The Battle for the Checkout

Intro

The checkout page is one of the most fought over spaces in e-commerce due to its high value. Companies not only want to be used as the payment method for the completion of a transaction, but they fight over the data that they can acquire through facilitating the transaction through their ecosystem. After all, data is the new oil.

Historically and across many industries, a lack of physical space has caused someone to try and capture this scarcity and monetise it. Think real estate. Think ad space. Will the checkout space be monetised in the same way?

In this piece I will introduce an old physical commerce concept, slotting fees, as the lens through which to view the checkout page. I will briefly highlight some of the post-covid changes in e-commerce that are generally well-known as important context for why the checkout page, now more than ever, is highly sought after. Then I will attempt to demystify some of the technical terms such as payment gateway before using the Jobs To Be Done (JTBD) framework to indicate the key elements of the checkout page that both merchants and consumers need.

Then I’ll analyse the six main types of companies that are competing in the battle for checkout space; the status quo, incumbent card networks, digital wallets, BNPL providers, universal one click checkout solutions and finally account to account payment solutions.

Rounding out the analysis are my thoughts on opportunities to differentiate and what it takes to win in this space.

Slotting Fees

A slotting fee, or listing fee, is a cost suppliers pay to retailers to both carry their product and to have it placed on their shelves. Although there are some operational costs for a retailer in listing a new SKU item, the fee is commonly levied to allocate the best and most sought after shelf space. The size of large brands such as Kraft Foods in the supermarket industry means they dominate the grocery shelf real estate as they have the ability to pay the highest slotting fees or give the largest discounts to have prominent positions in consumers line of sight and at the ends of aisles.

Will the checkout space be dominated by deep pocketed tech companies who pay for the top spot? Will the card networks successfully leverage their ubiquity and reign supreme? Will alternative payment methods like BNPL and account-to-account payments which promise higher value to the merchant have prime positions?

Shift to e-commerce

The COVID pandemic has shifted the way we shop, accelerating a trend that has been growing for a number of years and is unlikely to reverse course. According to McKinsey’s 2020 Global Payments report, in H1 2020 consumers spent $347bn online with US retailers, up 30% from H1 2019. This was 6x the annualised 2019 growth rate of online retail.

The report also highlighted the increasing dominance of digital marketplaces, such as Amazon, eBay, Etsy, Flipkart and Shopify, which experienced 70%-150% growth in seller sign-ups. Marketplace sales account for 57% of all global retail sales and the top 100 marketplaces globally saw nearly $2trn in sales according to Digital Commerce, with 60 of the top 100 being located in the US.

This shift to e-commerce has a lot of implications for consumers and merchants, as online shopping behaviour doesn’t always mirror physical purchasing behaviour. With new shopping behaviours come new payment trends. Cash, unsurprisingly, has been a big loser. Data from Worldpay’s 2020 Global Payment report shows the increasing payment methods available and their estimated traction in the coming three years.

Source: WorldPay

Technical terms

A payment service provider (PSP) is the broad industry term used to describe companies that provide a turnkey solution to allow merchants to accept payments online without having to set up their own dedicated merchant account. PSPs operate a single merchant account and offer individual merchants sub accounts which makes it very quick to onboard a merchant. The companies discussed in this post are all PSPs using a variety of different channels (online, point-of-sale, mobile) and are active in different geographies.

A payment gateway is a technology that sits on top of a merchant’s own account or a PSP, that performs a number of functions on merchants behalf. They analyse, encrypt and transmit transaction data to an issuing bank to request authorisation and then authorises the transfer of funds when its authorisation is approved. PSPs generally force merchants to use their built-in payment gateways but if a merchant has their own merchant account then they can choose to connect to any gateway.

Source; Stripe.com

Payment gateways easily allow merchants to add different payment methods such as cards, wallets and buy now pay later. Stripe does a much better job of explaining what it does so I will refer you here for more details. Stripe allows merchants to either use a prebuilt hosted payments page (Stripe Checkout) or to create their own checkout flow with Stripe Elements.

Modern payment gateways also provide ways to plug their data into merchants’ other systems (accounting and order management etc) which helps the merchant with transparency into their business as well as reconciliation and settlement.

An example of the benefits of these additional services offered by PSPs can be seen when Twilio selected Stripe for its enterprise payments and found its acceptance rate increased 10% compared to other global processing companies.

What are the jobs to be done from a checkout page?

