Card Scheme Tokens Emerge as Latest Payments Tool to Drive Sales of Digital Goods

As the digital goods and services market expands globally, merchants and their payment partners must figure out the ideal mix for each market, offering the right choices without overwhelming the customer or pushing them to consider abandoning the purchase.

Complications inherent in this came up in a conversation between PYMNTS’ Karen Webster and Michael Bilotta, head of digital goods and services at payment platform Worldline.

Looking at the intersection of payment choice and the customer experience in online environments from streaming to gaming, Bilotta focused on securing payments for digital goods in a market where choice is exploding, menaced at every turn by friction and fraud.

As most digital goods are delivered on a subscription basis, Bilotta talked about reducing the friction on these payments in a variety of ways, including scheme tokens.

“Scheme tokens, especially global scheme tokens, are really nothing more than the ability for a merchant and/or a payment service provider to be able to recognize, at a scheme or a brand level — so Visa, Mastercard and the others — a customer that’s coming back to them,” he said.

The simple beauty of scheme tokens is how they both limit friction while holding back fraud.

It comes down to recognizing a legitimate user when they pop back into a game or service without asking, “Do you want to renew? They’ve already opted in. They’ve already agreed to the T&Cs, so let’s just get that subscription going and make sure that they can enjoy the service. I would start there. Scheme tokens are very important given where we’re at in the evolution of subscriptions and digital goods and services within eCommerce payments,” he said.

This idea of reducing friction while maintaining strong security protocols came up several times, as Bilotta noted, “you have to strike the balance between having no sales and ensuring that you have the right level of security. On the one hand, you can avoid all fraud by having the most stringent set of rules, and then your sales will suffer. On the other hand, if you have no rules and let everybody in, the fraudsters know where to go.”

On Micropayments and Consumer Sophistication

In Bilotta’s world of digital goods and services, that balancing act of friction to combat fraud without lessening the experience gets more complicated as the conversation moves to different geographies and localized payments where Worldline focuses much of its activities.

Relating an all-too-familiar “friendly fraud” story where a friend’s children used stored payment credentials to make a series of in-game purchases, he applied it to the topic of in-game micropayments and merchants or brands considering their place in an overall strategy.

“It’s important to ensure that there’s an infrastructure that underlies your payments ecosystem that allows for these micropayments,” he said. “As this social aspect ramps up, and as these smaller purchases or donations kind of ramp up within players in the game, these are all crucial aspects to keep in mind to have a profitable business.”

Reflecting on the comparative simplicity of online digital payments pre-pandemic and post-pandemic, he pointed to the maturation of digital and mushrooming of payments choice in recent years, saying that a puzzle of choice must now be thoughtfully solved.

“The reality is that as you scale a business online, you have to keep in mind the fact that consumers are much more sophisticated now,” he said. “Now, because of this increasing level of sophistication, having the right payment methods, having the right currency, the currency that’s in their actual bank account, the payment method that they pay with most frequently, these are things that have gone from what’s coming next” to a time-sensitive decision.

As it relates to services that typically involve subscriptions today, the ability to serve up just the methods most favored by that subscriber beats showing them every option you support.

Bilotta’s filter on this is as follows: “You may be able to have that payment method at checkout, but can it recur? Can it be subscription-based? These are super important things for people to think about when it comes to their ability to, one, convert a new customer, and then keep them as a recurring customer for a longer life cycle.”

Being Selective With Localized Payments

Asked how he’s advising global brands on their expansion strategies as it relates to payments, he harked back to the increasingly sophisticated digital consumer and getting it right for them.

Noting that Worldline has focused in recent years on emerging economies and countries in the BRIC (Brazil, Russia, India, China) markets, he said as those markets mature in terms of eCommerce and digital payments, “the next phase is working on becoming truly localized in those geographies.”

“If I use Worldwide as an example, the solutions that we bring to the table tie together the local payment methods, the different acquiring banks, and even the local card brands. This is something that people sometimes don’t think about, but Visa, Mastercard, Amex and Diners aren’t the only card brands that are in the market. There are many others.”

When even the world’s biggest names in payments have trouble penetrating markets that don’t default to the card rails favored by the Western world, what digital goods purveyors need are partners who have spent more time and effort on localization to capture new consumers.

“You as a leading brand within eCommerce may have a huge swath of customers in any of these countries that I just mentioned. However, if you haven’t brought your solution in that market to the next level, i.e., the ability to process locally, you can access local schemes, local payment methods, then there’s a huge amount of penetration that is still to be garnered.”

That also means choosing between the hundreds of local payment schemes in markets worldwide and equipping eCommerce checkouts with just the right mix.

“One of the things that we talk about a lot, it’s maybe a bit overplayed, but friction is the death of conversion,” he said. “You don’t want to create this paradox of choice. It’s quite an analytical and practical assessment to be done. The figures are out there. If you work with good partners, both globally and locally, you can understand the adoption rate of [various] payment methods.”

If there’s a payment method preferred by 90% of gamers on your platform, he called offering it “a no-brainer.” For a broad-based SaaS company or a streaming provider with a global footprint, however, “then you want to look at the metrics very plainly and say, OK, I know that there are 25 payment methods and schemes in this country, but five of them that will give me 90% penetration, and it won’t create this paradox of choice.”