Post-COVID Payments Industry Is Stress-Tested and Ready for Next Challenge

With just over a month left to go until 2023 dawns, Spreedly CEO Justin Benson told PYMNTS that 2022 can be viewed as a year split into halves when it comes to the payments industry.

In the first half of the year, there was still an exuberant FinTech environment, riding what might be seen as post-COVID tailwinds. There was lots of funding available, and investors and merchants alike were focused on top-line metrics and growth.

And then things changed, seemingly on a dime. Inflation and layoffs mounted, while enthusiasm from investors waned. For merchants, the focus has shifted from top-line momentum to operating profits and black ink on the bottom line.

“The reorientation around a new macro landscape has been quite impactful,” he said.

As companies have repositioned their priorities, he said, there has been a continued and pronounced interest in payments orchestration — the process in which payments are routed and processed across different paths and providers. It is among the latest developments to help merchants maximize flexibility in the pursuit of capturing every sale possible.

The urgency is there. As Benson recounted, a bit more than a decade ago when the general card-not-present (CNP) payments infrastructure was not ready to support the rapid pivot to mobile and mobile apps, new platforms such as Uber and Airbnb wound up being restrained by the payment ecosystem. Payment technology caught up, and then the pandemic hit, which sent a new wave of merchants scrambling just to make sure payments worked — and they did.

Looking for Flexibility

Today, payments infrastructure is about more than simply completing a transaction.

“We now want to be more selective. We have these new use cases,” he said of merchants and payment service providers (PSPs), “and we need to be broadly inclusive of different payment ways in which the consumers want to pay.”

That aspiration demands that payments stacks be optimized to capture the “long tail” of payments.

In order to capture that long tail, merchants have been “switching” their approach toward optimizing the payments stack, moving from a mindset that sought out all-in-one providers and embracing a multiple PSP approach, Benson said. That shift has come in tandem with merchants doing more business (and seeing more digital transactions) across borders and seeking new, untapped markets on a global stage.

In addition, “in the last 12 to 24 months,” said Benson, “we’ve seen an increase in the interest and the actual usage of [alternative payment methods (APMs)].” Payments orchestration helps address the challenges around APMs — namely, how to make sure users are valid, that they have sufficient funds on hand, and how to address refunds. Those considerations are critical when entering new markets where card penetration has been relatively low, and where some countries might conceivably be completely “off limits” if merchants don’t support APMs.

Looking ahead into 2023 and beyond, merchants will need to focus on new payment initiatives (such as real-time payments), payment methods and potential new geographic regions to explore, Benson said. And since the focus will be on doing more with relatively constrained resources, they’ll look to firms like Spreedly to provide payments orchestration.

“This year will be more about bottom-line than top-line,” growth, said Benson, “and the focus on the bottom line will be good for the industry overall.”