The jobs to be done (JTBD) is a product development framework that deconstructs an end goal and the thought process behind it to make it really clear what an end user is trying to achieve.

Merchants

With an ever increasing list of payment options for merchants, its worth revisiting the JTBD for merchants from the checkout page, which includes:

• Reduce cart abandonment
• Increase the average order value (AOV)
• Reduce fraud
• Minimise costs of transactions
• Increasing customer conversion by capturing customer information

Research from Pymnts.com has shown consumers fill out on average 23 information fields to complete a single online purchase according to Visa which takes on average two minutes to complete. It also showed that buy buttons can reduce online checkout times by nearly 40%, with the amount varying by button and by merchant. On mass merchant sites, the reduction can be as high as 54%. On average nearly 70% of online shopping carts are abandoned with 21% of those surveyed saying they abandoned because the checkout process was too complicated (Source). Merchants need to balance UX with the payment option flexibility to increase AOV, which is one of the key reasons for the success of BNPL providers. The shift to e-commerce has presented new opportunities for fraudsters, with online merchants faced with higher decline and fraud rates, which is why payment gateways offer fraud solutions for merchants, leveraging their entire transaction data sets.

Consumers

Consumers jobs to be done (JTBD) include;

• Being able to pay with preferred payment method
• Easy completion of payment information and delivery information
• Safe and secure storage of payment information

Consumers want a quick and easy checkout experience and to be able to pay with their preferred method of payment which is why there has been a proliferation of payment methods recently. One of the reasons merchants ask users to create accounts with them secured by a username and password is to reduce fraud with the benefit to the consumer of enabling them to save delivery information and payment information for future use. Consumers try to keep card details out of the hands of untrustworthy characters and they are often out of reach when it comes to checking out online, so having them saved online helps for an easy checkout experience. This however can mean fraudsters target merchants to steal usernames and passwords in stead to take over an account.

Whilst the data indicates both merchant and consumer are looking for a frictionless checkout solution, there is an ethical consideration to balance. How easy should spending money be for consumers? This question is beyond the scope of this post but it is important context as to how far the process should be simplified, beyond how far it can be technically simplified.

The Battleground: The Checkout page

The battle for the checkout page is in full swing with digital wallets competing with credit/debit cards which compete with BNPL solutions which compete with crypto solutions which compete with other checkout solutions. The need to provide merchants with tools to prevent fraud and reduce cart abandonment presents a user experience challenge that is becoming a popular space to attack.

Not only are people buying more online but also on mobile and the checkout experience needs to be seamless on both. The lack of screen space on mobile makes it even more pertinent for easy checkout solutions such as buttons.

Stripe is the undoubted leader in checkout button technology, as it powers 66% of the top million sites according to Built With, although its Stripe Checkout button is only 4th in the rankings.

Source: Built With

Built With also identifies the number of websites that are live with other checkout technology which highlights the clear distribution advantage PayPal has.

Distribution Channels

For merchants, checkout solutions come from three main channels. Payment gateways, direct or from e-commerce platforms. Payment gateways such as Stripe and Checkout.com allow merchants to quickly spin up checkout pages and add whatever payment methods the gateway supports. E-commerce platforms like Shopify have this functionality built in through its Shop App and Shop Pay solutions. Shopify lets merchants create a store on its platform and use its built-in checkout and payments solutions as well as utilising consumer’s Shopify accounts, but they do not currently work outside the Shopify platform. The increasing volume of purchasing going through digital marketplaces mean they are a very important channel partner.

There are a number of companies solving from the consumer side, notably PayPal, Apple and Google. The “Pay with X” checkout buttons have become abundant and solve a lot of the JTBD for consumers. One downside however is consumers are becoming increasingly more reluctant to give any more data to large tech companies so might prefer an alternative solution.

Challenger 1: Status Quo

Lisa Ellis at MoffettNathanson estimated in late 2019 that 33% of e-commerce outside of Amazon was done via buttons, with the remainder through manual entry of card details or log in details. Although these numbers might have shifted since COVID, buttons are unlikely to still be the majority.

Currently users either have to remember login information at merchants, with potentially multiple email addresses and password combinations for different merchants and must have their card information handy. Consumers could use password managers to store login information and card details, which are gaining in popularity and work as browser extensions across any merchant. But these are not 100% secure, as hacking incidents at LastPass have shown. Not to mention the hassle of updating and remembering card information when they expire.

