The financial services industry is undergoing a significant transformation, which was accelerated by the COVID-19 pandemic. Digitalization plays a key role in fostering innovation in payment processing, with payments becoming increasingly cashless. In this context, supporting digital economies and driving innovation are some of the main areas of development for the near future, according to a PwC research.
As customers expect more seamless and secure transactions, frictionless services boost customer satisfaction, loyalty and repeat business, and any hiccup however small can drive customers to competitors. Beyond this consumer-facing side, a quality payment processing strategy streamlines back-end operations, reduces costs and frees up resources, paving the way to scalability.
While the challenges are common, the solutions seem to differ from one business to another depending on its particularities. For instance, CatalystPay is a provider of merchant services offering bespoke payment processing solutions for online businesses, whose product offering to EU and UK merchants includes payment gateway, merchant accounts and alternative payment solutions. With their team located mainly in the CEE, they created a product around personalized services and support from actual experts as a competitive advantage.
In this article, we’ll explore ways in which leading SaaS and e-commerce companies in the region leverage these strategies to their advantage.
The Payment Processing Landscape In CEE
Traditional banking structures have given way to an increasingly diverse and competitive ecosystem, with smartphone usage and increased consumer preference for convenience, as well as e-commerce growth. Although cash payments are still prevalent in certain CEE segments, countries like Poland and Hungary register higher adoption rates, with mobile wallets and contactless payments becoming more popular. In 2022, cash accounted for only 3% of all payments in Poland, and 6% in Hungary, while at the opposite end of the spectrum Bulgaria registered 67% cash payments.
On top of all this, data breaches making headlines turns secure payment processing into more than protecting funds, and it helps safeguard a company’s reputation and public trust. In addition, regulatory changes such as the EU’s Revised Payment Services Directive (PSD2), have paved the way for increased competition and innovation, and worldwide cashless transaction volume is expected to more than double by 2030 compared to 2020.
There are various gaps to be bridged in the region, but CEE is on its way to shrinking the gap through cross-border transactions, regulatory frameworks and unparalleled growth.
While the payment processing industry is expected to reach $146.45B by 2030, according to a Capgemini report, 89% of SMBs say they are reconsidering relationships with their primary banks because of the lack of digitalization.
In this context, the only way to leverage different payment options is understanding the way that leading SaaS and e-commerce companies adapt to the payment preferences of their customers, both in terms of challenges and competitive advantages.
CEE SaaS And E-Commerce Leaders About Their Payment Processing Strategies
Checkout X & Vanga AI
Besides ensuring redundancy, how can a founder structure their decision process about selecting their payment infrastructure?
The first thing is compatibility. If you’re using an e-commerce platform, you need to check what’s available on the platform, otherwise you can’t use the solution in question. Then you should look for a combination of price and acceptance rate. Because you might get a better price, but if you have many rejected cards you lose a lot of orders down the line.
Where do you see the future of e-commerce in the next 5 years?
Instant delivery is definitely a trend, allowing people to get their items asap, so any form of instant delivery service where as a seller you don’t have to build a physical store might develop.
But even here, there are different types of orders. Ones that you don’t need immediately and you can buy online and receive in a few days, and others you need delivered immediately from the supermarket or the pharmacy.
On top of that, there is an entire industry of digital items as well, along with specific ways of purchasing them. And I think this is going to grow – digital services like teaching and fitness and so on.
Rush & DevriX
From your experience, what are usually the biggest challenges companies face when it comes to payments?
There are multiple high-stake challenges in terms of payment integrations. For starting businesses, it’s about revenue cut, handling accounting, navigating refund requests, and developing integrity and robustness in a payment gateway. It’s not unheard of for large players to block an account for good for possible ‘violations’ of terms and conditions, high return rates, or the inability to handle fraudulent payments.
Larger businesses have to balance out ease of use and recognizable vPOS solutions with CC fees, handle international cards, and deal with localized challenges with validation (such as ZIP codes or phone numbers during the process). Invoicing details and generating proper order information for accounting is also a key struggle for both parties.
How would you describe the current e-commerce landscape in Central and Eastern Europe (CEE)?
The CEE market is fairly segmented.
From a lingual standpoint, Europe has 24 official languages (with nearly 200 generally spoken across the borders). Targeting a handful of small countries hosting several million people each is an expensive undertaking for larger eCommerce solutions like WooCommerce, Shopify, and BigCommerce. Let alone the different nuances for each region.
The same extrapolation goes for localized payment providers, ERP systems, or marketing automation tools, invoicing apps, local legislation gotchas, and different regulations from the EU. Let’s not forget about currency exchange rates and providing seamless user experience for shoppers trying to sort out both logistics and the actual final cost.
Thinkout
Tell us about your business model – how does it work, and who is it for?
ThinkOut is a cash flow analysis and forecasting platform dedicated to small and medium-sized businesses. We aim to make cash flow management easier to grasp for managers who want to know more about their businesses’ financials and make informed business decisions.
Could you share some insights into how you use payment data to better understand your customers’ behavior?
In the past years, we have tested different payment processing solutions. We have extended our operations across different countries in the CEE and we’re currently looking at The Netherlands, so our needs are permanently changing.
