If theres one thing that appears unlikely to change for ISOs in the year ahead, its the rapid rate of change itself.
Innovation, competition, disruption and adaptation will continue to characterize the payments industry in the months to come, experts predict.
The pace of change that has evolved in the last few years will remain constant as new technologies drive new solutions, says Kevin Lambrix, chief operating officer for EVO Payments International, an ISO in Melville, N.Y.
As long as ISOs are willing to roll with those changes, experts contend, the opportunities will outweigh challenges. That requires proper positioning, the right products and services, and seizing opportunities as they arise.
The fact that merchant acquirers are embracing disruptive innovation underscores the uniqueness of the payments industry, says Jason Oxman, CEO of the Electronic Transactions Association. Whereas other business segmentssuch as the record industryhave shunned or mishandled innovation, payments companies are forming partnerships with technology companies, while also drawing inspiration from them to launch products and services.
That speaks very well to the bright future of our industry, Oxman says.
From his vantage point as head of the ETA, Oxman sees payments becoming more importantand more innovativethan ever before. The industry is embarking on an era of innovation that could change the way consumers and merchants initiate payments transactions, he says.
I think its safe to say we are at an inflection point in payments. The level of innovation taking place today is greater than any level in the 50-year history of the credit card industry, Oxman says.
Meanwhile, competition will continue to drive down margins, and the industry will have to cope with that, says Steve Eazell, president of the Western States Acquirers Association and vice president of sales and marketing for Secure Payment Systems Inc., a San Diego-based merchant services provider. But competition also produces opportunity, and theres continued optimism for the year ahead.
We are going to witness some positive aspects of the industry really come to fruition in 2014, Eazell says. Were going to see profit, change and growth.
ISOs are facing more competition than in the past, and its from players who previously didnt participate in merchant acquiring. Thats been ongoing for the past few years, and experts expect it to remain a hallmark of the industry for yet another year.
The extent to which ISOs embrace new technology will dictate how fast the technology progresses, says Gil Luria, payments analyst for Wedbush Securities, a Los Angeles-based financial services firm. Luria believes that in 2014 the focus will remain on how ISOs compete with Square, PayPal and other entrants in the payments industry who dont have sales forces to acquire merchants but do have good distribution.
Luria points to a PayPal payment acceptance scheme as an example. In April, PayPal launched a deal with Discover Financial Services that enables bricks-and-mortar merchants to accept PayPal payments at the point of sale. Customers can use PayPal anywhere that accepts Discover by keying in a mobile phone number and PIN at the terminal. Through the agreement, PayPal has potential access to as many as 8 million merchant locations and more than 55 million PayPal accounts.
Shortly after the launch, Discover contracted with 50 merchant acquirers to enable the in-store PayPal system. But not every acquirer was sold on PayPal. First Data made headlines when it publicly announced it would not support PayPals in-store payments.
Big acquirers have been reluctant to become involved with the deal, Luria says. Theyre literally going to hold back the progress of technology, he says, adding that PayPal will continue to find ways around those obstacles.
For as many challenges as new entrants create, opportunities could be plentiful for ISOs willing to adapt. Companies such as PayPal would rather rely on established infrastructure to enable their customers to pay at the point of sale, Luria says.
(An expanded version of this article is scheduled to appear in the January-February print edition of ISO&Agent.)