Challenger 2: Card Networks

Recently Visa, Mastercard, Discover and Amex got together in a highly unusual move for such a competitive industry, to create “Click to Pay”. Click to Pay is a single buy button for online merchants aimed at mirroring the single terminal to accept all card payments. The interoperable solution is aiming to provide a streamlined digital checkout solution for consumers. It launched in the US in October 2019 and has been implemented by more than 10,000 merchants.

Click to pay is set to go global and these companies have distribution network/advantage. 10,000 U.S. merchants have signed up for Click to Pay, including Cinemark, Crate & Barrel, Expedia, Fresh Direct, Jo-Ann Fabric and Crafts, JoS. A. Bank, Lowe’s, Marriott, Papa Johns, Rakuten, Saks Fifth Avenue and SHOP.com.

As gatekeepers of the underlying payment rails, card networks are in a unique position to incentivise traffic merchants to adopt and prominently display Click to pay on their websites. Maybe slotting fees become lower interchange or less merchant liability for Click to Pay transactions. Card networks are successfully doing that currently to encourage adoption of contactless payment technology (EMV). Merchants not using EMV processing now are now responsible for the liability associated with fraud which motivates them to upgrade their processing capabilities. The same could be done with Click to Pay.

Challenger 3: Digital Wallets

Increasingly available online are checkout buttons from PayPal, Amazon, Apple and Google. These apps let you check out using your respective login from each company, something that is likely to be more memorable than a merchant’s website you visit infrequently. These companies are hoovering up transaction data to further deepen their customer insights for future monetisation.

Both Venmo and Cash App are adding functionality to allow payments to merchants, expanding beyond their humble P2P origins as they seek to expand their utility. Zelle could be a stalking horse for the banks into the payment space and a way to cut out costly card network middlemen if they too were to add a “Pay with Zelle’’ button for checkouts online. This could be built out further into an account-to-account payment product, more on that below. The security that comes with checking out with a major tech company is not something to be sniffed at and provides reassurance to consumers. On mobile, Apple and Google also have a clear advantage in building for their own OS’s and devices as well as traditional web browsers. MoffetNathanson reported in October Google Pay adoption increased to nearly 30%, in part due to its Chrome-based ‘auto-fill’.

Source: Pyments.com

In research by Pyments.com, they found that PayPal’s and Amazon’s buttons were the most effective at reducing the checkout time, with a near 40% reduction. Although these numbers were higher to begin with and Apple had the quickest checkout times with and without buttons.

PayPal — yards ahead

Morgan Stanley found in 2019 that PayPal’s checkout button was present on 369 of the top 477 internet retailers websites, with Amazon Pay the next closest at 64. Whilst this data is a little stale and COVID may have changed things, it shows the huge distribution advantage PayPal has.

According to MoffettNathanson, PayPal’s checkout button saw volumes grow nearly 40% in Q2 2020, which is almost 2x pre-pandemic levels, and this growth will continue in 2021. This distribution advantage is also enhanced with PayPal’s recent $4bn acquisition of Honey, the browser extension. Honey automatically finds and applies coupon codes at checkout with a single click. Honey provides comfort to users that they got the best price when making a purchase, a very valuable feeling. One of Honey’s selling points was that it didn’t monetise or analyse your personal information or browser history because it makes money from charging retailers. This data however is almost certainly going to be utilised at Paypal and also provides PayPal with distribution through 17 million active users. This scared Amazon enough that it said in early 2020 that Honey “poses a security issue”.

PayPal’s wallet adoption is nearly 3x the next closest (Google Pay) and with its button distribution advantage, MoffettNathanson estimates two thirds of e-commerce transactions involve a user seeing the PayPal Checkout button. Senior analyst Lisa Ellis says this advantage is 25x larger than the next closest wallet, Amazon Pay.

One drawback is the increasing creep of technology companies into all facets of daily life and there could be some apprehension from consumers to use their checkout features and furnish them with even more data that they could monetise. Not to mention possibly looming regulatory scrutiny on the companies more broadly.

Challenger 4: BNPL Solutions

BNPL providers market themselves to merchants as a way to increase their AOV whilst appealing to consumers to further delay and spread out the cost of purchases. Their easy checkout experience and availability across multiple merchants also provide a seamless experience for the benefit of both merchant and consumer. The added benefit to consumers, of delaying and spreading out payment even further is crucial to their adoption amongst younger generations where credit card penetration is lower.

