3 PAYMENT METHOD SCORECARD
Bank Transfer payment platforms such as SEPA Direct Debit, ACH and BACS are typically associated with recurring bill payments in the developed world, and are yet to significantly expand beyond this. Merchants typically engage with bank transfer via a third-party processor such as Adyen, Stripe or PayPal but some have built their own “pay by bank” functionality. Bank Transfer scores 16.1 and finishes seventh. Cash should not be written off: our case studies suggest that cash spending remains significant in many countries, and its relatively low cost of acceptance for merchants means it remains an important payment method in pretty much every country. Perhaps impressively, cash finishes fifth in our rankings. Buy Now, Pay Later has seen big success in countries such as Australia, Germany and Sweden in recent years, and is well positioned as an alternative source of consumer credit to credit cards. However, growth has levelled out in many areas and until sufficient volume growth delivers economies of scale, high merchant fees are needed to cover a large cost base that includes bad consumer debt and large sales/marketing costs. We believe this largely explains why BNPL scores poorly when it comes to cost, and it doesn’t score well enough in the four other areas to compensate for its high merchant fees. Therefore, BNPL finishes eighth in our ranking, but we’ll be looking to see if the industry can continue to build scale, and if this will ultimately be reflected in end user fees and subsequently improve its score and ranking. Stablecoin is very much the new kid on the C2B payments block(chain). Although there is precious little track record of Stablecoin in C2B payments in any country at time of writing, we decided to include Stablecoin for the raw potential it has as a disruptor in the payments space, and high-profile legislation aiming to legitimize the industry in major jurisdictions such as the United States and the European Union will likely provide a tailwind to Stablecoin’s growth. Despite this, headwinds remain, including building solutions to rival the functionality of cards, and there will likely be challenges building ubiquitous acceptance including consumer adoption incentives. As a result of the nascency of
Stablecoin and the challenges it faces, it finishes ninth and bottom of our rankings. However, we believe there is a lot of potential here and we wouldn’t be surprised to see Stablecoin storm up the rankings in the future. Scorecard Methodology: Using the characteristics from Section 1 as a guide, metrics were determined to evaluate how well the payment methods measured up to the ideal payment method. Each metric is provided with a related question and a score, 1 to 5, with 5 meaning the payment method is close to the ideal. Following is a chart of the metrics, their definitions, the question posed, and the score range for each of the characteristics laid out in Section 1. Note: Buy Now, Pay Later – Many BNPL providers utilized cards to extend their service in-store for users. In these instances, the merchant is essentially accepting card payments. Our analysis considers direct connections between merchant and BNPL. Stablecoin – There is the possibility merchants will accept stablecoin directly into their treasury. However, our analysis considers merchants accepting via third party service providers and being paid fiat currency into their treasury.
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