By Victor Fenix
The U.S. economy remained robust during 2019. But many smaller acquirers and ISOs, along with their small business merchant customers, probably share a common sentiment: If business is so great, why am I so worried? My advice is cheer up, and let's get ramped up for 2020.
Undoubtedly, part of the uneasiness among merchants and service providers can be attributed to the certainty that all boom times come to an end; it's something nobody can predict with certainty. But there are other dynamics at play that also may be disconcerting, namely technology and competition. Merchants and their payment service providers alike must deal with challenges in 2020:
I'm not here to say there's no reason to worry. But change presents opportunities to those who want to try and control their future, rather than hunkering down and hoping the storm passes over them.
Deloitte's Payments trends 2020 report says large banks are moving away from partnerships that allowed them to offer payments-related services such as merchant acquiring. So it's no surprise big acquirers are trying to bulk up, develop and integrate new channels in their efforts to fill the gap being left by those banks.
The consolidation will undoubtedly impact all our futures. But the impacts aren't necessarily bad or coming along with the velocity of a runaway train. The larger the merger, the longer it takes to deal with the internal reorganizations and inevitable staff defections, before the new organization can really create and execute new strategies.
Once those mergers really begin to take shape, the giants will be looking for ways to differentiate each from the others. It's likely they'll look externally for help in doing that (as it's practically a given that a larger organization will be slower and less adept at responding to market opportunities). I expect they'll increase their reliance on partners and look to acquire smaller, more nimble players to add to their talent pool and refresh their innovative drive.
Nimbleness will be a vital asset for industry players for 2020 and beyond. Payments are increasingly commoditized, which means players must battle for greater market share or develop new revenue streams (or, better, both).
As large acquirers slug it out for global reach and market share, smaller acquirers and ISOs must deal with the ongoing challenge of technology companies and new breeds of payment players trying to disintermediate the traditional relationship of merchants and their payment solution providers.
Payment facilitators such as Stripe, and payment aggregators such as Square, are betting their futures on being able to deliver payment solutions in a more efficient manner that allows them to bundle in more value-added services than traditional players.
The writing is on the wall for ISOs and smaller acquirers: PARTNER UP! Large acquirers have access to capital markets, and nontraditional players are digging into the deep pockets of venture capitalists. Smaller traditional merchant services providers can't survive by going it alone; they need to become part of a larger ecosystem that allows them to leverage innovation and resources of others that will complement their own unique expertise and skills.
The continual advances of technology will deliver numerous options for acquirers and ISOs to leverage as they strive to maintain their trusted relationships with merchants and to stave off new competitors. But that involves making choices and betting on how the merchant services market will evolve from here.
One of the most significant choices involves whether to pursue business utilizing traditional proprietary solutions or to embrace open platforms that promise greater flexibility. The first approach relies on embracing a particular vendor or two and hoping its strategies and execution are sufficient to stay ahead of the competitive wave. The open approach embraces what ultimately will become a mix-and-match environment where any device can be delivered to a merchant, regardless of the hardware manufacturer, and work out of the box.
Whichever path the merchant payment solutions provider takes, don't expect the merchant to be wowed over by insider talk about who is open or not, or who has the most apps in their marketplace. What the merchant wants is a "solution" that is going to provide the tools he or she needs to operate their business profitably and continue to excel at meeting consumer expectations.
Informing a merchant that you have a dozen customer relationship management apps to choose from is not the way to close a sale. They just want what works. They expect the provider to have the market segment knowledge and insight into the merchant's business sufficient to make the recommendation on what will work best.
As we enter 2020, those who are able to package a simple and relevant solution of the right smart terminals and apps for each merchant will be best positioned to enjoy success in the evolving payments market. That's the only way to stay ahead of competitors who offer lower cost deals, and one-size-fits-all solutions.
Victor Fenix, business development director with AEVI, has more than 20 years in technology product management, strategy and customer acquisition with the last 7 years in payments and value-added SaaS platforms for the Merchant Acquiring industry. He is responsible for establishing strategic relationships with leading acquirers and merchant service providers in the Americas and helping customers and partners bridge their existing solutions to the next generation of acquiring innovations. Contact him at email@example.com.
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