OVERCOMING eCOMMERCE CHALLENGESFIVE WAYS FOR ACQUIRERS TO BOOST MERCHANTSATISFACTION

ACQUIRER eGUIDE

In 2012, eCommerce netted 1.06 trillion USD and is forecast to reach $2.36 by 2018, an average annual growth rate of 20%.

In 2000, eCommerce accounted for less than 1% of allcommerce. Now it is over 6% and forecast to reach 9% by 2018. This means that eCommerce is still far from reachingits full potential.

SUBSTANTIAL eCOMMERCE GROWTH YEAR ON YEAR

2000

OF ALLCOMMERCE

LESS THAN

1%

2017

6%OVER

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s

COLLECTING PSP

NON-TRADITIONAL PAYMENT PROVIDERS

NEW START-UP BANKS

eCommerce-based growth is a massive long-term opportunity for acquirers, however, the sector is increasingly under threat fromdigital innovators, such as collecting PSPs, new start-up banks and non-traditional payment providers.

THE eCOMMERCE OPPORTUNITY FOR ACQUIRERS IS FRAGMENTING

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MARKETING INSIGHTS

DIGITAL PAYMENTS ENABLE

CROSS-SELL OPPORTUNITIESthrough related services(e.g., booking, ordering,

shopping, gifting, donating)

derived from payments andbrowser data (e.g., event-based o�ers, promotion, marketing)

HIGH MARGINSamong small- and medium-sized

merchants with consumer-likebehavior

Competition in the acquiring space has led to declining margins, forcing acquirers to compete for merchants based on value-added services, rather than price.

The uptake of digital payments enables much more data(e.g., location, behavioral, search, preferences) to be captured across sales channels with each payments category.

The amount and the value of data collected on individual consumers are increasing due to advancements in processing capability, data analytics and data mining to identify payment patterns. Digital innovators such as PayPal, Alipay, TransferWise and Venmo have uncovered benefits from peer-to-peer payments that extend beyond authorization, clearing and settlement, threatening to displace traditional banks from these payment categories.

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ACQUIRERS UNDER THREATFROM DIGITAL INNOVATORS

1

2

34

5

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THE MAJOR CHALLENGES ACQUIRERS FACEWITHIN eCOMMERCE

FULFILLING EVER-CHANGINGMERCHANT NEEDS

SHIFTING TECHNOLOGY AWAYFROM LEGACY SYSTEMS

PROCESSING CROSS-BORDERTRANSACTIONS EFFICIENTLY

DEPLOYING EFFECTIVEFRAUD PREVENTION

SOLUTIONS

DEFENDING AGAINSTENCROACHING ALTERNATIVE

PAYMENT METHODS

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FIVE WAYS FOR ACQUIRERS TO BOOST MERCHANT SATISFACTION

1 SHIFT TECHNOLOGY AWAY FROM LEGACY SYSTEMS Fully outsource payment processing to support multi-country, multi-language, multi-currencyand multi-time zone payment processing.

5 DEPLOY EFFECTIVE FRAUD PREVENTION SOLUTIONS Protect your business with a risk management solution closely tailored to your needs. Keep fraud out at minimum cost while facilitating genuine orders.

2 FULFILL EVER-CHANGING MERCHANT NEEDS Easily integrate with open APIs to reduce development times, resources and costs. Unburden your merchants with a single integration.

4DEFEND AGAINST ENCROACHING ALTERNATIVEPAYMENT METHODS Operate cross border by o�ering locally preferred alternative payment methods. Merchants will increase sales as they maximize conversion rates.

3 PROCESS CROSS-BORDER TRANSACTIONS EFFICIENTLY Simplicity in integration and security in transaction processing are key factors forglobal expansion.

1CHALLENGE SOLUTIONThese systems often run on mainframes and are built in fragments to respond to changing business needs.

The physical presence of cards is becoming less common as they are being hidden in digital wallets, apps and social media. The growth in contactless payments is causing scalability and upgrade challenges forlegacy-reliant acquirers.

Legacy systems lack the flexibility needed to address global merchants’ changing market trends and are burdened by highermaintenance, development and operational costs.

Today’s advanced software-as-a-service solutions enable acquirers to fullyoutsource their payments processing. Migrating in one go to improved eCommerce systems that support multi-country, multi-language, multi-currency and multi-time-zone payments processing will decrease silosand diminish operational and maintenance costs.

In turn, acquirers will reduce complexity, reduce cost of normal business operations, free up resources for innovation, and improve flexibility and responsiveness in the market.

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SHIFTING TECHNOLOGY AWAYFROM LEGACY SYSTEMS

CHALLENGE

2SOLUTION

APIs are still transforming the way consumers shop online, mainly by allowing merchants to “open” up numerous payment possibilities.

Many acquirers trail the rest of the payments industry’s API capabilities, operating ad-hoc, rather than via strategically open APIs. To remain competitive, acquirers must utilize advanced and innovative APIs or risk falling irrevocably behind.

Open APIs are increasingly appealing to acquirers due to their ease of integration and reduced development time, resources and cost outlay. These strategically open APIs also enable acquirers to unburden their merchants by routing paymentsinformation to the issuers.

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FULFILLING EVER-CHANGINGMERCHANT NEEDS

CHALLENGE

SOLUTION

3

Merchants frequently face higher non-authorization rates and bank fees for cross-border transactions, often because they are unable to process a transaction in the shopper’s local currency.

