Cost of Payments Acceptance Is Top of Mind for Merchants

Merchants have much on their minds when they interact with Link Money, CEO Eric Shoykhet told PYMNTS.

“Cost of payments acceptance — that’s the main focus,” he said.

Enterprises want to drive these costs down. Interchange rates have been rising, which makes card transactions more expensive; alternative payment methods may be attractive to consumers, but they cost merchants money. It all eats into the bottom line.

The focus on cutting costs has gained some urgency in a macro environment where top-line growth is slowing, and where macro headwinds and inflation have become mainstays of pretty much every company’s competitive landscape.

Shifting the Payments Narrative

Merchants need to “shift their narrative” about payments overall, Shoykhet said.

It’s no longer an optimal strategy to “have every payment method in the checkout cart and give customers all the optionality for whatever they want,” he said. Many merchants, before macroeconomic pressures set in, may have simply chosen to pay whatever costs would be in the offing to make sure that a customer’s preferences were met, that transactions wouldn’t fail — and of course, that they’d close the sale.

“Now the mentality has shifted to ‘how do we actually optimize the cost of payments and find cheaper alternatives if they exist?’” he said.

Many companies, especially those that operate internationally, have been aware of and enthusiastic about pay-by-bank options, which now account for double-digit percentage points of volumes in many countries. Unified Payments Interface (UPI) in India and Pix in Brazil have made merchants familiar with the fact that there are cheaper options out there. Those payment modalities and newer payment rails, he said, are especially advantageous to have in the mix for internet or subscription companies that sell their offerings in multiple markets, which wind up being cheaper to accept than card payments or buy now, pay later (BNPL) plans.

“These companies are exploring the possibilities of having these payments in the United States in order to drive the cost of acceptance down … especially since the U.S. is a much larger market for a lot of these companies than Europe,” he said.

But in considering the cost of payments acceptance, the cost of fraud must factor into the equation, noted Shoykhet. He offered up a hypothetical situation in which the direct cost of payments might be 2%, but there could be another 1.5% layered on top in terms of friendly fraud and chargebacks.

Pay-by-bank offers a much more secure environment than card payments because it mandates that a consumer log into their bank account and authorize a payment, he said. The higher levels of friction inherent in disputing pay-by-bank transactions also disincentivize friendly fraud. Link Money, for its part — by enabling pay-by-bank functionality — saves merchants as much as 60% or more on transactions versus the costs tied to card payments.

As 2023 winds down and inflation remains in place — be it at a slowing pace — Shoykhet said enterprises will likely gravitate toward ensuring that pay-by-bank is in their payments flows, particularly as faster payments gain ground in the U.S.

Of pay-by-bank, he predicted: “A year from now … companies will be thinking about how to get the most ‘juice’ out of it and gain better adoption rather than just being in the initial stages of exploration.”