With ongoing advancements in digital banking and financial technology, online payments are now expected to be simple and efficient. As the online payment processing market grows, users increasingly look for more features, pushing the market to grow in multiple directions. In an attempt to provide payments beyond those traditionally offered by banks and to facilitate more cashless transactions, providers are under increasing pressure to adapt. With this pressure come unique challenges that payment service providers need to account for.

At Penser, we specialize in consulting services for the payments and fintech industry, and we’ve listed five of the key challenges payment service providers (PSPs) face today:

1. Handling fraud

Fraud losses are estimated to top $22bn this year, and could go as high as $48b by 2023. To combat this, service providers need to look for better solutions to improve online security. PSPs also need to ensure that they are PCI-compliant and have the necessary certifications in place. Using modern machine-learning technologies that complement existing traditional rule-based systems, transactions can now be processed live and risk scored instantly, and decisions can be made about the validity of the transaction in real time. This can help prevent unusual and possibly fraudulent transactions from going through.

2. Effective authentication

Alongside analyzing customer behavior, it’s important to ensure that customers are suitably identified and authenticated before proceeding with a transaction. With the adoption of new APIs, potential new vulnerabilities might be uncovered that cybercriminals could exploit. However, using multi-factor authentication and advanced technologies, such as biometrics, geo-location-based authentication and cryptographic keys, could be instrumental in ensuring that transactions are more secure.

3. Mismatched solution set

PSPs need to be able to package the latest technologies into a tailor-made solution that meets what their customers are looking for. For instance, take recurring billing and subscription payments. Some PSPs can deal with card expiries and cancellations to ensure an uninterrupted experience. Others can maximise payment success rates with data and machine learning. Some others may be able to support one-click payments through tokenized payment data. Understanding which services would enrich your merchant’s experience would allow you to build a custom solution that suits your needs.

4. Insufficient support

Service providers may not provide the support needed to ensure that technical issues are easily and effectively dealt with. Many PSPs refer users to the company’s website for solutions or refer them to a service center where the question may be stuck in a queue. A PSP that offers you a single point of contact that you can connect with immediately to resolve any issues would be helpful in preventing any unnecessary lag in problem resolution

5. Poor user experience

When it comes to the payments experience, the front-end is just as important as the back-end. Ensuring that you have a robust system in place is important, but the user experience should also be simple and easy. Reducing friction points and ensuring transactions occur seamlessly and intuitively enriches the customer’s interaction with the PSP, resulting in a greater likelihood that they will use the service again. Along with this, providing visibility into current and past transactions lets the customer effectively track their transaction history. PSPs need to be able to customise payment flows, making it easier to apply discounts and rewards, and support one-click payments, where it can help improve conversion rates for merchants.

If you’re looking for the right PSP for you, it would be beneficial to ensure they address the above concerns, and make sure that they are the right fit for you. Alternatively, as experts in the payments and fintech sector, Penser can help you find a suitable partner. We’ve acted as advisors to a number of financial clients on their digital transformation journeys, as well as supported them with due diligence and strategic planning services.