adapted to market requirements on a case-by-case basis without adding extra cost and lead time.
2. Technological Integration
European payment systems have traditionally been developed on a local basis, meaning each region includes its own unique technology stacks with which providers need to cooperate to deliver their services, including:
- Local issuers and acquirers for issuing payment cards and accepting payments at merchant locations.
- Specific local payment methods that are popular in the new markets they are targeting from legacy credit cards and debit cards to mobile payments, and e-wallets.
- Hardware requirements, such as POS terminals and authentication tools.
For firms with complex, longstanding technical infrastructure, adding new partners can require months of scoping, development and testing. Given that new markets may require dozens of new connections in order to offer a competitive service, this can quickly add up to a significant investment.
Agile expansion requires the ability to integrate core systems with new markets swiftly in order to offer the widest coverage in a new region. For most providers, this requires working with a technology partner such as Payconiq to facilitate connections through a secure, flexible API platform.
3. Consistent Customer Experience
When scaling into new markets, a high-quality customer experience is key to attracting, retaining and growing new customers. This includes fast transaction times, customer service and offering a user-friendly interface for merchants and consumers.
The challenge for payment providers is maintaining this standard across borders within the EU to a consistent standard as customer numbers grow, where technological and commercial conditions may vary widely.
- Back-end systems must be ready to handle increasing transaction volumes and provide reliable, high quality service.
- Systems must demonstrate secure, compliant functionality while still delivering on convenience.
- Data strategy should include robust disaster recovery plans in place to ensure the integrity of user data at every stage of the payment process.
For providers working on legacy infrastructure based on local servers, scaling customer experience may require investing in new processing capacity, which adds new costs and delays.
4. Product innovation
Scaling isn’t just about breadth of coverage – it’s also about going deeper on the services that make a difference for customers. Payment providers need to balance maintaining and upgrading core payment technology with regular innovation to help merchants keep pace with changing market conditions, including new payment methods, features, and services that meet the needs of merchants and their customers.
Payconiq International has worked with European payment providers to enable the creation of new services, including:
- Digital meal vouchers: We launched a new digital meal voucher solution in Belgium and Luxembourg, enabling consumers to add their vouchers to the Payconiq by Bancontact app.
- Buy now, Pay later (BNPL): Integrating with third-party financing providers to enable consumers to split transactions into multiple payments, increasing basket size and conversions for merchants.
- Hybrid payments & loyalty schemes: Integrating digital accounts to enable the splitting transactions into two, or more, with only one authorisation, blending loyalty schemes points and bank payments to cover a purchase.
As e-commerce becomes a driving force in economic growth in the EU, providers have the opportunity to embrace new forms of payment not tied to traditional card networks, which can lead to higher fees for retailers. This requires developing payment systems that can integrate with new payment methods, including the ability to develop value-added services such as loyalty schemes or customer apps.
5. Payment harmonisation
Payment harmonisation is a key goal of the European Commission to encourage economic cooperation and stability within the blog through initiatives such as the Digital Euro and PSD3. However, in order to be compliant with future legislation, many providers will need to perform large scale revisions to their systems to ensure that they provide a compliant standard of service across regions.
This may include infrastructure upgrades to update the way providers process payments and the routes they interact with merchants and customers. While this can be a significant commercial opportunity, the investment and compliance challenges involved will put pressure on providers to adapt or fall behind in the evolving market.
Payconiq International works with a range of leading European institutions to embed technology that can equip them for the future of European payments. Our modern cloud payments platform is built for an open payments ecosystem, with the ability to integrate with new systems, regions and partners securely and efficiently through a single API.
As the EU becomes increasingly connected, the ability to scale systems will be the key driver of success for payment providers. Our experts have already worked with leading European payment schemes to redesign their back-end networks, improving flexibility, security and speed, helping them move ahead of competitors to capture market share and evolve their service.
The chance to grow is out there, but in a future where payments transcend borders, and convenience becomes the currency of choice, it’s up to providers to embrace the right tools to get there.