INTERVIEW WITH AYDEN

Seamless commerce places new demands on payments

The way we shop online has changed. According to Tobias Lindh, more than 60 percent of e-commerce today goes through mobile, where mobile-friendly payment methods such as Swish, Apple Pay and Google Pay have made it easier to complete the whole purchase. But a smooth checkout is not only about speed. Payment methods must also suit the customer and the purchase situation.

"The biggest friction we see is that the customer isn't offered the payment method that suits them. That's why it's essential to understand which industry you're in and what type of product the customer is buying," says Tobias.

Order value also plays a role. For larger purchases, BNPL (Buy Now Pay Later) or credit cards may be a better fit, and for smaller purchases, Swish or debit cards. A furniture purchase with a long delivery time is a clear example. The customer doesn't necessarily want to be out the full amount before the goods have been delivered. If a purchase by the same customer at the same company is smaller, speed and simplicity may weigh more heavily. The trend is therefore moving toward more dynamic payment flows.

"Instead of showing the same list of payment methods to every customer, the checkout can be adapted based on, for example, product, amount, market and customer behavior," Tobias explains.

For the merchant there is also an economic trade-off. Payment methods have different fee models and affect conversion in different ways. A digital service with a very high margin can more easily bear a higher transaction cost if the payment method also drives conversion. In consumer electronics, order values are often high and margins lower. There, both payment cost and fraud risk become more important. Tobias therefore stresses that it is important for the merchant to make a careful assessment.

"You have to ask yourself: what is important to me as a merchant? Where is my sweet spot?"

The choice of payment solution also affects how well the customer journey works across channels. Digital and physical retail are growing ever closer together, and with unified commerce, both the purchase and the payment can follow the customer between online and in store.

"The big trend right now is that e-commerce and the physical store are becoming more and more integrated," says Tobias.

One area where Tobias sees a clear change is how the boundary between e-commerce and physical stores is gradually disappearing. For the consumer, it matters less and less which channel the purchase is made in. Instead, many expect to move seamlessly between different touchpoints, from buying online to pickup, returns or service in store.

For the merchant, it is about connecting the e-commerce system, the point-of-sale system and the payment system so that customers can move between channels without the purchase having to be handled as separate transactions. A purchase made online can, for example, be picked up or returned in store, while the same payment and transaction follow along through the entire flow.

"That blurs the boundaries between e-commerce and the physical store. You can buy online and return in store, but still return against the same transaction," Tobias explains.

This becomes especially clear with returns. The refund can go back via the same payment method that was used for the purchase, even if the item is returned through a different channel. This also applies to a partial refund, a partial return where only part of the order is returned.

"If the customer has bought three garments and sends back two, you should be able to refund only that part, using the same payment method that was used at purchase."

According to Tobias, the development is about much more than smoother returns. When a retailer's different systems are integrated, companies get a better overall picture of the customer and can create a more coherent shopping experience. He also sees many e-commerce companies establishing their own physical stores, while traditional retail chains continue to digitalize both sales and payments. In physical retail, too, self-service solutions and contactless payments are becoming more common. The result is that the differences between store and e-commerce are becoming less clear, and retail is increasingly seen as one connected experience rather than separate channels.

The basic principle, in other words, is that a refund should go back via the same payment method used at purchase, and preferably as quickly as possible.

"Returns are super important, because everyone wants them to be as smooth as the purchase itself and to happen as quickly as possible. If you don't handle this properly and offer a simple, fast solution, it can create quite a lot of ill will."

The same demand for smoothness applies to security. The merchant must be able to prevent fraud without making the checkout unnecessarily complicated for legitimate customers. One effective way to avoid money laundering is to ensure that payments and refunds are made in the same way.

"Let's say you receive a payment from a customer using one payment method and handle returns using another. That opens up many problems behind the scenes, including high transaction costs," Tobias clarifies.

Security and verification. For card payments, 3D Secure (3DS) is used, among other things, to verify that it is the right person making the purchase. 3DS is used to meet the requirements for Strong Customer Authentication (SCA), which stem from the EU's Payment Services Directive, PSD2. The security layer can create extra friction in the checkout, but newer 3DS flows have made authentication considerably smoother than before. According to Tobias Lindh, customers' attitudes have also changed.

"Before, there could be more irritation around verifications," says Tobias. "I think people see the need for security more today."

The problem arises when the risk system becomes too strict. False positives mean that legitimate transactions are stopped because they are wrongly judged to be suspicious. According to Adyen's global data, up to nine percent of customers can be wrongly declined in global markets. In the Nordics, Tobias estimates the level at just a few percent. Lowering the security level to reduce the risk of false positives is not an option, however, as fraud would then risk increasing instead. The challenge is therefore to determine which purchases need extra checks and which can pass without additional steps.

AI plays a central role here. By analyzing transaction data and behavioral patterns, systems can better distinguish legitimate customers from suspicious transactions. Tobias says Adyen has been able to reduce false positives by nearly 42 percent.¹

But the technology is used on both sides. Fraudsters are also increasingly using AI to automate tests of card numbers and weaknesses in merchants' risk systems.

"The fraudsters use AI and we use AI to identify it, so it's a bit of an arms race."

According to Tobias, around five percent of fraudsters on Adyen's platform account for just over half of the fraud, both in terms of number of attempts and amount.²

At the same time, AI is used to reduce friction for legitimate customers. In Adyen Uplift, the technology is used for risk management, authentication and checkout optimization, among other things. Product, amount, region and behavior thereby influence which payment methods the customer sees and in which order they are shown. This means security and conversion do not need to be treated as two separate issues, says Tobias Lindh, pointing out that the same data can be used both to stop a suspicious purchase and to make a legitimate purchase easier.

Looking ahead. AI agents, Click to Pay and digital currencies are widely discussed, but Tobias sees a development where payments instead become gradually more mobile, integrated and situation-adapted. AI agents may take on a greater role in the customer journey, but he believes merchants will want to retain control over the brand and the customer relationship going forward.

"The most important thing is to be able to offer the right payment method. There is no reason to put a payment method at the top or try to push it on the customer if it isn't relevant."

When Tobias looks ahead, he sees above all continued integration between e-commerce and physical stores, rather than a single payment method changing the market.

"The big part is that e-commerce is starting to grow together with the store. We're seeing more of it, it's becoming more integrated."

A more concrete change is the new consumer credit rules. They are not expected to change the customer's payment experience to any great extent, but may require e-commerce companies to review their payment setups and partnerships, including kickbacks on credits.

"In the end, it's the merchants who will be responsible for this, not the payment provider," says Tobias.

Payments are thus becoming more advanced behind the scenes, while the goal for the customer is the opposite: a simple, relevant and secure purchase experience. For the merchant, the task is to create that smoothness without losing security or control over the customer relationship.