Elavon adapts for the growing payment facilitator market
By turning itself into a pseudo payment facilitator as part of a new program, Elavon says it is in a better position to grow by offering services in a fast-growing sector.
The Atlanta-based payments processor and technology provider, a unit of U.S. Bancorp, is launching Scoop and Scoop Direct this month, targeting payment facilitators. By its simplest definition, a payment facilitator puts together contracts and handles transactions for a group of sub-merchants, thus allowing generally smaller merchants to bypass a direct merchant contract with an acquiring bank or independent sales organization.
But it's more complex than that when a payment facilitator is a franchisor taking all of the payments for the companies doing business under that brand, or paying those franchisees. Or maybe it's an integrated payments our cloud-based software provider interested in operating as a payments facilitator.
No matter what sort of business model is at play, eventually some payment facilitators may want to dip their toes in global business or simply outsource some functions. That's where Elavon's Scoop and Scoop Direct come into play.
With Scoop, Elavon provides support for traditional payment facilitators, especially those needing to handle new payments technology in new markets, or seeking to add brick-and-mortar presence to e-commerce businesses.
It's with Scoop Direct that Elavon takes on a lot of the functions of a payments facilitator itself in handling merchant onboarding, underwriting, compliance and risk management.
"We are finding this to be a real growth area and a very attractive, burgeoning market for us," said Ian Drysdale, executive vice president of global e-commerce for Elavon. "When payment facilitators understand the amount of work it takes to underwrite and monitor sub-merchants, sometimes they really want to outsource that function to Elavon because we do that for a living."
Elavon is making a move into an aspect of payments development that other processors are talking about, said Thad Peterson, senior analyst with Boston-based Aite Group.
"Processors clearly see the writing on the wall with pay-facs, knowing it's a trend that is only going to grow," Peterson said.
Because Elavon and other processors generally can handle the physical retail world just as well as they do the online and mobile worlds, they position themselves well to compete against the likes of Stripe or PayPal's Braintree, Peterson said.
Stripe and Braintree handle a lot of e-commerce payment processing, a landscape on which many payment facilitators operate for sub-merchants through marketplaces or as extensions of brick-and-mortar businesses.
"It's a trend that is going to transcend the virtual world and move up to the physical world very quickly," Peterson said of the payment facilitator model. "It's a vastly simpler solution for a merchant."
Payment facilitators generally keep the customer service aspects of transactions with the merchants, and the same applies to Scoop.
"We are a second line of support, but not the customer service aspects," Drysdale said. "We allow the payment facilitators to utilize their own brand."
Because Elavon is affiliated with U.S. Bank it makes certain the payment facilitators closely follow the card brand rules and other guidelines established to operate as a pay-fac.
"We register our Scoop customers as payment facilitators and our Scoop Direct customers as merchant services providers," Drysdale said. "It gives them the ability to recognize top-line revenue and other features, operating like an MSP on steroids with a much more modern capability."
That modern capability comes in the form of taking advantage of Elavon's expertise with end-to-end encryption, tokenization, omnichannel services, e-commerce and card-present payments.
"Clients sense that the two programs are similar, but it really depends on what they want," Drysdale said.
Some have the capability to do their own underwriting, onboarding and risk management within Elavon rules, so they enroll in Scoop; for the rest, there is Scoop Direct, Drysdale added.
"Sometimes, payment facilitators are really aware of U.S. laws and rules, but outside of the U.S., they fall out of their comfort zone," Drysdale said. "We can put global programs together that will remain compliant, get to market quickly and operate within the home currencies of cardholders."
Elavon expects the Scoop programs to increase transaction volume and generate revenue through services provided.
"The reality is, we have been shifting a lot of emphasis to e-commerce and integrated payments, and more and more we are finding that Scoop clients are integrated payments companies and often heavily on the e-commerce side," Drysdale said.