Can Payments-as-a-Service Crack EU’s Cross-Border Payments Complexity?

For Europe-based platforms and marketplaces connecting businesses and consumers or business-to-business (B2B) platforms, juggling different payment methods and currencies can be challenging when dealing with customers from all over the world.

Keeping up with laws and standards in a region known for its constantly evolving and changing regulatory landscape adds another layer of complexity to business operations, while trying to perform know-your-customer (KYC) checks on different customer profiles and safeguard the payment environment can also be taxing on any firm in this era of unprecedented rates of cybercrime.

It’s these challenges that Mangopay has been trying to solve since its launch in 2013, providing leading EU marketplaces and platforms, including e-retailer platforms hosting third-party vendors and crowdfunding platforms, with an end-to-end solution for all their payment needs.

According to the firm’s CEO Romain Mazeries, the once niche market has since attracted the attention of several FinTechs, leading to intense competition in the marketplace platform space. But providing clients with a flexible, white-label solution which enables them to create their own payment flow and set up e-wallets to easily manage payment splits and the use of escrow accounts, for example, has helped protect their turf and fend off competition so far.

“We’ve got a technical advantage because of the flexibility of our solution and how we enable platforms to put in place the workflows they want. Basically, the more complexity there is in the workflow, the [easier it is] for Mangopay’s solution [to solve],” Mazeries told PYMNTS in an interview.

Today, the company’s “developer-friendly” API is used by over 2,500 companies across the region, enabling clients like Leboncoin, Rakuten, Chrono24 and Wallapop to accept consumer payments on their platforms, onboard sellers and move money quickly and securely between users.

Since its launch, the Paris-based firm has processed €28 billion (about $30 billion), 75% of which were processed in the last 24 months alone, thanks to the pandemic-induced surge in eCommerce and accelerated digital transformation, Mazeries said.

Bank Wires, Open Banking, Digital Wallets

Despite the use of a unique currency, Europe is not a unified market as one would expect it to be, Mazeries said, adding that consumer behavior and payment methods are very different from one country to another.

Currently, about 40% of marketplace users pay Mangopay clients through bank wires and instant bank-to-bank transfer systems such as iDEAL in the Netherlands and Bancontact in Belgium. Debit cards from Visa and MasterCard are another widely used method by customers, while American Express (AmEx) cards are popular with platforms accepting payments from customers in the U.S.

The use of digital wallets like Apple Pay, which have a growing penetration rate in Europe, is also on the rise, he noted, while the use of Klarna’s buy now, pay later (BNPL) solution is gaining traction in areas like Benelux (Belgium, the Netherlands, and Luxembourg) and the Nordics.

He further pointed to payment initiation, the payment method made possible with open banking that allows customers to authorize a payment directly from their bank accounts, as another area with huge impact for consumer payments moving forward.

“It’s only the beginning for payment initiation. I really believe that it’s going to be huge, especially in Germany, Benelux and the Nordics, and will eventually take over a huge part of the market from credit cards, for example,” he said.

Regulation Levels Playing Field

In April, global private equity investor Advent International announced that it had purchased a $75 million majority stake in the French firm — a deal which, according to Mazeries, will be key to boosting their ongoing European expansion plans.

Related news: Advent Acquires Majority Stake in Mangopay

Part of those funds have also been earmarked for an upcoming expansion to the U.S. market, where they will battle yet again two of their strongest competitors in Europe — U.S. payment giant Stripe and Dutch firm Adyen — with the hopes that their value proposition of a flexible solution solving complex payment workflows will stand out to potential customers there, he said.

And while funding is no longer a challenge following the Advent acquisition, he said the constantly evolving regulatory landscape in Europe is one that will keep them on their toes moving forward.

On the upside, however, the fact that EU laws are constantly changing can be a great barrier to entry, he added, helping to level the playing field in the intense, competitive landscape so that well-funded players, for example, do not have an edge over competitors.

“Anytime there is a new regulation from Brussels [the de facto capital of the EU], it’s a race to start innovating and think out of the box around this new regulation, and this makes [payments] a super exciting industry [to operate in],” Mazeries said.


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