If some in the merchant acquiring industry consider banks to be unaware of, or at least slow to react to, technological changes in payments, they may want to rethink that perception.
In fact, an exactly opposite perception–that banks are far more forward-thinking and aware of the changing payments industry than are nonbank acquirers–is likely more accurate.
At least that’s what Boston-based Aite Group concludes in a June 6 report based on a survey involving 50 merchant acquirers worldwide during the first quarter.
Analysts Gwenn Bézard and Judith Fishman co-authored the report “Merchant Acquirers’ Priorities: Examining Differences” for Aite clients.
Various other surveys and reports suggest the Googles and PayPals of the world are the fast-responders, but the key revelation in the Aite report is bank acquirers “are more readily willing to deal with rapid technology transformation than are nonbanks.”
In other words, bank acquirers are keenly aware of technological changes and trends, while independent sales organizations, or nonbank acquirers, are likely more unaware because of the nature of their business model of “going door-to-door to make sales,” Bézard tells PaymentsSource.
“Banks came out in this report as being far more aware of the threats facing them in merchant acquiring,” Bézard says.
Acquiring banks have long been viewed as too conservative, leaving the door open for payments and financial industry analysts to “bash them for not being innovative,” Bézard adds.
Banks actually are listening and remain in tune with what is happening in the acquiring business and the banking industry in general, he contends.
“It is not fair to compare banks to Apple or Google in terms of innovation,” Bézard says. But when looking at their broader history, banks have been very innovative in dealing with payments, federal regulations and establishing new ways to increase revenue, he suggests.
As for the ISOs and nonbank acquirers, the report reveals “they are not really grasping the shift” in a marketplace getting crowded with many players of all sizes from Google Inc. to Square Inc., Bézard says.
Bank-owned acquirers generally are more technology-driven than ISOs are regarding security and customer service, making it understandable why ISOs would focus more on their sales than staying on top of the latest trends, Bézard suggests.
Among the bank-owned acquirers surveyed, 61% were more apt than were other acquirers, at 44%, to agree that, within the next 10 years, Internet-connected personal computers, tablets or smartphones will replace stand-alone point-of-sale terminals, the report notes.
However, at 39%, nonbank acquirers surveyed were more likely to disagree with that development than were the 19% of responding bank-owned acquirers. Those nonbank acquirers felt a change of that magnitude will occur, but not within the next 10 years.
Asked whether point-of-sale terminals would move to a hosted, gateway-powered model to support Near Field Communication and new forms of loyalty marketing and mobile payments more easily within the next five years, 55% of bank-owned acquirers surveyed said they would. Among nonbank acquirers, 56% expected that development to unfold but over a 10-year timeframe.
The survey included a cross-section of merchant acquirers considered “large players” (42% of participants), midsize players (35%) and small, niche players (23%). About half of the respondents were acquirers in Europe; the rest represented all other regions of the world.
When asked if their IT spending in the next two years would be low, moderate or high in specific technological areas, 46% of European acquirers expect spending to be high on Near Field Communication technology, compared to 17% of non-European acquirers.
As for the most important sales channels for acquirers two years from now, 70% of larger acquirers cited relationships with banks, or referrals through banks, as the most important. By comparison, 47% of midsize acquirers felt banks were most important, while only 36% of the smaller acquirers chose banks.
Ultimately, team leaders at bank-owned acquiring units “should take pride” in the findings and build on their forward-looking attitudes, while nonbank acquirers should not assume they are immune to what they consider the lack of vision at the banks, according to the report.
But the perception that banks are missing the boat regarding payments technology likely won’t fade quickly.
In March, global business advisory firm Alix Partners LLC released research indicating banks were a step behind and needed to respond quickly to the growing number of mobile -payments players in the industry (see story).
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