An interplay of factors – competition from non-traditional players, constant margin pressure and the ongoing shift to digital consumerism and omni-channel commerce — is having a significant impact on the merchant acquiring business. Merchants, increasingly, are partnering with acquirers, who can manage the complete payment process and better navigate the omni-channel payment landscape. Established acquirers need to engage with merchants in innovative ways. Effective service management is now the key to sustain growth and capture new opportunities.
In most acquiring organizations, the underlying business support infrastructure comprises discrete payment processing systems, having been assembled in response to specific service needs. Many channels simply operate under a unified brand, but with a completely siloed view of external merchants. As a result, acquirers are struggling to keep pace with market-driven changes. For instance, merchants across markets have a fragmented channel experience, as acquirers rely on transaction processing systems dedicated to specific payment channels.
Traditional POS transactions originating from brick and mortar stores are processed by a separate switch, compared to transactions originating from digital channels. This also requires merchants to install separate software integrated with the merchant’s IT systems. Likewise, multiple systems, result in duplication of critical functions and workflows – for example merchant accounts need to be created on each payment channels. The infrastructure is inefficient, expensive to maintain and provides limited operational and business visibility, impeding ability to service merchants efficiently.
How can Acquirers Respond?
To be competitive and improve top-line, acquirers need to strengthen backend service capabilities. With a large base of merchants and a proliferation of channels and systems this is a challenging task. A Merchant Services Hub will centrally manage key functions, enabling acquirers to deliver an integrated payment processing and service experience across all touch points. Overall the solution aims to simplify business operations and brings significant advantages. It can slash OPEX by eliminating duplication of work process, accelerate time to market and improve merchant satisfaction.
The complete breadth of capabilities includes:
Unified Transaction Processing: Omni-channel is a macro-trend defining the retail payments world. With the emergence of new payment instruments and the blurring of lines between in-store, online and mobile commerce, acquirers need to offer integrated payment systems for physical and digital transactions. The unified transaction processing layer rests between the front-end channels (e.g. POS, UPI in India, Mobile Wallets, Online Channels) and the traditional interchange and bank payment networks. This single integration point replaces the multiple interfaces required by the conventional approach and flexibly enables payment acceptance for merchants, regardless of payment type or channel of origin.
Shared Back-Office: The merchant services hub provides a shared repository of common business service functions across channels. These include merchant onboarding, accounting and settlement. As an example, a centralized Know Your Customer process, as opposed to verifying the merchant for each payment channel that needs to be activated can save onboarding costs and improve time to market. Likewise, settlement processes can be automated across multiple transaction channels and accounts, eliminating the need to manually aggregate transaction data from disparate systems. This significantly improves the acquirers’ ability to offer innovative settlement terms. For instance, acquirers settle accounts of large merchants’ n times a day as compared to end of day, improving merchant stickiness.
Analytics Layer: Underlying the unified approach is the ability to have a holistic view of the business. Empowered by advanced analytics, acquirers can generate actionable insights on the overall profitability and performance of the merchant portfolio across channels. A broad view of the merchant relationship allows acquirers to enhance merchant engagement, optimize quality of portfolio, improve merchant lifetime value, and make intelligent pricing decisions based on performance.
Ancillary Services: The hub also aggregates data that can be fed into ancillary systems such as Services Monitoring and CRM, significantly improving quality of service offered to merchants. With a single view of the merchant network, acquirers can take immediate action in case of network events, ensuring high throughput and availability a key service quality element. Likewise, CRM departments can be proactively informed of issues enabling quicker resolution of merchant queries.
Making the Vision a Reality
Powered by technology, analytics, mobility and flexible marketing operations, acquirers can deliver innovative experiences in ways that bridge marketing and service interactions. And they can do so by integrating across all functions, products and services.
Creating and implementing an integrated Merchant Services Hub is however a multi-year journey. Most acquirers will need to deploy merchant services hub in stages and there is no single implementation blueprint. Some acquirers may favor a front-end overhaul where the objective is to simplify merchant on-boarding. Other acquirers may want to improve business efficiencies and integrate back-end functions for example Settlement, Accounting CRM, typically driven by a desire for efficient IT operations.
The choice of the most appropriate model depends on several factors including whether the acquirer is driven by technological business or strategic innovations. Achieving an omni-channel reality requires executional courage to move forward, the right organizational structure, and a partner who can bring global experience to get things done. FSS is helping acquires to make the transition to a more integrated services approach.