Not dissimilar to the web of supply chains that make up the eCommerce landscape, the payments industry has always relied on successful partnerships to create mutually beneficial outcomes. Recent findings from PWC reveal that 86% of surveyed professionals in the payments sector agree that traditional payments providers will collaborate with fintechs and technology providers to innovate online retail operations.
Although not a new phenomenon, payment partnerships continue to evolve and innovate. This is occurring alongside the continued rise of digital commerce, which is projected to reach a total transaction value of US$6.03tn in 2023. Indeed, research from statista predicts an over four fold growth in the financial volume of eCommerce sales in the period between 2016 and 2026. Confidence remains high for the continued momentum of e-commerce, as 89% of payments industry experts believe will persist, leading to an increased focus on business-to-business (B2B) and payment partnerships.
While the payments sector possesses expert knowledge of payment-making processes and partnerships, merchants often lack awareness of the nuances in partnership types and the benefits garnered by forming them. This lack of understanding can impede business growth, market competitiveness, and limit opportunities for higher profits and reduced risk. As globalisation reduces cross-border payments friction, eCommerce businesses need to do all they can to gain the edge among a rising number of retail competitors.
What Is A Payment Partnership?
While various payment partnership types exist, they usually occur when two or more businesses utilise each other’s infrastructures for mutual benefit. Typically, one business provides the technological components to facilitate secure domestic or cross-border payments, while the other offers one or more sales channels and customer bases. For businesses with a solid domestic sales funnel that are ready for international expansion, established sales channels in new regions can create instant impact to growth.
Partnerships depend on various factors such as sector, demographic, products, and market size of the partnering businesses. They can also be flexible or fixed-term, dependent on sales and payment success figures. Partnerships can encompass a business’s entire operation or focus on specific aspects, such as customer bases in a particular region or payment processing technology designed for a specific customer base or payment method. Naturally, partnerships are dependent on the eCommerce dynamics of partnering businesses and can be tailored toward specific objectives, such as accessing a new region.
The Benefits Of Payments Partnerships
The first benefit of partnerships is increased reach and exposure, leveraging partner networks to tap into new customer bases and providing the next step for expansion. By doing so, businesses can explore untapped markets and tailor their product and service offerings to newly-gained demographics, positioning themselves for faster growth opportunities.
It’s important to understand that partnerships are not limited to domestic or established markets. They can be just as, if not more, effective in markets primed for growth. Let’s take the UAE as an example, the region ranked as the fastest-growing eCommerce market in the world in 2022 and has a projected value of $17.2billion by 2027. At Nucleus365, we have seen an increase in merchant exploration into rising markets, utilising our service to create effective partnerships in regions such the UAE – namely Dubai, alongside the likes of Hong Kong and Europe.
Accessing new yet established markets also provides valuable market data, performance history, and additional experience to inform business decisions. Partnerships enable businesses to enter the market more swiftly by leveraging established supply chains and relationships of their partners, eliminating the need to start from scratch.
Within this, payment partnerships actively work to reduce risk, which is one of their key advantages. Insights and customer bases that businesses now have access to allow them to make informed decisions without the trial and error processes that often come with increased risk and threats to efficiency and bottom lines.
Moreover, accessing new markets diversifies sales, mitigating the negative impact of diminishing returns and a market downturn in a specific region, should it occur. By partnering, businesses can share the financial burden of payment investments and no longer rely solely on their own business performance, thus increasing operational resilience. In an eCommerce landscape where customer demands are ever-changing, resilience remains a key consideration.
Businesses underestimate the benefits partnerships garner through information-sharing between companies. In our view, the most successful partnerships go beyond market growth, new customer bases, and risk reduction. By treating partnerships as collaboration, businesses can quickly gain insights that would have otherwise been unavailable. In doing so, they can generate new ideas, streamline operations for efficiency, and position themselves for more strategic growth trajectories.
Payment Partnerships In The Future
The benefits of payment partnerships for growing and established retail businesses are numerous, with particular advantages for market growth, penetration and resilience. However, partnerships require thorough due diligence. Relying on an experienced and trusted intermediaries can mitigate both short and long term risks and ensure mutually beneficial outcomes for both businesses.
Partnerships will become increasingly common as the eCommerce sector continues to expand into emerging markets. The rise of technological infrastructures in developing regions will encourage the formation of new partnerships designed, in part, to access these customer bases safely. Ultimately, consumers globally will benefit from the increased robustness of global retailers, who can offer products and services to demographics at an accelerated pace, all while ensuring increasingly flexible, safe and secure payment facilitation.
Attributed to Anjulie Patel, VP of Partnerships, Nucleus365