However, one of the benefits of BNPL, that there is no hard credit check performed, is also one of its downsides, in that a user cannot build up their credit score. Despite the lack of a hard credit check, some BNPL providers are reporting some payment details to credit bureaus. Affirm for example will report loans that incur an APR to Experian. I would expect an increased reporting requirement from regulators in the future for BNPL providers.

Competitors such as PayPal, Visa and American Express are already encroaching on the turf of BNPL so they will not have this space to themselves for long. However there is a divergent approach with incumbents and their BNPL products. American Express and other card companies offer consumers the ability to split large payments (>$100) after they have been made using their own mobile apps. PayPal and Visa offer the more traditional “Pay in 4” product allowing a customer to split payments into four payments.

If the ability to split payments is a BNPL provider’s only value add, they will not last long. They need to hook merchants with data and analytics and offer consumers additional value to keep them from more familiar brands with similar features.

Challenger 5: Universal checkout solutions

Universal checkout solutions are a cross-merchant, one-click solution to speed up the checkout process for consumers. Originally patented by Amazon in 1999, the 1-Click technology has proliferated since the patent expired in 2017. Users create a secure profile once and save their addresses and card details which can be used at many retailers across the internet. You can think of it as a cross-merchant one click buying solution like Amazon has made popular.

Fast is a device and platform agnostic solution which is consumer focused and marketed as “world’s fastest checkout”. The ‘Fast Checkout” button is available on the BigCommerce and WooCommerce platforms with their total merchant reach over three million, despite only releasing its product in September. However it is not clear how many of these merchants have implemented Fast but those sellers on Bigcommerce that have, have seen 20%-35% uplift in conversions in a week after implementation. A notable departure from the norm as well is that Fast is committed to not selling the data it collects to advertisers.

Fast has one very powerful partner behind it, Stripe, which invested in its Series A in April 2020 and its Series B in January 2021. Fast presents Stripe with a route into the consumer space which could be expanded over time to balance the B2B focus of Stripe’s current business model. Fast could easily be embedded in Stripe products and gives the payments giant a consumer focused product to complement its more traditional B2B offering. However, Stripe also has relationships with the other digital wallets to balance and will not want to cannibalise these other valuable partners.

Bolt is another universal checkout solution which is taking a more B2B approach with its marketing. Bolt’s “Checkout Experience Platform” sits on top of a merchants e-commerce solution to add its fast one click checkout experience. Bolt advertises a 60% increase in conversion for merchants using its solution and offers fraud and multiple payments integrations. One of Bolt’s key differentiators is that Bolt is targeting independent online retailers who are looking to maintain independence who value control of their platform and ownership of the customer. Bolt is looking to leverage these independent retailers to create a network effect where they all benefit. Bolt found that 93% of their online retailers have had cross-network purchases with a conversion increase of 63% and nearly 20% of all Bolt transactions are network driven. Bolt could later leverage this into its own shopping experience via an aggregated app or website to drive traffic, not dissimilar to Shopify. However these endeavours may stray too far from the original goal of helping retailers which should be the primary focus.

Challenger 6: Account to Account payments (A2A)

A2A means that the payment goes directly from a consumers bank account to the merchants. This has a number of benefits for merchants which include quicker receipt of funds for better cashflow management and lower fees through circumventing card networks. The previously mentioned McKinsey report found that merchants payment acceptance costs are expected to rise by an incremental $8bn-$15bn (which is 6%-10%) as commerce shifts to new digital channels. 11:FS discuss the potential for A2A here.

For consumers, some of these A2A providers such as Trilo are taking a consumer approach of having one profile that you can use across multiple merchants as well as integrating rewards and cashback. Zelle could provide banks a way to facilitate account to account payments in the US as they become more embedded in consumer’s minds as a payment method. Banks already have the customer accounts and Zelle could be used to make direct payments and avoid the card networks and middlemen. However a Zelle A2A solution would cut off the lucrative interchange revenue stream for issuing banks.

Source: AppBrilliance

AppBrilliance takes a B2B approach with their real-time non-custodial Open Payments solution which eliminates over 75% of their payment processing costs, estimated at $120bn per year for consumer payments. Their Money API removes barriers from interacting with back accounts and enables instant push payments to merchants. Banked is taking a similar approach in the UK of focusing on the merchant side of things rather than having a more consumer facing approach like Trilo.

Pricing

It is difficult to gather pricing information as a lot of these companies do not have publicly available pricing on their website but the internet does give some clues. The lack of information also further indicates the competition for this space and the flexible nature of pricing policies depending on volume which necessitates opaqueness.

