Alternative payments drive faster growth for merchants
As second-hand luxury goods retailer Vestiaire Collective expands into new markets in Asia and grows its existing ones, Head of Payments Pedro Bennasar said it is using alternative payments to expand faster and provide greater value to its customers.
Alternative Payments Enable Faster Growth
Alternative payments are becoming more and more popular, Bennasar said, with various solutions across the world. They provide customers with the flexibility and purchasing power to acquire what they are after. For Vestiaire, they also make second-hand luxury goods more available to everybody by giving them the capability to buy items such as Louis Vuitton bags. “Our goal is to implement a second-hand DNA,” Bennasar said, as “you don’t need new clothes all the time. Second-hand clothes are good.”
There are a vast number of alternative payments methods today, Bennasar explained, and they are especially popular with the younger generation. Whereas cards are used specifically for payments, consumers in Asia have integrated alternative payments into their day-to-day experience. Asian customers are technology-advanced and use their mobile phone constantly, so Vestiaire has needed to adapt and become part of the mobile ecosystem. “It’s better to have alternative payments bringing value that cards don’t bring.”
“The important thing is not having tons of alternative payment methods. You need to pick the ones that make the most sense. If you have checkout with five or six methods, you confuse the customer. It becomes counterproductive.” It is preferable, he said, to choose a small number of preferred payment channels.
When Vestiaire launched in South Korea, for example, it did not want to offer just basic options such as cards and PayPal. Instead, it started with Naver. Naver is Koreans’ “day-to-day life,” and they use it for almost anything, Bennasar explained, so it also adds value to Vestiaire’s proposition.
“It makes sense to start with the payments that add value. In Europe, we start with cards and maybe PayPal. Cards are the main driver. In Asia, as we expand to new markets, we will definitely jump in with alternative payment methods. They are valuable.”
While mobile wallets have been the primary alternative payment method in Asia so far, Bennasar said Vestiaire is testing buy-now-pay-later (BNPL) as a white label solution to see how acceptance is in specific markets. “We’ve seen good traction that could lead us to implement local BNPL.”
While data is essential for effective payments, Bennasar said the availability of data depends on the alternative payment provider’s methods. While some offer a vast number of data points, others are very restrictive and provide far less data than traditional cards. BNPL providers are even more restrictive and tend not to share information, so Vestiaire has to rely on the provider for information to analyse payment acceptance. With cards, he said,
“you know why they failed and you can route the user to the right method. You don’t have as much data with alternative payments. If you don’t know why it failed, you need alternatives to analyse and resolve the issue. As a merchant, the more information you get, the better the experience.”
An advantage of alternative payments is that they are more secure than traditional methods and risks tend to be lower. The latest generation is even more secure, though he cautioned that merchants still need to be careful. And although some alternative payments companies have vendor protection programmes, merchants need to manage them carefully because they do not always favour of merchants.
The next hot topic is open banking, Bennasar said. The UK is expanding, as is the rest of Europe and countries outside of Europe. “We are talking to partners. This will give us the extra edge, not having any limitations for people who don’t have credit or debit cards. They are way cheaper and fully secure. You should not have any fraud. We do see open banking coming next.”
An added advantage of open banking, he said, goes beyond wire transfers.
“It’s also opening up into gathering any sort of information from the end user. If the end user allows, you can get their financial information. We can use that from a marketing view to have a targeted campaign, as we know their purchase behaviour.”
He expects a different scenario in three or four years, with the right pieces of information enabling more personalised campaigns.
Asia is different than other regions, he said, as wallets have so much power and are going to keep on growing. European players such as Klarna are trying to replicate the behaviour of Alipay to become consumers’ day-to-day platform for chat and purchases, and some players are trying to replicate Naver or Grab. “That’s coming next.”
In the United States, the new requirement for affiliate networks to offer two options rather than just cards such as Mastercard and Visa will be a “big change.”
The BNPL “fever” is not yet over, though, so “we might see cooler stuff, companies reinventing themselves and being more aggressive to end users.”
The “cool thing,” Bennasar said, is that new partners and providers are coming up with these new concepts. As people’s preferences are evolving, technology is also evolving and is ahead of the curve, with new methods that enable merchants that use it well to gain a first mover advantage.
Author: Richard Hartung, Research Director, Singapore, Payments Consulting Network
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Pedro Bennasar is one of speakers of Alternative Payments Channel panel for MRC Singapore 2022. The panel will cover the role of alternative payments as a revenue driver in Asia Pacific, along with key innovations that enable merchants to accept payments amid evolving customer expectations.
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