PAY.ON: switched on - Markus Rinderer
As innovative new payment processes wink into life across the globe, enabled by the proliferation of the smartphone, CEO and co-founder of PAY.ON Markus Rinderer speaks to Future Banking about the value proposition of an outsourced payment solution.
Over the past decade, the acceleration of change in the payment space has been dramatic. A perfect storm of technology and market maturity has gathered to make outsourcing payment services for banks virtually a no-brainer. But this has not always been the case.
"People are more willing to outsource services like payment processing now, but if you look back ten years, everybody built their own systems because they were not ready to outsource these sometimes core parts of their business," explains Markus Rinderer, CEO and co-founder of PAY.ON.
"If you think about being able to offer the full chain of services, starting with global connectivity to more than 250 acquirers on every continent, with all the anti-fraud checks that go with that, it's just not worth it to set that up on your own anymore. It would take too long now, so you have to outsource it and we benefit from that."
Founded in 2004, PAY.ON is an omni-channel payment processing company. The business is not itself a payment provider, but powers these providers by offering white-labelled infrastructure to them, and they in return outsource all their technology and services to PAY.ON.
"All our services are hosted by us as a Platform as a Service," Rinderer says. "We process e-commerce, m-commerce and chip-and-PIN secured transactions all through one platform."
As a payment provider it is PAY.ON's goal to accelerate clients' payment innovation, improve their products and bolster security. Typically, its clients are leading payment service providers and acquirers who use the company as their merchant gateway.
"You could see us as the IT department of payment companies," says Rinderer. "The main difference between us and the other players in the market is that we never contract merchants directly; our clients are always payment providers. We're typically white-labelled so merchants usually don't see us."
While PAY.ON may be keeping a low profile, the potential cost savings of payment service outsourcing are big news.
Just in terms of building the payments system itself, a company could spend enormous amounts on development - potentially millions if one takes into account money lost in time to market.
Even if one already has an established platform, there are significant costs that can be saved using an outsourced service, including onboarding new customers, integrating new channels such as mobile, and implementing alternative payment methods.
"Almost every day, somewhere in the world you have a new payment method popping up and another one dying," explains Rinderer. "If you want to grow internationally with your merchants you have to keep up. We are specialised in building those connections into acquirers' systems. There are huge cost savings to be made by working with someone who's already integrated with all those payment methods."
Market dynamics and trust
In terms of maturity in the market, the connectivity and capability that PAY.ON provides is becoming more of a commodity. It's something that banks simply need to have; they must be hooked up everywhere to be able to offer merchants a global solution that also works at a local level.
"And it's definitely a trust thing," adds Rinderer. "When you look at the banking industry, no bank would ever build its own online banking system - they all buy it from somewhere. Especially with the emergence of the smartphone, they need to follow that and offer something in the market."
Mobile point-of-sale (MPOS) in particular can make a real difference to merchants because it's a cheaper way of accepting payments. In fact, smartphones in general simply make a lot more processes possible, provided banks and their customers can take full advantage of the opportunities.
"It's all about making it as simple as possible for the consumer," says Rinderer. "From our perspective, we are always looking at the full chain. For the merchant it's about maximising their conversion so they want to sell anywhere and everywhere. This means that developing a clever checkout process on the smartphone that is easy to use is the challenge for everybody in the market.
To keep track of new payment processes, PAY.ON has an extensive research and marketing operation, set up to monitor common payment methods globally. The company also receives a lot of input from the merchants directly, requiring it to build new connections, whether they be in Australia, Brazil, Singapore, South Africa or the US.
"There are some exciting things coming up every month. Payment methods that would never work in Germany, for instance, in other countries are just totally normal. To take one example, you have Boleto Bancário in Brazil, a very simple way of shopping online, then you print a record of what you've bought and pay in cash at the store round the corner.
"We just processed payments for a major global sports event taking place next year in Brazil and they offered two payment methods: Visa, because it is sponsored by Visa, and Boleto."
In Rinderer's view, a lot of banks are not responding well or fast enough to these developments: "We think banks are relying too much on major card brands such as Visa, MasterCard and Diners Club. Meanwhile, payment providers themselves are becoming competitors in this space, so banks need to watch they don't lose market share."
What's more, further along the supply chain, some retailers are making much more of mobile transaction opportunities.
"We have statistics on all this," says Rinderer. "Take the case of a very large clothing retailer in the US; they are now at 30% transactions originating from mobile devices. They have a very well-designed app and a very well-optimised shop."
During its ten years' experience in the market, PAY.ON has built up quite a system of security protection, with 120 individual fraud checks in all. The company also uses a lot of external global fraud database blacklists, all designed to determine whether to process a given payment.
"It's about finding a balance; it's easy to have no fraud if you decline everything," Rinderer says. "So it's really about discovering the sweet spot so that the merchant is making the most out of the situation."
Fighting fraud in the payment space remains a constant battle, however; no sooner has a new payment process become popular than it is open to abuse. This is, no doubt, one of the many issues on the mind of the acquirer when looking into outsourcing payments processes.
To this end, with its partners Payvision, ReD and World IT Lawyers, PAY.ON has recently launched the Cross-Border E-commerce Community (CBEC). CBEC is a strategic initiative that aims to support merchants, payment service providers, ISOs and acquiring banks that are expanding their businesses globally in the payment industry, by offering key insights and information on every aspect of international e-commerce. The members of CBEC have committed to invest in research as well as deliver up-to-date, country-specific e-commerce information about preferred payment methods, logistics, risk and fraud, legislation and regulation in mature and emerging markets.
"The community is designed to be a knowledge hub, offering a deeper understanding of the different influences on e-commerce and key insights that can help to drive international expansion, for the benefit of all stakeholders within the dynamic global e-commerce landscape," Rinderer concludes.