As banks modernize e-commerce, they must optimize performance

This relatively late engagement with modernization stems from a decade-long period of lower profitability. After the Great Financial Crash of 2008, the funds and other resources required to modernize were in short supply. To drive improved profitability and rationalize operations, many banks merged or acquired operations in new markets, especially across Central and Eastern Europe.

From a payments and e-commerce perspective, this round of mergers and acquisitions (M&A) left a range of redundant platforms, differing systems and standards and – above all – a complex mix of legacy technologies that are expensive and time-consuming to maintain. Even where such M&A activity did not occur, banks still struggled with finding the time, money and people to modernize online acquiring operations, relying on growing consumer appetite for e-commerce to deliver more revenues. However, it’s now clear that modernization is a necessity.

Over the last 15 years, customers of all kinds – both consumers and merchants – have come to expect the same speed, agility and security from payment experiences found in sectors such as digital media, healthcare and online retail.

Meanwhile, e-commerce growth is projected to be around 4% per year over the next five years, and online merchants and shoppers want value-added services based on access to rich transaction data, from product purchasing trends through to inventory management, new payment products like BNPL options from accounts or cards, and more. 

As we’ve noted in previous blog, further complexity is added to this situation by a range of emerging regulations that aim to safeguard consumers as fraud rockets in digital channels, while the nature of digital commerce is becoming more diverse, with new rails and payment methods added all the time.

To compete with nimble digital-first competitors, whether PSPs or fintechs, banks need not just to modernize their approaches to e-commerce, but to optimize them for the markets and sectors in which they operate, responding to the specific needs of their customer base.

White-label gateways - owning the e-commerce experience, yet reducing cost and risk

Banks can own the e-commerce experience with a white-label gateway, tailoring their offering to meet the unique needs of various customer segments, while leaving tasks such as compliance management, updates, security and more to their software solutions partner. 

From a consumer perspective, this could mean offering specific payment methods preferred in certain regions such as Bizum in Spain, BLIK in Poland, or PayPal in the UK. Likewise, banks can create a smooth, in-band payment process tailored to meet the needs of specific groups, geographies or segments – for instance, applying additional anti-fraud measures in the gaming segment.

Owning an e-commerce gateway enables banks to create differentiated solutions for merchants, while upgrades and new features can be integrated by their software solutions partner. Differentiated, tailored merchant solutions create competitive advantage for banks compared to the “one-size-fits-all” model provided by some PSPs and fintechs.

Through ownership of the e-commerce gateway, banks can control everything from transaction pricing through to new features based on the analysis of rich transaction data, all through a single integration between bank and merchant.

Relying on a single integration can also speed up merchant onboarding from days or weeks to a matter of minutes, depending on a bank’s internal requirements – while the complexity of managing upgrades, compliance and security can be handled by their software partner.

Finally, owning an e-commerce gateway gives banks the flexibility to integrate with fintech partners, creating a bespoke dashboard for merchants on which fintech integrations sit alongside transaction data metrics, fraud detection performance statistics, and other features. Taken together, these factors constitute a powerful argument for why merchants should choose a bank-owned white-label gateway over a range of fintech and PSP products.

As part of the wider modernization of their payment systems, banks should consider their own e-commerce gateway to reduce costs, improve service delivery and time to market, drive more revenue, and position themselves for the intense competition we’ll see in the next 5-10 years.

E-commerce gateway: Onboard with ease, succeed with security