Optimizing In-App Payments Opportunities And Challenges

Integrator Media had an interview with Remo Giovanni Abbondandolo, General Manager-MENA, Checkout.com

Could you provide a brief overview of the entire ecosystem surrounding in-app payments?

The in-app payments ecosystem encompasses a network of various components, including payment gateways, digital wallets, and payment processors, that work to streamline payment transactions within mobile applications. Within this, the payment gateways act as intermediaries, securely transmitting payment information between the app and the payment processor. The payment processors validate and process transactions, ensuring they comply with regulations and security standards, while the digital wallets store users’ payment details for quick and secure payments. Successful integration of these services requires careful planning and implementation to ensure a smooth user experience and adherence to regulatory requirements, ultimately enabling businesses to deliver seamless payment experiences to their customers.

What are some factors driving the growing trust in digital payment ecosystems among consumers?

In the past few years’ ecommerce has grown faster in the MENA region than anywhere else in the world, with an estimated 209 million consumers transitioning to online shopping during the height of the pandemic. And with the pandemic’s lockdowns now behind us, the number of ecommerce shoppers in MENA only continues to grow. Latest estimates from Redseer have forecasted the total MENA ecommerce market size to be worth $100 billion by 2023. This has had a huge impact on how consumers in the region view digital payments, and on their willingness to use them. Furthermore, the increasing trust in digital payment ecosystems can be attributed to several key factors.

Firstly, the ecosystem is becoming significantly more secure due to rapid advancements in security and fraud prevention. Between 2021 and 2023, the fraud rates for online transactions during Ramadan in the region reduced by a whopping two-thirds, based on Checkout. com processing data. This improved security has instilled confidence in consumers, encouraging them to utilize digital payment methods more frequently. Secondly, the convenience offered by digital payments aligns with the heightened activity in app browsing and mobile shopping during this period. In 2023, for instance, Checkout.com saw processing volumes of online transactions during Ramadan swell in the region year-on-year by 69%, furthermore, we saw a significant uptick in funds sent by expatriates to their families and friends, both in anticipation of the Eid holidays and during the holy month, translated in a 17% increase in the UAE, and 28% in Saudi.

Can you elaborate on how the ecosystem is experiencing enhanced security due to rapid advancements in security and fraud prevention?

The digital payment ecosystem is becoming increasingly secure, thanks to advancements like robust encryption methods that protect payment information during transmission and storage, advanced authentication techniques such as biometrics and tokenization, and real-time transaction monitoring systems. Additionally, machine learning and artificial intelligence algorithms are being increasingly utilized to detect and prevent fraudulent activities. These technologies work together to create a multi-layered security approach, significantly reducing the risk of fraud and ensuring the security of digital transactions. Consequently, businesses can provide consumers with a more secure and reliable payment experience, fostering trust and loyalty.

How do in-app payments offer various opportunities for monetization to businesses operating through mobile applications?

In-app payment processing enables merchants to accept payments for goods and services directly within a mobile app, streamlining the checkout process for users to enter their payment details without leaving the app. This opens all sorts of monetization possibilities for app-based businesses, from setting up subscription payments to unlocking exclusive content. Enhancing in-app payment processing presents an untapped opportunity for merchants in the region to gain significant advantage, with benefits that encompass higher conversion rates, increased revenue, enhanced customer retention, and quicker settlement times. Simplifying the checkout process within the app reduces the likelihood of cart abandonment, leading to a smoother customer journey and ultimately boosting conversions. This not only drives revenue growth but also encourages customers to spend more time within the app, thereby improving retention rates. Additionally, offering direct account[1]to-account payment methods through in-app payments can significantly reduce settlement times compared to traditional card payments.

What are some potential drawbacks that merchants should consider when considering the implementation of in-app payments?

When considering the implementation of in-app payments, merchants should be mindful of two key drawbacks. Firstly, high commission fees can significantly impact profitability, particularly for businesses earning over $1 million in annual net app revenue on both the Apple App Store and Google Play Store, where fees can reach 30% of revenue. However, for businesses making less than $1 million, or in the case of a subscription[1]based app that’s been in service for over 12 months, the corresponding fee is 15% of the revenue, which will apply to most app developers. Secondly, the lack of flexibility in direct integration with Payment Service Providers (PSPs) may limit merchants’ ability to offer alternative payment methods beyond Apple Pay or Google Pay. Despite these challenges, the benefits of in-app payments, especially during busy seasons like Ramadan, often outweigh these drawbacks. Merchants should strive to implement in-app payment processing in a way that optimizes user experience, minimizes commission impact, and complies with app store guidelines.

Do you believe payment service companies are reshaping the landscape of financial services in the region?

Yes, I believe they are indeed reshaping the landscape of financial services in the region. The innovative approaches and technology-driven solutions being offered are revolutionizing how businesses and individuals manage transactions. With the rise of mobile payments, digital wallets, and contactless payments, payment service companies are making transactions more convenient, secure, and efficient. Looking ahead, as technology continues to advance, we can expect to see even more seamless and integrated payment solutions. This includes increased personalization, improved security measures, and further integration with emerging technologies like blockchain and AI. These developments are expected to offer new opportunities for growth and innovation, while expanding the range of services offered. As consumers increasingly embrace digital payment options, payment service companies that can adapt and evolve to meet changing needs are likely to thrive in the growing financial services landscape.