The world of payments is a crowded place today and deciding which is the best payment solution can be quite the feat. Some payment solutions offer low fees, others offer faster transaction times and yet others offer worldwide services; but which one is the best?
In order to understand payments better, it is important to identify the three types of payment solutions:
- Global
- Regional
- Local
Global Payment Solutions
As the name implies, global payment solutions operate on a global scale. They are accepted virtually everywhere. VISA and MasterCard are great examples of global payment solutions. Such wide-scale payment solutions take many decades to come into being and morph into a de facto global payment method. A counter example is something like China Union Pay. While CUP is aiming for global outreach, it will be many years before the pivot is complete.
Regional Payment Solutions
Regional payment solutions are applicable to a specific region; either within a country or a few countries. The most classical example is the Eurozone. Payments within the region are based on cooperation between all the financial entities and central banks to work on accepting a payment instrument that is local to the region.
Local Payment Solutions
As the name implies, local payment solutions are restricted to the local region or a country. Local currency for example is a local payment solution. Boleto, QIWI, Paytm, DragonPay, EasyPaisa, M-Pesa are all examples of local payment solutions.
So what exactly constitutes a best payment solution? The answer essentially lies in Convenience.
The long and short argument is that there cannot be one particular feature that defines an ideal payment solution. Just as there is no one-size fits all, there can be no one feature that satisfies everyone because the market is fragmented.
How convenience is defined can vary. Listed below are some important variables (i.e. features) that define convenience and attribute towards the characterization of a good payment system:
- Acceptance (acquiring)
- Fees
- Speed (settlement)
- Security
- Availability (issuance)
- Interoperability
- Ease of use (user friendly)
- Rewards (Loyalty)
- Fraud Protection
- Qualification (signup)
- Omni-Channel (platform availability), etc.
- Reputation
- Marketing
All these features in their own right and weight shape a payment system, regardless of the market: global, regional or local.
Solve a Payment Problem
Each system that is being used in the market today is addressing some specific problem area. PayPal for example sought out to address the internet payment problem mechanism. M-Pesa sought to solve the unbanked and distance problem. Boleto sought to solve the problem with not having access to cards and hence relying on the receipt system for payment.
Many-a-times, payment system operators will introduce a payment system forcefully onto an ecosystem which perhaps does not require yet another player. The US peer-to-peer payments market is one such arena, especially when it comes to remittances.
Aite Group published an infographic that shows what payment systems are in use in the US:
As you can see, in this particular case, there is no one distinct feature that would categorize it as the ideal payment solution. The one feature that is used by a majority in the United States happens to be Cash, which can’t really be classified as a payment solution per se.
In contrast, Denmark is going to be perhaps the first country to become a cashless society, where card based payments are employed for almost everything. Why? Because multiple features like Acceptance, Speed, Fees and Issuance are in-built to the payment networks operating in Denmark.
So, Which is the Best Payment Solution For Me?
Companies can aim to better their feature sets, but in the end, it is the consumer who will ultimately decide if the features are worth labeling it as the best payment solution or not. Before you decide which payment solution to use for your ecommerce business, a thorough market analysis which takes into account customer pain points and identifies audience needs will go a long way in helping you decide which is the best payment solution for you.
