The Online Payments Jungle

When it comes to outfitting businesses to accept online payments, it is not a one-size-fits-all operation – especially when dealing with small- and medium-sized businesses. That’s what Mark Henkel, CEO of Paymill, often deals with. He shared with PYMNTS his perspective on the challenges of – and solutions for – facilitating online payments in Europe as well as in the United States.

When Paymill was first introduced to market in 2012, the stated mission was to deliver the easiest payment experience for Europe and allow businesses to enter the global market a lot faster. Three years later, do you feel that you’ve accomplished your mission?

MH:  We had really ambitious targets in the beginning, and we are very happy with our position at the moment. We’re very well recognized in the European market.

Have we successfully completed all of our goals? In a way. But there’s a lot more to do in order to fulfill all of the needs of eCommerce and online players.

Looking to the beginning, when I thought everything would be easy, I would say that yes – I have completed those tasks with my team. But as you step deeper into the problems over the past 3 years, you see more things that need to be solved…and there are a lot of opportunities out there for us to do better.

You do a lot of work with subscription businesses, for whom chargebacks remain a big issue. Based on your experience, what do you think subscription-based businesses should do to reduce those chargebacks?

MH:  In terms of subscription-based business, it’s very important to have certain features. For example, what happens when the payment card has expired? Do you get a notification, and how do you handle it? Do you have inroads to talk to the merchant so that he is informed about what’s happening with his transaction?

A merchant is obviously very happy if everything runs smoothly, but you also need to inform him if something goes wrong. Especially with regards to expiring card dates, I think a really smooth interface with a merchant is necessary.

We also learned a lot about this from our first subscription solution. It was not ready to handle of all these issues; we’ve since released a second one that is equipped to do so and we are developing a third one. In doing so, we are working very closely with the merchants, and you’re completely right – chargeback is a big topic for them.

It’s not about just offering recurring payment or transaction with the platform. It’s about the features for subscription itself. I think this is very important to solve and you need to solve the related problems in close collaboration with your merchants.

I will admit that the U.S. market for subscription is, on the merchant side, far more advanced than the European market is right now. The subscription business is really just now kicking off in Europe, and it’s good that we get to experience it with our merchants. We are developing a product right now with them, in fact.

B2B customers and owners want online payment options, but according to a recent survey, small business owners do not know how to get started. What advice would you share with SMBs in that situation?

MH:  It’s a jungle out there. And that’s rooted in the large number of different payment options: PayPal, MasterCard, Visa, plus all the local ones in Europe. You really need to cater the payment methods to your business.

For a software-as-a-service provider in Stockholm, for example, who just offers software to download, he needs a credit card solution that is very easy because his target group is international. Everybody can download his software from anywhere.

But if you have a retailer from Germany who just sends stuff to that country, he needs to take care of his target group in Germany. Credit card is one thing, PayPal is another – but he definitely also needs to add the local payment methods. That’s one of our strengths.

You have companies like Stripe or Braintree, who are brilliant in what they do – brilliant at credit card processing – and I think credit card processing is far more important in the U.S., where there’s 60 to 70 percent of credit card share. But if you’re in Europe, you need to realize that there are local payment methods, and you need to offer them.

What we offer is a variety of payment methods to all merchants in order to provide them with the right approach. We also serve a little bit as consultants, and say, for example, “You are a SaaS provider; you don’t need EPS, you don’t need PayPal – you don’t need all these special ones. You need one – very easy; good conversion.

You have a pay per transaction business model. What advantages does this model bring for you and your clients?

MH:  We thought about implementing a flat fee, or something like that. But, because we especially cater to SMBs, I think the pay per transaction model is the best solution. It provides transparency for the merchant.

Our Merchant Center allows merchants to see all of their transactions in detail, and we only want to make money when the merchant makes money. If something is refunded, if something is a chargeback, if something is a failed transaction – we don’t want to charge any money.

Of course, on our back end, we have to pay for it all, and that’s where are efforts go. But we just want to make money when the merchant does, and that’s why we use a pay per transaction model.