By Marc Beauchamp
If you've watched any stock market analyst, you've heard the term "The trend is your friend," meaning that following and understanding current trends is one of the more profitable investments strategies. Think about it: the odds of successfully investing are exponentially improved when you know which way the market is headed. While we can't always tell where things are headed, we can usually make a good, educated guess.
I believe the coming year will be no different than years past; accelerated innovation, disruption, change and growth are in the forecast. There is true value in identifying and confirming continuing trends and, of course, new ones as they emerge.
In addition to payments industry trends, significant macro trends affect us all. These include, for example, unemployment rates; credit defaults; labor participation rates; population growth; tax revenue collection; government stimulus; government budgets; healthcare adoption; retirement ratios; small business growth; and now vaccine rates, adoption and efficacy. All are critical indicators to consider.
For our purposes, I'd like to look at a few significant continuing trends that affect our little slice of the world. By studying these movements, you can more intelligently allocate capital, sales, support and organizational resources for maximum productivity.
The process begins with probing questions such as:
In answering these questions, I've identified several trends you might want to consider when analyzing your business and where to focus your efforts. A discussion of each follows.
Ecommerce sales were already growing at brisk rates but COVID-19 accelerated the trend. All the big boys have had an omnichannel strategy for years, but with platforms like Shopify and Big Commerce, smaller merchants can adopt ecommerce solutions with relative ease.
Business owners realize they need to meet consumers where they shop. For some, it's in store; for others it's now online. With record numbers of consumers having realized how easy it is to shop online, the in-store component may never return to prior levels for some commodity-based retailers.
On top of the demand component, add a more tightly integrated solution via the cloud and custom API capabilities, and a once stand-alone ecommerce platform now becomes a tightly integrated ecosystems able to communicate with accounting, marketing, social media, customer relationship management and much more.
According to recent research there are now more than 275 million smartphone users in the United Sates; by 2024 the numbers is estimated to top 290 million. Throw in the roll out of 5G over the coming years, and more and more commerce will take place on our mobile devices. By 2022, it's estimated there will be over $14 trillion in mobile payments business transacted.
This continued, rapid expansion of smartphones use for commerce is having a staggering impact on the payments space. With a solid mobile payment's infrastructure in place here in the United States and many payments companies now offering easy to access SDKs or APIs, developers and entrepreneurs can quickly create mobile payment apps in a fraction of the time it takes to deploy a standard terminal and certify on a processing network.
Faster, easier mobile technology means the continuing trend toward cloud-based solutions, cloud-based POS functionality, and contactless and mobile application development will just get stronger. If you're not on the bandwagon, hitch a ride now.
It's simple supply and demand. When a market experiences a point of hyper competition, margins tend to become compressed. As more and more capital flows to the payments industry, it invariably increases competition and the likelihood of disruption. Untrained, inexperienced merchant level salespeople who give away free terminals and don't know how to sell value tend to sell on price.
Players like Square, Stripe and PayPal are gobbling more market share at a rapid pace as merchants and consumers are given more payment and acceptance options. This will continue to drive competition and push margins down.
Not everyone is experiencing major margin reductions. The companies that are perceived as niche experts, selling targeted solutions and value will likely survive this trend and even prosper. They are bundling their goods and services in unique ways that meet customer expectations and offer a comprehensive solution to their specific challenges.
The trend toward cash discounting and surcharging will continue to be strong. ISOs are using these programs to make up for lost revenues in other areas. Merchants are attracted to saving money in the current environment, and consumers don't seem to have issues with these programs at this time.
At some point, margin compression will hit cash discounting/surcharging as well; hyper competition will drive down margins; however, in my opinion, we have time until this occurs.
As we are all aware, security has been a hot topic for quite some time. With continued data breaches, fraud and identity theft running at record levels, I believe this will continue to be a hot button issue and initiatives to curb it will be a major trend. Many states have enacted data security and breach laws, and more are on the horizon. I believe standards will continue to be tightened, regulation will increase and the cost of maintaining compliance will rise. Along with this cost, you will see more organizations continuing to charge regulatory and PCI noncompliance fees.
Data security is a must have. We've got to maintain the integrity of the system and, more importantly, the confidence of consumers so they will maintain their card usage. My suggestion is to do what several other smart organizations have done: make data security, EMV and PCI compliance one of the focal points of your sales and marketing efforts.
The question is how can you use you use data security, EMV and PCI compliance to close more business?
There are many more trends than these few, but I expect that you get the point. The year is just beginning. Sit down and spend time focusing on a macro view of the industry and identify underlying trends that will positively and negatively affect your business. Once these trends are identified, the biggest piece of the puzzle is solved. Then you can formulate and appropriate plan to deal with each.
Remember the trend is your friend, but you have to recognize it first. Have an awesome 2021.
Marc Beauchamp is author of Survive and Thrive in the Merchant Services Industry and founder of Bankcard Life, a community for payments professionals. He is offering a free copy of his book to all payments professionals at www.bankcardlife.com/greensheet. Marc welcomes your comments and feedback at email@example.com..
The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.
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