By Peter Spee
No company can rest easy in any industry as digitization upends traditional business strategies. That's certainly true for those in the payments acquisition value chain, where technology advancements are enabling novel solutions to overtake traditional sales propositions and distribution channels.
Industry players must invest to stay ahead of the curve, but no one wants to make the wrong gamble. So, where should payments companies invest to make the leap to next-gen acquiring? While a certain amount of risk is always present in the payments business, there is one certainty in this era: data is central to success.
With that in mind, acquirers, processors and ISOs should focus on two key objectives, one fundamental and one aspirational, as they make their investment decisions. These are, respectively, updating archaic onboarding technology and procedures, and monetizing data.
In the fundamental category, it is vital that those in the value chain make dramatic strides to optimize business operations because they are being overtaken by new entrants with new approaches to the business.
The card-present onboarding process that most merchants encounter is fairly archaic. It may take days, even weeks, from the time they sign up for payment acceptance services until they day they actually have a payment device up and running.
Think of how Amazon has disrupted the retail chain, from large national brands to Main Street bookstores, and the problem with this picture should be obvious. A merchant should be able to go to a website and choose a payment solution, get fast delivery, and enjoy easy and speedy onboarding.
For most industry players, websites offer little more than an online brochure and a form to provide contact information so a salesperson can follow up on a merchant's inquiry. There are few opportunities to configure and provision a payment solution quickly and online. Meanwhile, a host of technology solution providers are more than willing to sell over the Internet and drop-ship hardware that can be installed with relative ease.
To the merchant, our industry looks like a confusing mish mash of interlocking providers. Are they contracting with the acquirer or the ISO? Who needs to initiate services, such as key loading. It is an overly complex process that traditionally involves lots of faxed paperwork and potential for human-error and finger-pointing. Meanwhile, the merchant has to wait until everything gets resolved.
If Amazon can provide free, same-day service to some of its Prime customers, why in the world can't our industry provide same-day onboarding? Now that we can provide payment services and suites of related consumer-facing apps and business functions on open-platform Android devices, it should be easy to provide merchants with access to valued-added services and alternative payment methods.
What is required is a common digital messaging platform to optimize the processes between banks, acquirers, ISOs and even merchant level sales people. Data is key to eliminating traditional pain points that slow down onboarding. If traditional payment service providers don't move in this direction, there are many technology providers more than willing to step in and provide a more frictionless experience.
As more alternative payment forms ‒ Apple Pay, Google Pay, PayPal, and others ‒ take hold in the realm of physical retail environments, profits will increasingly be squeezed out of traditional payment services. That's just the nature of free markets where more competition results in tighter margins.
Acquirers and ISOs must aspire to create alternative sources to replace those profits, and data is the goldmine that sits waiting to be exploited. Today, as business becomes increasingly digitized, data is the most valuable resource. In the small to midsize merchant space, it's probably the most underutilized asset.
Merchants capture valuable data every time they process a credit card or ring up a sale on a POS system. Other than getting periodic reports on sales volume and the cost of processing fees, most of those merchants realize little, if any, additional value from that data. Acquirers and ISOs harvest data from many merchants and make greater use of it, but most have barely scratched the surface on its potential.
That data can be used to improve existing processes, improve existing products and services, and be sold or bartered with other companies to generate new revenue streams. Merchant payment solution service providers can provide valuable services to their customers by showing them how to leverage loyalty programs, analyze the most profitable products and services, pinpoint promotions that spur additional sales, and team with issuers and other financial institutions in offering credit programs to shoppers. They can partner with product suppliers to help merchants take advantage of pricing trends and consumer patterns.
Acquirers and ISOs need to start harvesting non-payment transactional data that currently flows ‒ or could flow ‒ through POS systems. That information is a commodity that can bring value to the merchant, to marketers of consumer goods and products, and even to the consumer. Learning how to monetize that commodity is essential to future success in the payments industry.
Acquirers and ISOs can improve their competitive advantage by providing merchants with payment systems that integrate a variety of consumer-facing and back-office function apps and services.
Data is the fuel that will generate future business success. Acquirers and ISOs can utilize it to improve business processes and create new revenue streams, or they can watch as new players swoop in to take advantage of the opportunity.
Peter Spee has over 15 years experience in driving product innovation and business transformation in Payments. In his role as vice president of strategy and corporate development at AEVI, he is responsible for leading and implementing strategic developments and projects. His primary focus is to expand AEVI's footprint by creating strategic business partnerships with customers and partners. Peter laid the foundation for the next generation of merchant acquiring with his early involvement in the creation of the first SmartPOS in the market. Contact him at firstname.lastname@example.org.
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