We look at insights into metrics like customer lifetime value and churn rate, which are essential for any startup. More than this, we also care about how long customers use our platform and our monthly recurring revenue per plan. This certainly helps us better understand and leverage the value we bring to our clients, improve the relationships with our current customers, and refine our strategy for acquiring new ones.
Have you faced any specific challenges regarding payment processing?
As a fintech startup, we must comply with a variety of regulations, especially when it comes to data security. It is one of the main reasons we have chosen to use this provider as our payment processor, as they are one of the most relevant players in the industry and have invested in several security measures to protect customers’ data.
Also, as each country has its tax particularities, it was important for us to work with a solution that allows us to automatically calculate and apply taxes based on the customer’s location and the applicable tax rates. This way, by using this provider’s tax module, we know we are collecting the correct amount of taxes and staying compliant with VAT regulations.
Kubeark
Tell us about your business model – how does it work, and who is it for?
Our business model at Kubeark is based on offering software licenses to our
clients directly or through marketplaces. Our primary clients are enterprise companies looking for enterprise orchestration solutions.
Have your key criteria for choosing a payment service provider changed with your business growth?
As we grew and expanded our licensing footprint, criteria like reliability, support and global reach became more important when selecting payment partners.
Nold App
What are/ would be your criteria for choosing a payment processing provider?
Low commissions, flexible integrations (triangular split of payments and commissions), multi currency checkout
Have you faced any specific challenges regarding payment processing? For example, is there anything that stops you from implementing online payments at the level/ customer experience you want?
Shopify checkout is limited to a single currency, unless you use Shopify payments which is available only for a narrow list of countries. We solved it by registering an entity in a Shopify payments eligible country.
Turneo
What are/ would be your criteria for choosing a payment processing provider?
Most important thing at the beginning was ease of implementation. We were also checking that the tool had features we knew would be important to us in the short-term future, including support for different currencies and accepting all card types. Overall reliability is also super-important, we don’t want a payment system that crashes on us often (or at all!).
Native Teams
What are/ would be your criteria for choosing a payment processing provider?
When it comes to criteria for selecting a provider, I’d list it roughly in this order: acceptance, anti-fraud measures and pricing.
Have you faced any specific challenges regarding payment processing?
The two issues which we consider to be impediments of online payment processing are cost and fraud. Cost, because accepting payments this way is expensive, in percentage terms.
Fraud, because unlike a direct bank transfer, card payments can be reversed.
If so, how did you overcome them?
Costwise, we keep pushing to get better deals as our volumes increase. There is scope to ‘shop around’ although the technical integration work required with different vendors adds some friction.
Fraudwise, we’ve bolstered our internal policies and KYC measures substantially. This has certainly reduced our exposure to nefarious users and therefore the risks posed with card payment chargebacks.
Providing Scalable Payment Processing Solutions
If you’re looking to partner up with a payment service provider that has a comprehensive understanding of your financial processes and challenges, CatalystPay’s team consists of industry experts – either former merchants or banking professionals – who build solutions with the perspective of their customers in mind. Leveraging industry insights and staying on top of trends and innovation, quality support from real experts are all necessary in creating a solid payment strategy.
With over 8 million annual transactions processed, 350+ business clients served, and over 27 regulated financial partners, CatalystPay helps businesses be smart about payments performance, whether they’re familiar with the payment processing industry or not.
PwC consumer research shows that online purchases have increased from 33% to 45% since the start of the outbreak. Furthermore, over 90% of consumers are likely to continue using e-commerce channels after COVID-19 subsides, indicating a change in online and in-store purchasing habits. This means the pandemic has done what the industry’s been striving for: make digital payments the number one choice for consumers.
While all these trends are for the most part valid for CEE as a whole, there are certain markets in the region that are still lagging the transition to a cashless society. This opens up an opportunity for startups in the fintech sector to emerge and boost the transition to digital commerce in Eastern Europe while supporting the e-commerce and SaaS sectors’ growth. We at CatalystPay are happy to embrace this challenge and motivated more than ever to continue to provide convenient payment solutions tailored to the needs of both established and emerging online businesses, says Stefan Zisov, COO at CatalystPay.
As an emerging market, the CEE is facing a particular set of challenges, and SaaS and e-commerce businesses require flexibility, as well as a partnership that can help increase profit margins throughout the scaling process.
Conclusion
The evolution of payment processing solutions suggests a greater need for addressing this part of the business process from a more strategic approach. Seamless and secure payment strategies that are tailored to the needs of growth-focused businesses are a potential differentiator that impacts internal processes all the way through scalability. For the consumer base in CEE, payment options that cater to local preferences enhance user experience and boost conversions, while efficient processing ensures that businesses can handle volume spikes, especially during peak shopping seasons, ensuring operational continuity.
On top of this, secure systems are essential for both data and financial considerations, particularly in our region, where digitizing is an ongoing, increasing process. Opting for a partner with extensive expertise in the EU such as CatalystPay can help transform payment processing for these businesses, in an ever changing market that needs security as much as adaptability, where relying on expert guidance is increasingly relevant.
