The merchant payments industry is changing rapidly, due to ongoing technology innovations by companies like Amazon and Uber as well as the shift towards artificial intelligence and machine learning. For independent sales organizations (ISOs) or agents, keeping up with merchant services trends is vital. This enables them to develop niche business models catering to specific markets, which ensures they stay relevant and on top of their game.
Currently, merchant services trends getting attention are:
#1: Multichannel Commerce
Consumers are using more and more channels to make purchases, and merchants are increasingly needing to accept debit and credit payments from cards, phones, tablets, wearables, and other mobile devices. Payments are becoming a component of native apps, point-of-sale (POS) software, digital wallets and other connected environments, and customers expect vendors to be able to offer every option.
#2: The Partnership Principle
Since the dawn of the payments industry, products and services have been driven mostly by issuing and acquiring banks. Digital is changing this, and payment processors can now choose from a list of partners that includes application developers, payment gateways and integrated software vendors (ISVs). These partnerships help to create user-friendly interfaces or APIs that are fundamental to good consumer experiences, and ISOs that aren’t embracing this trend are likely to be left behind.
#3: Leveraging Data
With big data taking over the world, so to speak, merchants need to be able to use insights from analytics to understand customers and payment requirements, and provide loyalty programs and targeted advertising that resonates. One of the important merchant services trends currently is the provision of detailed management tools and data through an online dashboard designed to give the merchant full control of their account. Merchants can monitor competitors, compare revenue with businesses in multiple categories and locations, track revenue growth and see how their online reputation and social media impacts revenue.
#4: Fighting Fraud
Fraud is one of the biggest problems facing the digital payments industry, but artificial intelligence (AI) offers potential solutions by being able to:
- learn from previous events and adjust algorithms without human involvement,
- optimize payment routes by sending a transaction to the acquirer with the highest chance of approval based on the type of card, issuer, type of transaction, etc, which increases merchants’ authorization rates, and
- automatically retry declined transactions, saving merchants and consumers time and embarrassment.
Previously, most payments fraud was discovered—usually by the consumer—months after it happened. Rule-based logic was able to block transactions with a high chance of being fraudulent, but that didn’t stop fraudsters from switching to new merchants.
#5: POS Solution Providers
As a result of the adoption by merchants of POS solutions, value-added resellers (VARs), ISVs and payment gateways have become major players in the industry. According to McKinsey, VARs serve as an important distribution channel, while more ISVs are integrating payments functionality into their software. Joining our list of merchant services trends, payment gateways have emerged as front-end aggregators between multiple software solutions and payments platforms.
#6: Changing Fraud Landscape
With the increasing levels of fraud in 2018, customers are now used to EMV chip and pin technology and get confused when a merchant doesn’t support it. Since the last thing merchants want is to create any inconvenience that could result in a lost sale, they are rapidly developing a preference for EMV-enabled payments. ISOs and resellers can benefit from the merchant services trend of selling a product that encompasses all these variables.
#7: P2P Evolution
What began to enable dinner bills to be split between friends has expanded to payments to micro-merchants and freelancers like the local dog walker. According to research, 16% of 18-24 year-olds are using P2P apps weekly at minimum, as are 23% of 25-34 year-olds. Since providers don’t typically make much money on pure P2P payments, new merchant services trends now include parlaying their offering into C2B payment options to generate revenue. Zelle works much like PayPal, and is now even offering ways to make B2C disbursements.
#8: Voice-Enabled Payments
Voice-enabled assistants are the newest big thing among consumers, with Google, Amazon, Apple, and other companies offering the ability to order and pay for goods through conversational voice interfaces. The number of customers using voice assistants globally is expected to reach 1.83 billion by 2021. Alexa, Siri, and Google Assistant initially started off as a way to engage with customers, but has expanded to transactional banking and payment services.
#9: An Amazon Effort
Amazon is making its presence felt in every corner of the payments processing industry. Thousands of third-party merchants already use Amazon to facilitate payments, and Echo users can buy from Amazon.com if their payments card is on file. There’s every opportunity for merchants to develop their Alexa skills and enable customers the chance to order and pay for products using their Amazon-connected smart device such as the Echo.