PayTech remains a highly attractive subsector of FinTech, and typically accounts for the largest share of FinTech funding (c.32% of global FinTech investment in 2022). Amongst the large global VCs, PayTech accounted for c.28% of Andreessen Horowitz (a16z) FinTech investments in 2022, making PayTech its largest investment category. Similarly PayTech was one of the largest investment categories for Sequoia, accounting for c.16% of deals in 2022.
Everything, everywhere, all at once (or omni-channel payments)
One of the key trends in PayTech is omni-channel payments. Customer journeys have shifted radically in a post-pandemic world. Online and offline customer journeys are converging: for instance, buy online and pickup in store, browse in the store and place the order online, or buy online and return in store. Thus the focus is now on combining physical and digital worlds to create a frictionless, channel-agnostic experience for customers. Besides improving customer experience and benefiting a company’s top line, a true omni-channel solution simplifies accounts reconciliation, operations and data backend.
Figure 1: Omni-channel-commerce strategies are increasingly important, and these are underpinned by seamless omni-channel payments
We believe companies such as Trust Payments are taking omnichannel payments to the next level, which is Converged Commerce™. Converged Commerce™ not only includes omni-channel payments, but also e-commerce website creation, inventory management, loyalty and other value-added services – all from a single source. The success of Converged Commerce™ is evident in Trust Payments’ numbers, having scaled from £20m in gross revenues three years ago to £160mn, and running the UK’s third-largest loyalty programme. At our conference, Trust Payments indicated that the demand for its solutions is so strong that it cannot keep up – which in our view further underscores its pioneering efforts.
CHECKOUT TECHNOLOGIES ARE EVOLVING
As per a Pymnts study in 2021, 80% of in-store shoppers like the idea of a non-traditional checkout (such as self-checkout, cashierless checkout), with 66% of respondents saying these experiences are the options they most wanted to try. The two most highly cited reasons for customers desiring self-checkout options were that they are faster and eliminate the need to wait in line.
The ubiquity of self-checkout
Self-checkout lanes and kiosks allow customers to scan, bag and pay for their purchases without the assistance of human cashiers. Besides improving customer experience, self-checkout also alleviates labour challenges for retailers. We believe such checkout options are near ubiquitous in the UK, everywhere from Tesco to Boots and UNIQLO.
Cashierless checkout: Walk in, take what you want, walk out
The next step of the evolution from self-checkout is the ‘Just walk out’ cashierless checkout, as seen with Amazon Fresh stores, which have no registers, cashiers or even self-checkout lanes. Customers can simply check in by scanning their phones, pick up what they want, and walk out. The stores use technology similar to that in self-driving cars, which detects when products are taken or returned to shelves and keeps track of them in the customer’s virtual cart. The store works with an Amazon app, and the app is linked with the customer’s Amazon account for billing.
However, recent reports suggest that Amazon has introduced manned checkout alongside cashierless checkout in Amazon Fresh stores in London, which to us suggests that it may be some time before cashierless checkouts become more mainstream. That said, the trend appears to shifting in favour of cashierless checkout, albeit slowly.
REQUEST TO PAY
RtP service enables a business to ask a customer for a payment digitally. The customer can then check their balance and push the payment at a click of a button, so no data entry is required. Communication between the parties is via existing bank and payment applications, ensuring trust, security and integrity of the service. It gives billers a more cost-effective way of getting paid, and customers more choice and flexibility compared to Direct Debit (which debits a fixed amount on a fixed date, whether or not the customer has cash in their account). Players such as Answer Pay are providing white-label digital platforms that equip Payment Service Providers to implement their own-branded RtP digital payment service. RtP can leverage Open Banking, which avoids card rails and therefore scheme fees. Yet another benefit of RtP is how it solves the card-on-file problem: customers may forget to update their credit/debit card details post expiry, resulting in unsuccessful payments, which can be circumvented using RtP.
PAYMENTS ORCHESTRATION
We believe ‘payments orchestration’ is best illustrated by what APEXX Global does. APEXX Global provides a single connection to multiple acquirers and payment processors, and routes payments in such a way as to increase conversions and decrease costs, providing a one-stop-shop for all merchant payment needs. Its partner-agnostic platform provides merchants with market access to some of the best-performing payments services providers, in addition to automatic re-routing, routing flexibility, and analytics that help merchants to maximise value. APEXX helps businesses like Ryanair, CarTrawler and Avon to boost their payments capabilities by addressing pain points such as complexity, lack of trust, slow speed, and inflexibility of solutions.
Owing to the complexity of payments, and different providers dominating different niches, merchants use multiple providers – for instance, a merchant may use Adyen for card payments, and Boku# for local payment methods, and use different entirely different providers in different geographies. This further reinforces the need for a payments orchestration platform, such as that of APEXX Global. Indeed, its success can be seen with Ryanair: APEXX announced it as a customer in mid-2022, and is now already responsible for directing c.75% of its payment flows to get better pricing and higher acceptance rates.
