Each January, people are gearing up for a brand new year. Identifying successes and lessons learned from the prior year and strategizing to meet new goals are central to the process. In this second article of a two-part series, members of our Advisory Board offer insights into this process with answers to the following:
For the first portion of responses, please see www.greensheet.com/emagazine.php?article_id=6202.
1. Main highlights for CrossCheck. The highlight for us this year was signing large prospects in our two core businesses: check guarantee and debt collection. These businesses are intertwined, because when a check is properly authorized and we guarantee it, we have to collect it, or we must absorb the loss. Since we guarantee in excess of $6 billion annually, you can readily see that this is a pretty serious effort. We have to be laser-focused on both our authorization and collection metrics. We are a fully licensed, registered and bonded debt collection company in all 50 states, and we have every possible industry certification. This is very unusual, as most debt collection companies are regional or local.
In both businesses, which are run separately, we have shifted our focus to call on larger enterprises, in addition to our traditional SMB market. There are over 4000 debt collection agencies in the U.S., but we only have three major competitors in our check guarantee business. We need to be able to differentiate ourselves to show why our solution is better for the client.
We were successful in signing and implementing very large enterprises in our core markets, which include auto sales and auto aftermarket and furniture. Some of these have several hundred retail locations, and the logistics behind the setup are daunting. This year for one client, our retail systems support group took in 600 imagers for an upgrade and deployed a total of 1,300. For this client, Retail Systems Support installed 700 terminals remotely, and traveled to 11 states in five months to do installation and training. This is a major logistical effort that requires careful planning and coordination to meet the client's timeframe. These sales were the highlight of the year.
Actions we took for success: Getting a large enterprise as a client can often involve a sales effort that takes years. It involves finding and contacting the decision makers, who can change during this time, and it involves a regular calling effort, attending tradeshows, using in-person calls, memos, white papers, industry studies and proposals.
We must do research to get the facts about what they are doing now and try to identify how we can improve their workflow and increase their sales. Then we have to convince the decision makers that our data is accurate, and our forecasts are realistic. They have to be ready and want to listen. We have to be talking to them when they are ready to make a decision. We have to have hardware that will work in their current environment, and sometimes we will have to do custom programming. This requires planning for the proper resources and funding.
Advice: Identifying and targeting new clients takes a whole team of people. Over the 36 years we have been in business, we have had to modify and update our business strategies on an ongoing basis. The best advice I have been given is to "think like a client." This means understanding how the client does business, what their pain points are, and how we can solve them. Clients don't always volunteer this information, and we typically have to gain their trust to get it.
2. Failed initiatives and how to manage this in the future. I cannot point to a specific failed initiative because we were focused on new customer implementation this year and have not tried to develop any new products. We are paying attention to all of the developments in the payments ecosystem and are working to develop a solution that will address some of the changes that we forecast to happen in the near future.
3. Most significant developments for payments in 2019. Two big events in the acquiring industry were the Fiserv acquisition of First Data and FIS acquisition of Worldpay. The numbers are staggering. Fiserv paid $22 billion and FIS paid $35 billion to get into merchant processing. It will take years, not months, for these acquisitions to justify the cost, and that may never happen.
We do not know what these two bank core processors are trying to achieve with these purchases, but we can guess, and it will have a big impact on Green Sheet readers, particularly feet-on-the-street ISOs.
Another newsworthy development is real-time payments and same-day ACH. Merchants want to be paid as quickly as possible; this is always their first priority. The third development is the emergence of the payment facilitator model, which some people have forecast to ultimately cover half of all merchants.
4. Critical issues for payments in 2020. There are three critical issues: speed, security and cost. We have seen market solutions for faster payments, and more are being developed. This is not the case with the other two issues. A recent white paper by Retail Payments Global Consulting found that the U.S. accounts for half of the payment fraud in the world but only a quarter of worldwide transactions. The study found, "a systemic pattern by the card companies to use EMVCo to develop anticompetitive standards that protect the interests of its owners and preempt competition in the market that could lower costs and improve security for businesses and consumers alike."
The study concludes that "EMVCo is not the appropriate organization to develop and implement payment specifications that become de facto standards and strongly recommends that these standards be set by an independent and established open standards-setting body." The third issue is cost: U.S. merchants pay interchange rates that are multiples of what merchants pay in the rest of the world. Ultimately, the market will develop non-interchange-based solutions, such as what we provide for our merchants.
1. This year was a monumental year for Maverick Payments. Our biggest highlight was the launch of our proprietary Maverick Dashboard, which serves both as a CRM and portfolio manager for agents, as well as a portal for merchant clients to manage their entire transaction processing – in addition to a robust analytical platform, complete chargeback management, ACH processing and much more. We rebranded with a new logo and website, too, as we shift to a more technology-focused payments company. Another significant highlight from this year was a new acquiring sponsorship where we are offering expedited funding programs for merchants: same day and instant funding.
A major part of our success comes from our team. It's not easy building a great team but I believe this is the foundation of any truly successful business. Surround yourself with like-minded and motivating people and you can achieve big things. We've also taken a lot more feedback from clients and partners, especially as we build our own technology such as our dashboard. It's essential to put yourself in your clients' or partners' shoes and get their perspective. Ask more questions and truly care to solve their problems. As payment professionals, we tend to move fast trying to chase the next opportunity or sign that big merchant, but take a step back every so often and do more self-reflecting. I've found this to be extremely helpful.
