The EU’s Single Digital Market’s Push To Streamline Payments (2024)

Although they are vastly different beasts, shifts in the consumer payments ecosystem have significantly impacted the flow of B2B payments.

Rising eCommerce volumes and an embrace of the direct-to-consumer (D2C) sales model has led merchants to shift their own payment strategies — and seek out banking providers that can address those changing needs.

The drive to digitize B2B payments has organizations shifting their priorities in how they navigate the payments ecosystem as a whole — which, as Monneo’s Lilia Metodieva explained to PYMNTS, includes issuing banks, acquirers, cardholders, payment service providers and other service providers streamlining workflows around chargeback management, finance, compliance and more.

In such a complex payments ecosystem, merchants have identified the value in diversifying their risk through embracing multiple solution providers partners, including multiple banking services providers.

“Making sure all the risks are covered from the perspective of an online merchant ensures there is risk diversification and makes sure that they are connected to several acquirers and banks,” explained Metodieva.

Yet managing multiple banking providers to adapt to shifting consumer payment needs and diversify risk also means significant headaches, often through the burdensome need to toggle between online bank interfaces. As Metodieva explained, taking the PSD2 model of consolidating those banking relationships can have a profound impact on merchants’ ability to diversify risk within the payments landscape, without adding extra friction to the process.

Diversifying Risk

Having multiple acquirers is an important risk mitigation tool for merchants, but according to Metodieva, merchants aren’t always prioritizing the diversification of their banking solutions.

“Merchants have always focused on having multiple [acquiring banks], diversifying risk, but they didn’t really think about diversification of banking solutions,” she said. “Merchants didn’t realize how important it was to have a backup. This is a great risk because if you don’t have the proper banking tools to get your funds to maintain your business operations, it can be very dangerous for business.”

Having multiple providers ensures merchants can still access funds from their card transactions even if one bank provider stops operating in a certain industry or currency, for example. It’s one of the biggest threats to merchants today, with the potential inability to access capital from card payments when only a single bank is used, creating a potentially deadly scenario for a business.

Yet despite the value in diversifying risk, managing these multiple banking and payment service provider relationships is a challenge as merchants are forced to switch between interfaces and accounts, without a complete view of their current financials in one place.

A Single Digital EU Market

Tackling that challenge is PSD2, the European regulatory initiative that opened the door for merchants to manage their multiple bank accounts through a single interface. That framework can be applied to merchants’ payment solution providers, too.

“What we have done is taken our experience from the payment gateway and card processing world, and replicated this on a banking platform,” Metodieva said of Monneo’s approach to tackling this challenge. “To me, it all comes down to technology and simplifying that technology so it can be used in a very straightforward manner.”

In addition to having a single view of multiple bank accounts via a single platform that can connect to multiple banks not only streamlines financial visibility, but similarly diversifies risk and promotes compliance.

“All parties in the payment ecosystem … must constantly educate and keep themselves up to date with the latest requirements,” explained Metodieva.

That means minimizing fraud, understanding local regulations, and remaining compliant with regulations like know your customer (KYC) — as well as staying up to date as these regulatory requirements shift.

Through offering a single interface to manage all banking relationships, merchants can optimize management of finances and payments. It’s a concept that’s proliferating throughout the European Union, where the concept of a single digital market is a promising one to consolidate and streamline a crowded payments ecosystem.

“I’m really hopeful that one day I will see a single digital market in the EU,” said Metodieva. “I’ve seen that in Asia in the past few years, and it’s really impressive.”

“Connecting the dots,” she continued, between corporates, their banks, regulators, payment service providers, customers and their customers’ payment service providers, will be critical to ensuring merchants can successfully mitigate and diversify risk without adding extra complexity to the way they manage finances.

“Banking solutions diversification is as important as acquiring solutions diversification,” said Metodieva.