E-commerce is a business that is categorized as high-risk by banks and payment processors. Because of the inherent industry risks of the business, like high chargeback rates, vulnerability to online fraud, and extensive transaction volume. Due to these reasons, the majority of reputed payment processors deny providing services to such a business. As a result of this, the emergence of such specialized payment processors, which are built for handling high-risk payment processing, occurred. However, these high-risk payment processors could not be as useful in a market with the monopoly of a single payment method as in a market with various payment options. And Europe is the best example of it, where every payment method has a stronghold in the market, which makes it mandatory for merchants to provide all of them, and this is the area where the expertise of high-risk payment processors lies.
However, the love affair between high-risk payment processors and the European e-commerce market is not limited to this single point, as there are many more factors like this, that make the European e-commerce market and high-risk processing a pair made for each other.
An Overview of the e-commerce market in Europe
Europe might be the second-smallest continent on earth, but if it were a country, it would be the third-largest e-commerce market in the world. This fact shows the capability of the European e-commerce market, which is projected to reach $631.90 billion in 2023.
Some key insights
- In 2023, the eCommerce industry is expected to generate US$631.90 billion in revenue.
- By 2027, the market volume is predicted to reach US$902.30 billion, with revenue forecast to expand at a 9.31% annual rate (CAGR 2023–2027).
- By 2027, 586.30 million users will be a part of the European e-commerce industry.
- User penetration is projected to reach 64.0% in 2023 and 69.5% in 2027.
Information courtesy of Statista
- In 2022, 62% of e-commerce consumers in Europe used online shopping platforms.
As per ecommerceDB
- In the European e-commerce market, digital wallets were the most commonly used payment method ahead of cards.
According to research by Payvision in 2021,
Advantages of high-risk payment processors in the European e-commerce market
High-risk processors offer several advantages in the European e-commerce market:
Enhanced security measures
High-risk payment processors prioritize security, which is why they implement robust encryption protocols, fraud detection systems, and PCI DSS compliance. This ensures that sensitive customer data and payment information are protected, which is very important for the e-commerce market in Europe. As this industry lost $ 41 million last year because of online payment fraud, and this year the number is expected to exceed the $ 48 million mark globally, Europe is the second most vulnerable place for online fraud on earth, with a contribution of 26% to the global numbers. By providing solutions to mitigate online fraud and building trust and credibility among customers, such payment processors can help e-commerce businesses develop a wider customer base.
Chargeback risk mitigation
High-risk payment processors employ advanced risk management tools and techniques to mitigate fraud and chargebacks effectively. Their experience in handling high-risk transactions allows them to identify and prevent potential fraudulent activities. However, the chargeback ratio in Europe is 0.40%, which is still a huge number considering the number of daily transactions in the European market.
Convenience in payment acceptance
In the European e-commerce market, there is no prominent payment method that dominates the market. Although digital wallets were the most used payment option by online buyers in 2022 when 29% of the total e-commerce purchases were completed via e-wallets. But other payment opinions are not far behind, as credit cards were used by 24% of buyers, account-to-account or online bank transfers were used by 18%, debit cards were 16%, buy now, pay later was 10%, and cash on delivery was 2%. Report FIS Global Payments 2023. Because of such a diverse payment option landscape, a high-risk payment processor becomes necessary for e-commerce merchants to accept payments without any inconvenience, as such processors usually provide every available payment method in the market.
The most important advantage of high-risk processors is that they provide the option of customized online payment solutions. For example, if a merchant’s currency bank is not capable of supporting the high transaction volume of his business, he can easily get a high-risk merchant account from high-risk processors to match his business requirements. There are many more benefits like this, such as integration procedures and white-label solutions.
With these advantages offered by high-risk payment processors, European e-commerce merchants can easily overcome every hurdle in their industry.
As we know, high-risk processors are made for high-risk businesses like e-commerce, but in Europe, e-commerce businesses can be run over normal payment processors as there is no need for multiple currency support due to the common currency of all European countries, the Euro. But despite the worthlessness of this main feature of high-risk merchant processing, they are still pretty significant for e-commerce payment processing in Europe as they provide enhanced security measures, fraud and chargeback protection, a high-risk merchant account for handling high volumes of transactions, and many more advantages like this.