It seems that the card networks click to pay solution is currently offered for free with the same card-not-present interchange and processing costs. I would imagine the digital wallets also do not charge a fee for using their checkout button as they are all trying to drive payments volume through it.BNPL companies typically charge merchants between 2% and 8% of the transaction and sometimes an additional per transaction fee.

Data from 2018 shows for a merchant Bolt charges 2.9% + $0.30 fee but matches existing processing fees. According to public information, in the past Bolt have also taken a 1.8% “Bolt fee” on top of this as well but it is unclear if they still do so as they have no pricing information available. Fast on the other hand take 2.9% + $0.30 per transaction with volume discounts available.

The key selling point of A2A providers is lower fees. AppBrilliance says it can reduce payment processing costs by 75%, giving a probable transaction cost of ~0.625%. Trilo costs £0.20 per customer per month.

With these costs, BNPL companies need to really demonstrate value to the merchant of AOV increases of up to 5% to compensate for their additional cost.

What does the future look like?

Given the proliferation of payment options available to consumers when buying online, like supermarket shelf space, checkout real estate space is limited.

Source; JD Sports

There is an inflection point that more payment options becomes counterproductive for a merchant and puts consumers off. Whilst that point is unclear, the UX of JD Sports (above) is close to that point (if not already there).

For tech or payments companies, having one of the top slots on the checkout page will become increasingly important with the rise of alternative payment methods. Not only are the card companies competing against each other but they are now competing with tech companies (PayPal, Apple and Google), account-to-account payment solutions and increasingly crypto payment solutions.

The battle for screen space on a checkout page is hotting up. Payment gateways have some control over the prebuilt checkout pages they provide merchants. They are in control of what payment methods are available and in what order they are shown to consumers. Startup PayForm, which is a verified Stripe partner, also provides customisable checkout forms, putting the merchant in charge of creating their checkout experience, allowing more control over the checkout page.

You can see a world in the near future in which digital slotting fees or similar economic incentives are paid to merchants or payment gateways for prime placement at checkout. If you are Apple, Google, PayPal or one of the BNPL providers, would you reduce the fees charged if your solution was the first option a consumer saw, or for being the exclusive digital wallet or BNPL provider for the site?

Source: Million Dollar Homepage

Affirm has already secured this status with Shopify and paid handsomely for it. Shopify holds warrants to buy ~20m Affirm shares at $0.01 which has a current market value at the time of writing of ~$2bn. Merchants have to be wary of monetising too many payment methods or they risk turning the checkout page into the Million Dollar Homepage.

Merchants could also incentivise consumers to pick a payment method which they economically benefited from by providing different levels of rewards/cashback to consumers based on which method of payment they use. This type of steering would likely be scrutinised by regulators as being anti-competitive but I believe it would escape any action by regulators. Merchants are not currently forced to accept all types of credit card which pushes customers towards a particular payment, as do different credit card rewards offered to consumers. Merchants are also allowed to offer cash discounts, whereby a price is displayed for credit card prices and there is an offer of a discount on that price for customers using cash.

Source: Shopify dynamic checkout buttons

Shopify already allows for dynamic checkout buttons which changes based on customer’s preferences and include options for Amazon Pay, Apple Pay, Google Pay, PayPal, Shop Pay and Venmo. It is not a stretch to see Shopify auction off this prime spot or enable merchants to.

Checkout + Loyalty

This is not a winner take all market, there is simply too much at stake, and all challengers will have varying degrees of success as the space can accommodate a large number of players. The most successful I believe will be the one that has the distribution advantage. That advantage is likely to come from partnerships but also from increased merchant value add. The key space would be one of the challengers successfully integrating a rewards and loyalty solution for merchants and consumers. This would make both sides of the market stickier.

A Deloitte survey found that nearly 75% of consumers surveyed who prefer credit cards over other payment instruments, did so because of the rewards and discounts available. With travel related rewards being the largest category, in a Covid and post-Covid world, consumers preferences are likely to change and the rewards space could be in for a shake up. JPMorgan recently bought cxLoyalty Group, placing a bet that travel will rebound quickly once the pandemic is over. Even if it does rebound, the need for more personalised rewards is clear.

Consumers are increasingly looking for personalised experiences and rewards combined with easy integration at the checkout for earning and spending rewards and discounts. An additional feature could be the real-time notification of rewards earned to sooth the instant gratification of younger consumers.

