• Innovation & Transformation
    • Digital Adoption

How e-commerce is powering the payments revolution

  • Article

As more organisations go digital, they seek faster and more predictable ways to move money. In the HSBC Smarter Business Series, experts from HSBC and Stripe Australia discuss how payment solutions are adapting to the shift to e-commerce.

The demand for more sophisticated payments infrastructure continues to increase as businesses across Asia Pacific drive digital transformation. In particular, companies of all types and sizes are grappling with how to meet the need for faster, transparent and flexible payments as they develop a new online presence or expand existing digital channels.

It’s a priority to find solutions that support their evolving e-commerce strategies – and quickly. By the end of 2022, Asia Pacific is expected to oversee over US$390 billion in non-cash payments1, making this region the world leader in the volume of cashless transactions, according to Capgemini.

Stripe, a financial infrastructure platform for businesses, sees more businesses going digital all the time. In the last 12 months alone in Australia, over 100,000 businesses went online with Stripe. In 2021, Stripe saw an average of 40,000 Australian businesses a month look beyond domestic borders to transact overseas, said Oriana Tessari, Stripe’s head of product partnerships for Australia and New Zealand.

As companies extend their reach in new ways both at home and abroad, they want to improve how customers make and receive payments. These include offering payment choice, explained Tessari, in line with local market preferences, and customer requirements for currency presentment and FX management.

While solutions vary according to a company’s size and the sector in which it operates – from a plug-and-play approach by start-ups to reduce development and integration costs, to the more tailored needs of established businesses to better control cash flow and minimise transaction costs – the payments industry must respond to the full range of emerging digital trends.

We are seeing a convergence of real-time payments platforms and initiatives regionally and globally.

Navaid Khatib | Country Head of Product Management, Global Payments Solutions, HSBC Australia

The desire for real-time execution is notable with e-commerce expansion, he added, as businesses look to exchange information with their customers seamlessly while sending or receiving payments anywhere, anytime.

Pivoting to new payments needs

The evolving payments-related needs of companies moving online is spurring innovation in various ways.

For Stripe, a key focus in enabling companies to accept payments, send payouts and manage their businesses online, is supporting sectors that are newer to e-commerce. Healthcare and education, for example, have had to rethink the way they interact with customers in response to Covid-19. This has resulted in concepts such as “telehealth” and “edutech” which, in turn, must adopt new approaches and practices to accept payments from their customers.

The rewards for developing the right payment solutions are clear. Tessari pointed to Mr Yum as an example in the hospitality industry which uses a mobile menu and ordering system that saw 10-times customer growth through the pandemic. Stripe also enabled Coviu, a telehealth business, to facilitate 25,000 video consultations a day during the pandemic. Coviu uses Stripe to bill its customers – the doctors – who then use the platform to bill end-users.

It isn’t just the tech players innovating; traditional bricks-and-mortar retailers in Australia have also had to adapt. With consumers now making purchases in person as well as online, there is strong demand to unify payment options. “We've seen an increasing client focus on identifying opportunities for optimisation, product differentiation and new business models,” said Tessari.

The approach of companies in different sectors to some extent reflects different aims of start-ups and tech companies compared with those of more established businesses.

According to Khatib, start-ups and tech companies tend to focus on growth and enhancing the end-consumer experience – increasingly leveraging application programming interfaces (APIs) to do so. “These are good tools to send on-demand trigger payments to beneficiaries.”

APIs are also relatively quick and low in cost to implement, making them suitable for relatively more cost-conscious start-ups and their objective to improve customer engagement through new business models. “These firms just need to get online simply and, depending on their level of sophistication, may benefit from the use of low- or no-code solutions,” added Tessari.

To help some start-ups pivot and reinvent themselves in the digital space, e-commerce platforms like Shopify and Magento provide simple steps to create a virtual marketplace. They allow a user to develop an online shop that aligns with their individual brand or embed finance solutions to make the payment experience as simple as possible, too.

