The Green Sheet Online Edition
February 22, 2016 • Issue 16:02:02
The outlook for payments: Five questions
The Green Sheet asked me if I would share my views on our industry's changing market and on the future of the Electronic Transactions Association, for which I currently serve as Board President. I came up with five compelling questions that often arise in conversations I have with peers. I'm sharing my answers in a Q&A format.
1. How would you describe what you're witnessing in the payments space today?
The industry is evolving, and that evolution is being driven by global connectivity, new technology and a digitally engaged customer (consumer and retailer). The acquiring business isn't being "disintermediated" per se, but the models need to evolve. The "ask" from the small to midsize business (SMB) merchant is no longer just "help me accept payments," but has morphed into "help me run and grow my business."
Payment acceptance is now embedded as part of a bigger challenge and broader opportunity. Acquirers (ISOs, processors, banks) have the ability to be at the center of the conversation, but need to rethink strategy from product to distribution and come at the problem from a different angle and with a solution. This exciting era will spur tremendous growth in our industry, and we will get to see the winners and the losers from the inside.
2. For professionals (agents, ISOs, ISVs, VARs) in the space, what are the three biggest challenges today? What do they need to do to capitalize on these challenges and turn them into opportunities?
This change in "ask" from both the SMB merchant and the channel partner is driving most of the challenges that I see day to day:
- Distribution: Businesses are buying in different ways than they ever have in the past and asking different questions. There is a "new retailer" with different influencers and a different buying pattern. The old way of selling to these customers may be challenged, and it is incumbent on all of us to re-evaluate our channel partners, distribution strategies and marketing mix to keep the top of the funnel flowing with leads and opportunities.
- Customer engagement and retention: We must listen to our channel partners and merchants and deliver the solutions they're asking for. Customers expect a consultative approach with a suite of recommendations as opposed to a transactional sale around payment acceptance. The market is changing; we need to engage at numerous levels and capture the true voice of the customer. That feedback loop is invaluable, as the needs are changing rapidly. Acquirers can no longer be afraid to speak with and engage merchants. If we ever hope to change our relationships with our customers and get them to stay with us for the long haul, we need real, two-way dialogue.
- Solutions over payments: As I mentioned earlier, payment acceptance is one part of the retail value chain. Acquirers must become solution providers bringing more to the table than just the ability to accept payments. You need to develop a solution set (doesn't need to be built – can be assembled) that is pertinent for your target customer that includes payments, but is really geared at solving a pain point or set of problems for the customer.
3. Technology is a stimulus for much disruption in and opportunity around payments. What do you see as the top technologies that help create value for the SMB customer (merchant)?
I don't see any one technology creating the most value for a customer. It's pretty obvious that EMV and NFC are here for the long haul, and the adoption of new tokenization protocols and point-to-point encryption will help lock down the POS, but most of these technologies are being implemented to help with securing the payments ecosystem.
The things that excite me are some of the solutions that leverage these technologies to make the purchasing experience easier, help businesses bring in more consumers, increase frequency of existing customers and push payments to the back of a buying experience. Consumers want to buy, businesses want to sell and sell more, and payments should just happen. Like Uber, payments should be frictionless – functional and easy.
4. What advice would you give to people who are new to the industry and want to get into the payments space?
If I were a new ISO, I would find a vertical or segment that I knew well and that had good market dynamics (size, margin, growth). Then I'd assemble a set of solutions that would be pertinent for the customers in that segment. Next, I would look for the influencers of the businesses in that segment and form channel partnerships with those people/companies. At the same time I'd spend my remaining time with the prospective end customers, learning the market, selling, learning more, adjusting and selling again. It calls for a true solution-based marketing/sales approach to a highly targeted segment.
5. From the ETA's perspective, how have industry changes led to a change or evolution, if at all, in what the ETA's responsibilities are to its members and the industry at large?
The industry has forced the ETA to morph to meet the needs of the constituency. The ETA still supports ISOs, banks and processors, but members now include some of the largest technology and telecom companies in the world. This year alone we added over 100 member companies, and most are technology or value-added service providers. We have added new committees and programs to help our members navigate this new world of commerce.
Similarly, our events needed to be enhanced. Last year we broke attendance records at our two major events by adding new content and paths to support a growing ecosystem. Transact 2015 was held in San Francisco for the first time and included constituents in the venture capital and technology startup communities. We added Silicon Valley Day and Silicon Alley Day, as well, to the agenda, with more events coming in 2016.
With all of this exciting growth in the industry, however, the regulators have started to play a larger part, and the ETA has ramped up advocacy and legislative efforts. In the past year, we have dramatically expanded our government relations' activities to meet regulatory and legislative forces. ETA's in-house advocacy team has brought payments to the forefront of opinion-leaders' attention.
In 2015, the House Congressional Payments Technology Caucus and the Senate Payments Innovation Caucus were formed in an important recognition of the benefits the payments industry provides. The ETA was instrumental in working with legislators on the Cybersecurity Information Sharing Act and will continue to work on items such as a uniform standards breach notification.
In 2016, we will be expanding our reach to the state level and ramping up efforts to keep regulators out of our industry and supporting our members when government entities go too far.
I could go on for hours about all the great stuff the ETA is now doing on behalf of all of us, but I will sum it up with: this is a very different ETA than the one I knew 10 or 15 years ago. We have evolved and embraced a changing market, and are supporting you and your new challenges every day.
A 20-year payments industry veteran, Greg Cohen is President of iPayment Inc. and President of the Electronic Transactions Association's Board. You can reach him at firstname.lastname@example.org.
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