2. There weren't too many failed initiatives for us this year, luckily. However, looking back, I noticed there are so many new software companies, POSs and other tech companies entering the payments space that it's easy to get distracted trying to learn about them all. I have a pile of reseller and referral agreements from such companies on my desk waiting to be executed because I want to be able to offer our clients everything they may need to grow their business. However, I've learned that it isn't wise to try to boil the ocean, and you really need to focus on prioritizing your time and opportunities. It's also key to play to your strengths.
When considering other companies to partner with, such as a POS or gateway, it's better to work with fewer, but really become the masters of these products rather than knowing a little bit about a lot of them. It's a significant investment to review contracts, demo, train your team and allocate resources, so don't waste time offering other companies' products or services if there's no need or demand.
3. What came to my mind first were the massive acquisitions in 2019. From an MLS perspective, these mergers and acquisitions can be great opportunities if merchant pricing increases follow. Cash discounting and surcharging have been all the talk this year, too, as cash discounting has picked up significant momentum (although many of these programs are non-compliant in my opinion). I recall the ETA session on cash discounting and surcharging being the most attended by far.
I feel I must also mention the great progress that has been made in the cannabis industry both in terms of banking and payment processing. Living in Los Angeles, the cannabis industry is huge. A lot of us are chasing the CBD market and despite a lot of turbulence throughout the year, I've noticed a handful of U.S. acquirers come on board of late, including Square. I always like going after emerging markets and establishing a presence early on.
Another noteworthy topic was installment lending for consumers (point-of-sale loans). Companies like Affirm and Afterpay have become incredibly popular, as they make it easy for consumers to purchase higher-ticket items. Merchants love this, too, because they are experiencing less cart abandonment and increased revenues by selling more high-ticket items to customers that wouldn't purchase otherwise.
4. What I love about the payments industry is that there is so much innovation. I'm excited to see what comes about in 2020, but I believe there will be some critical issues facing the cash discounting market. I think the card brands will start to regulate these merchants and programs closely, so MLSs and ISOs should really review their portfolios to make sure merchants have proper signage and disclosures and they aren't really just surcharging. Take the time to educate your agents and merchants, too.
Another potential issue I see is more and more ISVs and other software companies rolling out their own payment processing and competing head on with MLSs and ISOs. The growing payfac model is very attractive to these software companies who can earn significant revenues by offering payment processing for their customers. We'll need to keep an eye on this, but it also stresses the importance of maintaining those valuable relationships with your merchants, so they aren't easily lured away.
I think in 2020 we will see a lot of growth in mobile and contactless payments, especially in-app purchasing. More and more companies are creating mobile apps where you can connect a debit or credit card for easier checkout. Companies are also using this to drive loyalty and rewards programs. For example, one of my favorite coffee shops has done a great job at this. By simply downloading their app and making a purchase, you got a free drink, and every $50 spent earns you a $5 credit. I would start talking to your merchants about contactless payments before your competitor does.
I also believe we'll see a growing demand for faster payments in 2020. Real-time payments and instant funding have generated a lot of buzz that will only grow louder. We're excited to be rolling out our own instant funding program for merchants, so I think it's important for MLSs and ISOs to stay in the loop with new technologies like this so they aren't left behind. For anyone servicing the petroleum industry, this coming October is the deadline for gas stations to make the EMV shift, so don't wait until the last minute to check in with your merchants. This is not an easy or cheap upgrade. Start reaching out to see how you can help. Hopefully, 2020 will be everyone's best.
1. Main highlights from the last year. 2019 seems to have been the year of cash discount, surcharing and similar programs. We tried a few different things until we found the program that works for us. This is going to be a growing trend in our business that will become the norm. We are becoming a fee-driven society. There are fees for everything.
2. Initiatives that didn't go as well as planned, lessons learned and future plans. Point of sale initiatives did not do particularly well for us in 2019. We are working on new products to bring to market and new partners – so we can compete in the right market.
3. Significant developments in payments and fintech in 2019. Peer to peer payments is growing, and danger exists there for fraud and illegal activity. Companies designed to be peer to peer frequently find themselves in the middle of illegal or business transactions. Right now it seems to be the Wild West with that stuff. We have seen merchants who say they have processing. Then they show us a host of peer-to-peer transactions that are business transactions they are taking into personal bank accounts.
Terminals are changing. Software in smart terminals is improving with more apps. It's going to be interesting to see how that evolves. Fraud and chargebacks are another issue. The new rules that favor cardholders are horrible. We saw chargebacks disappear in 2015 with EMV. Now, merchants are dealing with a lot of chargebacks on EMV card-present transactions – paid by another means, mistake at the point of sale, paid by cash, claiming duplicate transactions and non receipt of goods and services – at restaurants, bars and retailers. In my opinion these need to be retrieval requests, and merchants need to be charged less money if the cardholder's bank sees that it is an EMV chip-read transaction.
4. Critical issues facing the industry's feet on the street in 2020. There will be more chargebacks, fraud online is increasing, and there needs to be a solution. Simple two-part authentication with a text would be perfect. It will probably take five years to happen in the USA. For the feet on the street: you need to get educated and need to get good solutions for merchants. Also one thing that many sales reps do not do much today is have a second or third product to sell merchants. This is something reps will need to offer to address their merchants' pain points and enhance their businesses in important ways. This will make give them a shaper competitive edge.
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