Meanwhile, for more established firms, a common goal is to centralise existing cash management activities. “They consolidate payments, either over a week fortnight, and sometimes a month, to have better control over cash flow, as well as to minimise overall transaction costs,” added Khatib.

Catering to cross-border expansion

There are also emerging payment needs for companies operating across borders:

  • Predictability – in terms of the settlement cycle, to understand how much time it takes for the beneficiary to receive funds.
  • Transparency – across transaction fees, as well as FX and all other charges.
  • Visibility – in terms of the payment lifecycle journey, given the multiple correspondent banks involved.

Meeting these requirements can help companies tackle more specific challenges involved with expanding overseas.

With tax an increasingly important consideration, for example, being able to collect sales tax based on differing rates across each market – and without it being excessively time-consuming – demands solutions such as Stripe Tax - an automated process to collect tax in over 30 markets.

Another familiar issue for businesses entering a new market is setting up essentials such as banking, accounting, payroll and cloud computing as quickly and easily as possible. Stripe also offers the capability to plug this gap.

We found our partnership with HSBC to be very responsive, which really helps with fast problem resolution. We also have a proven global partnership with HSBC, which helps with consistency for our global clients and provides a great foundation to evolve and extend our business across multiple jurisdictions.

Oriana Tessari | Head of Product Partnerships for Australia and New Zealand, Stripe

Securing payment solutions

The need for companies and consumers to get comfort around payment security has also become critical amid growing concerns about cybersecurity-related fraud that have emerged due to digitisation and the prevalence of e-commerce.

Multiple layers of security can help companies tackle this. Khatib points to examples at HSBC such as two-factor authentication when accessing its online banking platform, and also to an artificial intelligence-powered fraud engine that works in the background at the point of initiating a payment. It analyses the transaction that has been created, to detect any unusual payment patterns.

“Over the past two-and-a-half years these multi-layered security protocols have significantly reduced the number of cyber-related incidents for our clients, helping them save a lot of costs,” explained Khatib.

Stripe, on the other hand, is a certified PCI Service Provider Level 1, the most stringent level of certification available in the payments industry. Stripe accomplished this by using best-in-class security tools and practices to maintain a high level of security.

Stripe also offers Radar, a set of machine learning-powered tools to help online businesses prevent fraud. Being fully integrated into users’ Stripe accounts, there’s no set-up time required and it’s constantly learning from and adapting defences based on Stripe’s behaviour network – the transactions seen across the millions of businesses using Stripe globally. Additionally, with Chargeback Protection, businesses are defended from the unpredictability of disputes. Built on top of Stripe Checkout, Stripe takes care of fraud prevention on behalf of the merchant, waiving the disputed amount and any related fees.

Forging effective payment partnerships

In general, the many new and varied payment demands of today’s growing digital and online landscape require solution providers like Stripe and HSBC to collaborate.

Ultimately, there is a shared interest in solving an industry problem around payments. “Our offerings are complementary,” added Khatib. “Stripe brings a cutting-edge e-commerce proposition and HSBC brings core payment capabilities.”

Key for Stripe, added Tessari, is ensuring a reliable service and support for clients. With this in mind, it looked to HSBC to enable a direct acquiring model in the market – a path that offers Stripe greater ownership over customer outcomes plus stronger relationships.

To become a direct acquirer in Australia, organisations must establish or have access to an Exchange Settlement Account (ESA) to help settle funds received – a less trodden route in the domestic market since not all banks allow their ESA to be used in a tri-partite agreement. However, thousands of Australian businesses now receive their daily Stripe settlement funds directly from HSBC’s payments infrastructure.

To respond to the needs of the market, HSBC recently launched a QR code capability in Australia under the HSBC Omni Connect umbrella. This enables a company to give a customer a QR code, either in a digital or in-store format, which the customer scans to make a payment. “We have effectively created an alternative to traditional credit cards,” explained Khatib, “which are one of the significant expenses that corporates incur when accepting payments.”