Payment industry regulations are changing: In regards to debit payments, regulatory bodies are now reinforcing payment rules at an accelerated rate in the USA but especially in Europe. Through SEPA and Payment Service Directive, all electronic payments for online and offline transactions are made more transparent – what big retailers, such as IKEA, have been advocating for so many years: to isolate each and every payment service.
The consequence of these latest rules creates a gap for new opportunities in payment acquiring and processing of existing large players but also for new entrants.
We are observing retailers’ race towards customer knowledge: On the retailers’ side, both small and big, focus is on their business: to better understand their customers’ behavior in order to present the right products at the right prices. If eCommerce platforms like Amazon or Google have been successfully harnessing huge amounts of data from customers’ online activities, thereby increasing their own business as a result, the challenge now remains in gathering relevant data from ‘brick and mortar’ purchases to maximize customer profitability.
Some very big merchants like Tesco in the UK have spent millions building a data warehouse connected to pricing and promotional marketing solutions (i.e. the Tesco Club Card), but how many merchants can afford to do the same? If you ask retailers about managing data, they would prefer to stay in control of their customer loyalty programs (i.e. track the enrollment of new participants, etc.) and not rely on third party loyalty operators.
eCommerce and physical commerce channels are merging: During the last 10 years, the payment industry has been splitting its platforms and networks to address online commerce separately from physical commerce. Effects from the Y-Generation and social media tsunami are now changing the way commerce will evolve. There are a few key trends to be addressed by the retail and payment industry: ‘showrooming effect’ (physical store to test the goods and online purchases for best deals), price comparators, geolocation, and many other new habits of consumption are changing the way retailers can influence purchasing behavior. When consumers are continually sent notifications to their smartphones for special deals from retailers (or when walking down the street with Google Glass), pressure from customers to receive targeted messages and offers is inevitable.
More and more players are speaking about Payment As A Service and VAS (Value added services): We all remember, at payment conferences a few years ago, when topics related to added value applications were pushed back to the last of the speaking slots. Times have changed and new players coming from eCommerce are now forcing the ‘traditional payment players’ to quicken their metamorphosis towards omnichannel and multi-service platform – an already built-in foundation for new entrants. The leading POS/ePOS vendors, VeriFone and Ingenico, have purchased online payment processors (respectively Point and Ogone). Does this mean they will continue processing only online transactions?
In a very mature and competitive payments market like the USA, payment is becoming an add-on of data-driven solutions towards merchants. PayPal in the USA announced last June, that they will subsidize payment fees up to $20K USD worth of transactions for SMB retailers, migrating their old cash registers to new ePOS (connected IP tablets) to allow multiple services including PayPal Wallet payment (‘Cash for Registers Program’). But behind these technology shifts (including the burgeoning of mPOS solutions), the key question may be: who is most justified for signing the merchant contract to those services?
Going even further, differentiation is a must for new payment processor companies (who have entered the market within the last 3 years), and they are focusing their merchant service activities towards customer knowledge and marketing services. A company such as Swipely in the USA is even discounting its card payment services for SMB merchants using their platform for customer marketing services. ‘Payment marketing’ has replaced traditional payment processing.
All these trends, regulations, and channel evolutions create business opportunities for Acquirers and Processors. In addition to supplying the best transaction processing at the best price, they need to bring extra added value to merchants, which means generating traffic at the point of sale. This way, acquirers and processors retain their own clients and even increase their business. To do so, their platforms need to provide retailers an "easy to use" solution that will: allow them to understand their customers’ behaviors, enroll them with a smooth and enjoyable customer experience, and reward them. Some of the processors and acquirers are developing their own VAS platforms, but most of them can rely on software and services companies who have seen the burgeoning of these Value Added Services Platforms a few years ago. Now they can offer solutions either as software or a service (SaaS).
In the end, these solutions will bring value not only to the merchants, acquirers and processors; it will also apply to the consumers as their needs and expectations will be answered with more accuracy.