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Profitability Hacking for Payment Service Providers: Merchant Services

posted on: Mon Nov 20 2017

By: Ben Cornett, Partner Marketing Manager

Payment Service Providers (PSPs), such as payment processors, payment gateways, and other merchant aggregation points (MAP), are an essential part of online retail strategy.

At the same time competition is driving down margins for PSPs, merchants are also asking them for more services and support. For example, merchants say that they turn to their PSPs first for help in fighting fraud, according to the Mobile Payments & Fraud: 2017 Report. That’s a potential problem and yet, in some cases, also an opportunity to increase profitability. How?

Delivering value-added services to merchants is becoming the new norm thanks to the growing capabilities of APIs and systems integration. When it comes to boosting sales and stopping fraud, the story is no different. Eight in 10 of eCommerce merchants look to their payment providers to help fight fraud. However, not every payments and fraud solution brings the same value. There are 3 pillars essential to PSPs executing an antifraud profitability hack:

1. Instant On (Zero Hassle)
  • Integration at the PSP level lets merchants avoid IT projects and enjoy immediate protection.
  • Value-added service increases merchant trust and loyalty.
  • Increased revenue to the PSP over the lifetime of the merchant.
2. Boost Merchant Sales
  • Data collaboration between PSPs, antifraud solution providers, and merchants allows Machine Learning and Artificial Intelligence (AI) to do a better job of getting good orders right, reducing false positives.
  • Increased transaction volume by merchants due to greater confidence from strong fraud prevention safety net.
3. Beat Fraud

The formula for profitability hacking is clear. More or better merchant services, increased sales (transactions), and lower fraud rates lead to greater merchant success, which fuels profitability growth for PSPs.

  • More or better merchant services. By integrating fraud prevention into a comprehensive payments processing solution, PSPs spare merchants the cost and hassle of doing it themselves. More importantly, it transforms the typical rate and fee discounting negotiations into collaborative discussions about increasing value and merchant profitability.
  • Increased sales (transactions). According to Javelin, one in six US consumers has been the victim of a false positive. The issue is estimated to cost merchants $118 billion in foregone sales. When PSPs collaborate with fraud providers like Kount, they can solve the problem of reduced merchant revenue and loyalty due to false positives.
  • Lower fraud rates. Every dollar of fraud prevented adds a dollar directly to merchant profits (all other factors remaining equal). And since payment processors take on the risk of payments accepted by their merchants, lower fraud rates protect PSPs, too.

To learn more about portfolio-level fraud prevention and the Kount Central product, download the eBook "Protect Your Merchants, Protect Your Profits".

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