Today’s fast-moving technological landscape has made many aspects of our lives more accessible and convenient.
No longer do you have to scrounge a meal together from the few ingredients in your fridge. Instead, you can choose from a variety of cuisines and have a meal delivered to your door. Heck, many of us don’t even need to be in a physical office to work anymore.
Along with these radical advances in technology come radical cultural adaptations. That is, we have to re-learn how we’ve always done things in order to stay agile, both personally and professionally.
When it comes to merchant acquiring and the payments industry overall, it’s no different. Emerging trends in merchant acquiring represent both challenges and opportunities on a global scale. Let’s take a closer look at what these trends are and how they’re impacting consumers, merchants, and merchant acquirers.
Global Trends in Merchant Acquiring
As Deloitte notes in a recent article, emerging technologies are poised to shape the new face of the payments industry.
Change is happening fast with payments trends evolving at an increasing rate. The leap from more conventional services to new channels born out of technology means ISOs and MSPs must adapt in order to survive.
But these new digital-only channels also offer game-changing opportunities for industry players, opening up room for growth where none previously existed.
Where industry participants previously relied on a limited number of traditional channels (like phone orders, mail orders, and mag-stripe credit and debit cards), today’s sellers, merchant banks, and other merchant acquirers can explore contactless tech, omnichannel retailing, mPOS, mobile payments, and e-commerce — along with all of the opportunities these advancements afford.
Essentially, merchant acquirers have transformed from mere payment processors into full-blown tech companies. This change is driven by both opportunity and necessity.
As McKinsey notes in a recent article, “The traditional acquirer processing model is destined to become commoditized and less profitable, as merchants gravitate toward solutions addressing a holistic set of business issues beyond standard processing functions.”
So, what does this mean for merchant acquirers?
While growth in more mature markets like the United States is slowing (apart from growth in certain industry-specific niches like healthcare and recurring housing payments), growth in emerging markets like China will remain in the double digits through 2020.
In order to take advantage of these opportunities, industry participants will have to embrace a new business model and industry trends, focusing on omnichannel solutions, cross-border digital payments, e-commerce, and general tech-savviness.
Keeping an eye on emerging payment trends will enable merchant acquirers to continue to meet (and hopefully exceed) merchant and consumer needs.
10 Payments Industry Trends Impacting Merchant Acquiring in 2019
Without further ado, here are the payments industry trends and technology that will shape merchant acquiring and payment processing in 2019 and beyond.
1. IoT, AI, and Blockchain are Disrupting the Industry
First and foremost, Internet of Things (IoT) solutions will completely change the face of merchant acquiring. No longer will credit card numbers, CVC codes, and expiry dates be required to process a payment.
With centralized accounts and wallets, consumers will be able to load money directly into their e-money accounts and not have to bother with card information input during the purchasing process. For merchant acquirers, the adoption of centralized e-money accounts means cheaper and faster transactions than traditional credit card systems.
Another game-changing technology is Artificial Intelligence (AI), which consists of both Machine Learning (ML) and Deep Learning (DL).
Deep Learning, which includes multiple neural networks, can help acquirers and merchants better assess risk.
Via DZone: “Neural net learning consists of multiple hidden layers and mimics the behavior of the human brain. Deep learning included multiple neural networks put one after the other.”
Other applications of AI and DL in the payments and technology industry are those we’re already familiar with from other platforms and apps — natural voice processing, facial recognition, chatbots, and smart ads — and more will likely be integrated in the near future.
Another emerging trend in the payments industry is an increasing adoption of blockchain technology. Not only can blockchain be used in smart contracts—allowing for automation and rapid data processing while still providing checks and balances to enable control over the process—but it can also be leveraged to confirm and secure digital identity, instead of relying on more common, and less user-friendly, methods.
2. Consumers Can Choose from an Increasing Variety of Experiences
Consumers are no longer limited to either analog or digital customer journeys. In many cases, these channels are now more flexible and integrated than ever. For instance, you can pay digitally when purchasing groceries in-person or order a meal from your phone but pay the courier in cash.
The growing range of experiences available gives consumers more choice and more power than ever, which means payment processing needs to become increasingly seamless in order to keep up with their expectations.