Acquirers need to o�er their merchants the ability to expand rapidly into new markets and develop new revenue streams. Many acquirers have multiple legacy platforms for di�erent channels and regions, but merchants selling in multiple countries want simplified and unified processing with one acquirer.

In addition to consolidation within the market, the continued globalization of eCommerce puts pressure on acquirers. Consequently acquirers are rethinking their business models to analyze how they can add value to their merchants’ business when expanding into new markets and developing new revenue streams.

Simplicity in integration processes and security in their transaction processing are the key factors when it comes to global expansion. Acquirers who can o�er a one-stop payments solution can reduce attrition from merchants who are looking to streamline their eCommerce operations and extend into new markets.

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PROCESSING CROSS-BORDERTRANSACTIONS EFFICIENTLY

CHALLENGE SOLUTION

4Alternative payment methods are crowding out card payments in global eCommerce. Mobile, digital wallets, micro-payments, cash-based options and bank transfers are only the tip of the iceberg. Savvymerchants are already considering what payment options to utilize in order to meet customer demand and, unless acquirers take action, they will remain on the outside looking in on massive portions of their merchants’ transaction volume.

Technology and solutions should enable acquirers to o�er non-card-based or alternative payment methods to their merchants to retain their business. Cross-border purchases are increasing constantly. Growing internet penetration and young populations accelerate this trend. Connecting to these new consumers means merchants need to adopt payment options familiar to them.

The connections between merchants and consumers exist before the transaction. Alternative payments acceptance by a merchant drives the connection by removing obstacles. This can be a competitive advantage. Alternative payments are an important driver in the eCommerce purchasing and decision-making process.

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DEFENDING AGAINST ENCROACHINGALTERNATIVE PAYMENT METHODS

INCREASESALES

SIMPLE, GLOBAL,SECURE

LANGUAGE AND CURRENCY LOCALIZATION

LOWER RISKOF RETURNS

PAYMENT OPTIONSFAMILIAR TO CONSUMER

CERTIFIED BUYINGPROCESS

PAYMENTS ACCEPTANCEIN REAL TIME

ACCEPT ALLPAYMENT TYPES

4

By accepting locally-preferred alternative payment methods, merchants enableconsumers to shop globally and pay locally.

By o�ering a wider selection of paymentoptions, merchants will increase sales asthey maximize conversion rates and reduce shopping cart abandonment.

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DEFENDING AGAINST ENCROACHINGALTERNATIVE PAYMENT METHODS

CHALLENGE SOLUTION

5Shoppers now engage with merchants through more channels and payment methods than ever before. On top of that, they demand ever-faster order fulfillment both within and across borders. As a result, fraud prevention is more complex and fraught than ever before.

To protect and grow business online, acquirers need to o�er their merchants a fraud prevention and risk management solution that is closely tailored to their individual needs and capable of adapting rapidly. Successful solutions facilitategenuine orders while reducing fraud, all at a minimum cost. Cross-border fraud rates are generally three times higher than on domestic transactions and mobile is increasing faster than on the web with 60% year-on-year growth versus the average of 49%.

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DEPLOYING EFFECTIVE FRAUDPREVENTION SOLUTIONS

TAKING OPPORTUNITY AND DRIVINGMERCHANT SERVICES

Acquirers today have become a vitalpartner in eCommerce payments formerchants. Yet to stay ahead of thecompetition, acquirers now must assume amore adaptable role and o�er value-addedservices to overcome declining margins.

Merchants are demanding comprehensiveglobal eCommerce solutions includingsuch o�erings as cross-border transactionprocessing, real-time fraud preventionand instant access to alternative paymentmethods, enabling the acquirer to own theentire merchant relationship.

The challenge for many acquirers is thatthey connect to multiple legacy eCommercepayment gateway systems. As a result,many acquirers do not have the capabilityto rapidly adapt to changing market trendsand are burdened by higher maintenance,development and operational costs.

Outsourcing to the open ACI PAY.ON® Payments Gateway™ enables acquirers toreach domestic and international marketsfaster, reduce merchant attrition andincrease revenue from existing customerswhile attracting new ones. The entiregateway is accessible through a singleintegration with a unified, RESTful API.Innovation is the core of ACI, anddeveloping technology that drives your success is our focus. Acquirers looking to expand their business with an end-to-end payments solution should leave the heavy lifting to us and benefit from the mostadvanced eCommerce solution with the simplest integration process.

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ACI BUILDS INNOVATIVE PAYMENT TECHNOLOGIES THAT DRIVE SUCCESSACI’s UP® eCommerce Payments™ solution delivers the ultimate in simplicity, global connectivity and security. Through a single integration to a unified RESTful open API, merchants gain access to the largest global payment network. The industry-leading payments gateway technology enables merchants to build payment apps and features directly on the platform.

Find out more about the UP eCommerce Payments solution for acquirers.

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ACI Worldwide, the Universal Payments (UP) company, powers electronic payments for more than 5,100organizations around the world. More than 1,000 of thelargest financial institutions and intermediaries, as well as thousands of global merchants, rely on ACI to execute $14 trillion each day in payments and securities. In addition, myriad organizations utilize our electronic bill presentment and payment services. Through our comprehensive suite of software solutions delivered on customers’ premises or through ACI’s private cloud, we provide real-time, immediate payments capabilities and enable the industry’s most complete omni-channel payments experience. To learn more about ACI, please visit www.aciworldwide.com. You can also find us on Twitter @ACI_Worldwide.