With economic headwinds picking up, consumer spending behavior is poised to shift as households tighten their belts in some categories and economists try to make sense of the short-term and long-term future.
According to Peter Dougherty, president of open payments platform Spreedly, a steady diet of data combined with a willingness to adjust when necessary will be the keys to success.
In a recent interview with PYMNTS Karen Webster, Doughterty doubled down on his recent observation that companies on the Spreedly platform — which connects merchants and payments services providers operating in 100 countries — are looking to grow. He believes lessons learned by companies in 2022 and 2023 about running lean and efficient will prove valuable as growth prospects soften. Businesses are still looking to expand, but with a sharper eye on margins.
“As a savvy business operator, flexibility to make pivots is super important to run a great business,” Dougherty said. “Having access to data to make those decisions, but also having the flexibility to pivot and bring new products to market is key.”
And one of the interesting things he’s noticing is that as merchants take stock of new go-to-market opportunities, crossing borders and growing their customer bases, payment service providers (PSPs) are doing the same thing and even asking the same questions.
“I want to open up in this new country, or get into a new segment, maybe discount grocery stores,” he said, offering up one example. “[The PSPs] are asking: ‘How do I capture the discount grocery store processing market?’”
The discount grocery store illustration is apt for what’s happening in commerce, generally speaking. Consumers are still spending, but they’re trading down amid inflationary pressures and as they seek to make their dollars stretch. In other words, they may not be buying name brand detergent … but they’re still buying detergent.
Against that backdrop, companies can expand their markets by being flexible and by pivoting as they meet shifting consumer demands, and anticipate what’s next on the horizon. In doing so, he said, merchants can segment their strategies into a core business that contributes the bulk of revenues and cash flow.
“And then there are the bets,” he said, “on what you think is the next big thing. That’s where you carve off a budget and plot things out step by step.”
Data’s the critical component of charting a successful path forward, he said, no matter if it’s a merchant or a PSP charting that path. Linking with Spreedly’s open platform, with its real-time insight into payments, market-by-market transaction preferences and trends can help firms make the pivots as efficiently as possible.
“These are the fundamentals,” he said, “and it does not matter what type of business you are in.”
Firms that don’t have data on hand won’t be able to make the granular adjustments that pay off over the long run. Spreedly, he said, has leveraged that incremental, flexible approach, as constant customer feedback helps cement the company’s ecosystem.
For the merchants themselves, Dougherty said, a few rules of thumb suffice when it comes to connectivity, and ensuring that transactions are routed efficiently in their chosen markets. There’s no need to connect to all 140 PSPs, but there’s definitely a need to connect to at least two, he said (though one merchant’s payment needs may differ greatly from another).
With the platform model, Dougherty said, merchants also link to a PSP’s fraud and chargeback management tool. Spreedly, he said, has vetted the PSPs, with what he called a “high bar” of certification that the services offered by the platform’s PSPs are best of breed.
“You can use these providers interchangeably,” he said, “as the technologies evolve and the market demands evolve.”
The connectivity is important, he said, because consumer preferences on how they pay can change quickly — and indeed, those preferences are changing. Dougherty noted that buy now, pay later (BNPL) and pay-by-bank options are gaining momentum.
Account-to-account transfers are ripe for a wider embrace, he said, because the customer experience has been improving. Pay by bank, he said, has already gained significant critical mass in countries like Brazil and India, and it’s just a matter of time before we see similar trends in the United States.
“This is something that’s going to ‘wash’ over the payments world,” he said.
One tailwind in the states will come from the rise of open banking, he said, where a slew of new providers with cash in the coffers are actively seeking to bring new payment innovations to consumers. In that market-driven way, the U.S. open banking market is evolving differently than what’s been seen in Europe, where open banking’s been mandated by regulators. Standard practices are being shaped by dominant players such as Mastercard and Visa, which helps drive innovation without those efforts being stifled by regulators.
“The modernization of payments,” he said, “is essentially the adoption of consumer-facing technology that offers more choice and reduces risk for other actors in the system. It creates frictionless commerce and more options for the business operators.”
Payment preferences that will be in demand through the next few years, he said, include paying with devices and even voice commerce.
As merchants and PSPs gear up for what’s next, he said, they need to be savvy with data-driven insights to make strategic pivots.
“You need to be fearless to make those pivots,” he told Webster, adding that “the time to make the investments is now.”