Established acquirers apparently aren’t content to stand by and let the big tech companies dominate the new market for micromerchant electronic payments.
Instead, at least a few ISOs are getting into the business of merchant aggregation, just like Square, PayPal, Google and Amazon. In effect, the tech companies or ISOs become the merchant in the eyes of the card brands, while the gardener, pool cleaner or babysitter becomes a submerchant.
Aggregation benefits small retailers that want to avoid the hassle or cost of signing up as merchants with the card brands, one observer says.
Many of those merchants are accepting card payments for the first time because it’s become practical with recently introduced readers on smartphones or electronic tablets.
That new reality has prompted enough members of the acquiring industry to take an interest in merchant aggregation that two well-known payments-consultants have joined forces to help aspiring companies get into the field–Todd Ablowitz, president of Denver-based Double Diamond Group LLC, and Deana Rich, president of Los Angeles-based Deana Rich Consulting Inc.
Ablowitz has built a reputation for expertise with new technology in the payments industry, while Rich, who’s known for risk management and underwriting, is serving as president of the Merchant Acquirers’ Committee, a trade group focused on risk management in card processing.
Risk and underwriting take on great importance in aggregation because transactions from small retailers pose a greater threat of fraud than do those from major chains, says Brian Riley, research director in the bank cards practice at TowerGroup in Needham, Mass.
Changes in payment card brands’ rules have aided aggregation, Rich tells ISO&Agent Weekly. MasterCard Worldwide instituted rules in recent months, and Visa Inc., which has had relevant rules for several years for online transactions, recently extended them to cover offline transactions, she says.
As consultants, Rich and Ablowitz say, they can help ISOs find processors that support merchant aggregation and help ISOs gain approval to get started with those processors. They also offer advice on reporting to the card brands.
Merchant aggregation differs from transaction aggregation, where transactions are bundled to reduce interchange fees, Ablowitz says, noting he and Rich are working on merchant aggregation.
“What might seem new to ISOs is monitoring merchants and controlling the funds–the things PayPal has been doing forever,” Rich says.
The market is growing, and it’s sanctioned by the card brands, Ablowitz says.
“It seems mystical, and we demystify it,” Rich adds.