Fidel is a fintech infrastructure company that helps to unlock the power of payments data. Its Offers product enables merchants to create and manage card-linked offers easily as well as providing insights into consumer behaviour through tracking of offers in real time. With soaring customer acquisition costs, retailers can increase profits more by retaining customers and loyalty is a key way to do that. Fidel’s research found;

• 5x more expensive to win a new customer than to retain existing one
• Increasing retention by 5% increases profits by 95%
• 67% of shippers will change their spending habits to make the most of loyalty
• 70% say their loyalty is harder to maintain than ever before

For merchants a reward and loyalty platform would enable them to engage more deeply with consumers to build loyalty. Access to aggregated, deeper insights on consumers gathered from a platform featuring a large number of merchants across different categories could also lay the foundation to boost merchant sales. Reward and loyalty platforms are typically the domain of larger retailers due to the difficulty in setting up, but if integrated with a checkout solution, it would enable smaller merchants to also offer them. New rewards platforms such as Dosh and Drop would be prime candidates to integrate with. Dosh has already partnered with Venmo via an SDK to “provide automatic, instant, card-linked cash back experiences to their customers”. Fidel’s rewards platform links payment cards, merchants and loyalty programs and is currently utilised by British Airways, Klarna and soon to be Google Pay.

Conclusion

PayPal is leading out front through its distribution and as it increasingly integrates Honey into its products to offer coupons, rewards and loyalty, it will be a formidable competitor. Its distribution dominance is likely to come under serious threat from the other tech giants as they expand their pay offerings. Tech companies are only starting to get serious with rewards as the recent Google Pay revamp shows but Apple offers cashback through its Apple Credit Card that could be leveraged.

The BNPL solutions provide a real value add to customers, but currently lack meaningful distribution(except Affirm which is partnering with Shopify). I believe over time they will become increasingly regulated and features copied by other checkout players. The need to race quickly to get distribution and preferred checkout placement.

The universal checkout companies are figuring out distribution by partnering with e-commerce platforms and I think they face the largest uphill battle given the lack of consumer recognition. Stripe is the ace in the pocket for Fast though and integration with its Stripe Checkout or Stripe Elements solutions would immediately throw them into serious contention. Bolt’s strategy of going after independent retailers in the clothing and fashion space who want creative license and customisation not always possible on large platforms. Like BNPL providers, I predict these universal checkout companies to create their own shopping apps to drive traffic to their merchants in the future, demonstrating their value by bringing merchants net new customers.

The longer term dark horses are the account to account payment solutions. The use case for the merchants is very high, lower fees and easier cash flow management. It is currently less obvious for the consumer but an integration with rewards, loyalty and cashback could tip the balance, although these would have to compete with rewards offered by credit cards. A consumer hook has yet to have been discovered. A closed loop Square Merchant + Cash App payment network could be very powerful, as would a PayPal + Venmo for Business offering.

Merchant adoption is the name of the game. While small transaction cost improvements are great, they do not move the dial for merchants like AOV increases, authorisation rate improvements and reduced fraud. Payments is at the absolute core of e-commerce and making changes to payment processes is inherently risky. Jobs are lost through payment failures because everything stops when a merchant can’t accept payments. The value proposition to merchants has to be so high to make them change but improvements in the above mentioned elements can do that.

The future leader in this space will have wide distribution across many merchants as well as providing real value to merchants beyond improving cart abandonment rates and AOV as mentioned. By giving merchants analytical tools and built-in rewards and loyalty platform capabilities it will further lock them in to a solution. Consumers will get a secure and seamless shopping experience. Win, win, win. Who that player is, remains to be seen but I predict it will come through a partnerships model.

Merchants should be a beneficiary due to the increased competition for their checkout screen space. I would look for merchants to drive down interchange revenue through incentives from card networks as well as reducing the fees and take rate associated with the other payment methods. Highly sought after merchants may also be able to extract more analytics from checkout providers to help grow their underlying business in a flywheel that also benefits the checkout provider. Also look for merchants to monetise their checkout pages through exclusive partnerships or placement deals.

Ultimately though, the big winners (except through BNPL and A2A) are the card networks. This can be the reason why Visa and Mastercard are increasingly getting into the BNPL space and are looking to make investments to remain relevant in an A2A world. These other solutions attempt to provide more convenient ways to use your card, which only helps grow the Visa and Mastercard duopoly. Although they would prefer consumers use their “click to pay” buttons because of the increased data they get, expanding card usage is their ultimate goal.