By William C. Nichols
If your primary goal is to provide frictionless payment at the checkout counter, you may be missing a critical market shift and risking the loss of future business. Making payment a fraction of a second faster or accepting Apple Pay or some other alternative is not sufficient to make merchant accounts enduringly sticky. What will endure is your ability to improve the total shopping experience.
The road to prosperity lies in figuring out how to deliver to merchants and consumers a complete and frictionless checkout experience that enhances the overall shopping event. That requires a focus on integration of value-added services, alongside payments, in the checkout process.
It's virtually impossible for a merchant to differentiate from competitors simply on the basis of payment. Instead, merchants must distinguish their offerings through a total shopping experience that smoothly integrates payment within a seamless buying transaction, such as scheduling a delivery of items or automatically redeeming loyalty points or discounts without having to present a separate card or enter a phone number. It might include arranging financing or installment payments on purchases. It increasingly will need to encompass omnichannel experiences such as in-store ordering for home delivery or online ordering for in-store pickup.
Acquirers, ISOs, merchant level salespeople and value-added resellers have been able to extend the life of the classic standalone payment terminal by delivering semi-integrated payment solutions, in which the payment continues to be routed directly from the terminal or PIN pad to the processor, while tokens are between a connected POS solution to provide some value-added functionality. That functionality is generally limited by the proprietary restrictions of the vendor and thus limited in appeal to independent software vendors (ISVs) who could provide additional value to the merchant and consumer.
More attractive to developers are the growing number of smart POS solutions that are more flexible and adaptable than either standalone payment terminals, or semi-integrated POS solutions. Smart POS solutions may run on a proprietary hardware platform or a more commoditized Android device that has been customized to the needs of the solution provider and its target market. Typically, smart POS solutions incorporate a software POS along with third-party applications offering other functions that provide additional consumer services and automate traditional merchant back-office needs such as employee management, inventory management, or billing and invoicing.
For acquirers, ISVs and other solution providers, smart POS solutions are not all alike. Solutions that provide merchants with access to app marketplaces often place a burden on the merchant to research, test and curate their own portfolio of apps.
Few merchants have the time, skills or inclination to configure their own smart POS app portfolios, particularly as more and more applications compete for their attention. Worse, they can expect little or no integration among those applications, so a purchase involving multiple interactions will require the consumer or merchant to interact separately with multiple apps, disrupting the frictionless experience that each desires.
That's why there is still an incredible need for direct sales and service of payment solutions. ISOs and other service providers can provide fully managed, fully supported, white-glove solutions at an affordable price point. But only if they are willing and prepared to change how sales are made.
The first challenge is to educate sales teams on how to sell software-based solutions rather than hardware boxes. That takes a commitment by team members to learn about the capabilities of different applications and how they can integrate with POS and payment functions. They must become discerning in how these applications bring new consumer-facing services to the countertop, and how they can make a merchant's business more productive and profitable.
ISOs and other providers need to find the right platform that will allow them to compile the right set of apps and services to meet specific needs of their merchant bases. They need an estate management solution that allows them to operate both smart POS and classic terminals.
In today's diverse merchant market, ISOs and other service providers must be able to mix and match apps to suit a particular merchant and its consumers. Traditional integrated solutions require custom integrations between ISVs or by specialized integrators, but the traditional SMB merchant market requires a simpler approach.
A seamless checkout experience requires a platform where the interactions between apps do not require custom integration, but rely on the platform to manage the transaction flow between apps so that it appears to merchant and consumer as one seamless operation.
To provide this seamless experience, ISV developers need application programming interfaces and other tools that allow their apps to seamlessly interact with payment apps without interrupting the flow of the shopping experience. For example, once a consumer is registered in the system, when the consumer's payment method is recognized, the platform should automatically reach out to a loyalty app, or automatically present a warranty offer when a small appliance is purchased.
Even with highly automated smart POS solutions, ISOs and other service providers will still need to acquire some technology acumen in order to package apps and smart POS devices into solutions suited to specific merchants and provide ongoing services. They have the opportunity to take a platform and create their own out-of-the-box solutions sets.
ISVs that already have technology expertise need the hands-on delivery channel that ISOs and acquirers already operate. Both app developer and service provider require a platform provider who makes it possible to integrate new apps with smart POS payment devices and deliver software updates in the field.
Whichever path a traditional merchant payment services provider takes, it must begin with the recognition that payment-first solutions aren't sufficient to compete in today's SMB merchant environment. Payment is just the means to an end – a variety of consumer and merchant interactions must combine to create a shopping experience. Service providers who can offer a solution to make that experience frictionless can gain a foothold as an integral partner in the merchant's business function.
William C. Nichols is vice president and GM Sales Americas, with AEVI. He has spent his career in fintech, with experience in strategic marketing, sales, operational leadership and new product initiatives in the highly competitive payments industry both in the United States and internationally. Contact him at firstname.lastname@example.org.
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