With technology at the forefront of payments, its tempting for industry players to become so enamored with the gee-whiz factor of the next new thing that they forget their end usersthe consumers who make the payments.
ISOs have been known to measure success by the number of merchants in a portfolio. But some pundits advise focusing more sharply on the end user. The ideas is that consumers are going to have much more influence on the future of payments.
The new competitors will compete based on different dynamics. It will be the value of a consumer, in addition to the value of the transactions, said Donna Embry, chief payments adviser for Payment Alliance International in Louisville, Ky.
Embry said most ISOs still think in terms of how many merchants they have and how many transactions theyre processing.
Technology plays into that way of thinking. New payments technology has found a captive audience in acquirers, who are exploring the ways they can use these tools to close deals. ISOs are looking to EMV chip technology as an opportunity to sell more equipment to merchants with the promise of making them more secure.
While thats important, Embry said ISOs shouldnt lose sight of the consumer. Theres a lot of emphasis on tablets and new payments technology, but few ISOs thinking in terms of how to help merchants create a more consumer-driven landscape, she said.
I dont see a lot of strategy coming out on how you enable the consumer to be in the drivers seat and find retailers that can offer them rewards and promotions, she said.
Thats not to say that the payments industry should ignore technology. On the contrary, technology is presenting opportunities for ISOs to improve the consumer experience if its applied correctly.
Apple has pioneered that effort, leading the charge with its consumer-facing tablet-based payments in its Apple Stores. Now, its empowering the masses to pay with their phones through Apple Pay.
Embry said industry players emphasize making new payments seamless, but they should go one step further and help consumers take control.
I think theyre going to miss an opportunity if they dont start thinking that way because I do think Apple is thinking that way, she said.
Consumers Demand Simplicity
Some of the most effective innovation for consumers doesnt require high-tech features at all. In fact, simpler is better.
Recently, Starbucks mobile payments app won out over the Square app the coffee giant had been using for the past two years.
In December, Starbucks announced it would no longer accept Squares mobile payment app and would focus on its own app, which stores and tracks prepaid balances while rewarding customers with free drinks for regularly paying with their phones.
The Starbucks apps simplicity is credited for its widespread customer appeal.
Its not a very big tech solution, but its a very practical value proposition for the consumer, said Margaret Weichert, the Americas lead for Ernst & Youngs payments practice and a principal with the firms Financial Services Performance Improvement practice.
By contrast, the Square app came with more features that consumers could employ at the point of sale, but it wasnt integrated with Starbucks loyalty program.
Emphasizing technological innovation over the consumer experience can be a risky proposition, Weichert said. Consumers dont necessarily want technology if its only going to complicate things.
When its technology-led, its rarely a success in the payments space, she said.
Weichert contends that the electronic payments system works well and has continued to grow even when the economy slows.
There have been all kinds of innovative technology solutions to what may or may not be problems, she said.
Industry strategists agree that smartphones will be at the center of the consumer experience.
According to the 2014 North America Consumer Payments Survey by Accenture, 24% of consumers in the U.S. and Canada use their phones as a payment device, compared to 16% in 2012.
ApplePay could help give consumers more ownership of their payments experience. I think as more consumers buy the iPhone 6, theyre going to become more aware of that smartphone being their instrument for communication and payments to the retailer, Embry said.
Anything that integrates the smartphone with the consumers lifestyle is in demand, and that includes the addition or retail and shopping.
Embry has been exploring ways for PAI to take advantage of technology such as Bluetooth-enabled beacons to create individualized promotions for consumers.
My speech to our CEO is weve got to think about this in a different way. Its all about individualized consumer habits and making that experience relevant to the consumer, she said.
Because they spend so much time pairing merchants with technology, ISOs are in a unique position to drive innovation that gives consumers more control. Weichert said ISOs can work with innovators and vendors to identify the pain points for consumers, and help influence ideas to solve these problems.
That kind of real, deep knowledge is really hard for a technology company to replicate, she said.
Thats especially true for ISOs that specialize in a specific business type, and particularly in industries where card acceptance is less mature, such as health care or property management, she said.
The ISOs may in fact know more about the customers than any of the other players in the value chain, Weichert said.
ISO and technology provider Cayan, formerly Merchant Warehouse, has been working behind the scenes to streamline the consumer experience through innovation. The Boston-based company rebranded itself in January to reflect its new focus, which has shifted in the past two years from acquiring to technology, with an emphasis on transaction processing through its Genius platform, payments gateway and other offerings.
Because its role is to link consumer wallets with merchant POS systems, Cayan acts as a hub between many different tech pieces. One of the things were learning is these things are made by engineers who often dont have the consumer in mind, said CEO Henry Helgeson.
Thats why Cayan vets potential vendors and is selective about which ones to include on its Genius platform. We want the payment experience to be as seamless and easy as pulling out a credit card and handing it to the clerk, Helgeson said.