3. The Focus is Shifting from Product to Service
Industry priorities have shifted, which means the product itself is no longer the differentiating factor. The service and user experience are what matter most, and are what will ultimately drive revenue.
This shift can be attributed to several changes within the payments industry, including:
- Emerging payments technology. The influence of smart technology, like IoT, AI, and blockchain, on the industry (including e-wallets, cryptocurrencies, tokenization, etc.).
- Increasing choices for consumers. The fact is that consumers have more choices than ever when it comes to how they pay for goods and services.
- More ways for sellers to receive payments. Emerging industry technology also gives more power to merchants and providers. Merchants have more options, too, in terms of how they receive payments.
4. A Frictionless Customer Experience
Today’s consumers are accustomed to the modern conveniences of technology. So, it’s particularly jarring when a new interface or solution doesn’t live up to their expectations. Rather than struggle with a difficult user experience, consumers are likely to drop the product or service altogether.
Failure to offer a seamless service and experience is proving to be a major competitive disadvantage. Success and customer satisfaction rests on how easy it is for end-users: create an intuitive, stress-free experience that only asks for the minimum amount of necessary information. This is easier, of course, if you own the experience ecosystem end-to-end.
5. Mass-Personalization is Here to Stay
Thanks to advances in AI, service providers can deliver in-depth personalization at scale. Not only can consumers enjoy the individualization they would expect in-store at their favorite boutique with their favorite sales associate (think product recommendations and customized offers), but this type of personalization can also be extended at scale.
6. Security is Everything
Secure transactions continue to be a top priority in the industry. Ensuring card data is protected and preparing for network-based attacks can mean reducing the risk of a data breach and detecting and preventing attacks before they happen, all while boosting consumer confidence, establishing security standards, and improving operational efficiency. Thankfully, AI-based technologies will help many in the industry continue to improve security.
7. The Full Value of Data Can Now Be Unlocked
Data is king, and access to and organization of data can help with multiple things we’ve already discussed, including improving the service aspect of your business, the customer experience, security, and more.
The ability to access, amass, and organize disparate sources of data across your enterprise in order to improve current services as well as create new ones will set you apart. Data and the insights derived from it are the currency of today’s marketplace: it can help you better understand consumer actions, assess financial risk, and ultimately, drive growth.
8. B2B Digital Billing for SMBs
CIO Review reports that B2B payments account for $38 trillion. However, a major part of these payments are still made by paper checks. As we all know, there are lots of problems and inconveniences tied to paper billing and payment processes, including lost checks and invoices, not to mention the money spent to purchase, print and mail all of that paper.
Digital billing is being adopted by more and more companies and will continue to be more commonly implemented, as it is more secure, cuts costs, saves time, and enhances the customer experience.
9. Mobile Ordering on the Rise
Given the proliferation of single-service apps, it won’t be long before we see a rise in curated, localized marketplaces that allow users to purchase a variety of goods and services from multiple vendors in one place. Not only will these marketplaces provide an all-in-one local shopping experience for consumers, but they’ll also open a new branch of growth for in-app payment providers.
10. A Growing Preference for Real-Time Payments
With the advent of systems like real-time payments (RTP), there’s been an increase in efforts to process payments faster. We can expect RTP and the expectations that go along with it to gain traction in the coming years.
Merchants can utilize these systems to bypass credit cards, including their interchange fees, to save significant money in the long run. For example, Delta Airlines estimates that they could save $600 million per year if customers favored RTP over credit card payments, and Accenture suggested they could reduce the cost of receiving invoices by up to 60% for SMBs. Furthermore, 30% of consumers have shown a willingness to switch banks in order to access RTP.
With New Potential Comes New Challenges
The latest merchant acquiring trends are positioned to change the face of the payments and technology industry in 2019 and beyond.
Although these trends raise the bar for providers in many ways — demanding greater adaptability, quicker implementation of new and emerging technologies, and a sharper focus on consumer needs and experiences — they also introduce virtually unlimited rewards.
For participants that rise to the occasion, the potential payoff is huge. Those willing to meet the challenge will not only discover new avenues of growth and find new ways to delight customers, but they’ll also find themselves steps ahead of the competition with a healthy boost to their bottom line.