Independent sales organizations are facing an age-old question that has confronted teenagers for centuries: What are they going to do with their future?
As payments technology evolves, ISOs will be confronted with the choice of taking on a new role with their clients. They can be "all things payments" to better service merchants and acquiring banks, or they can sharpen their focus to become specialists in a niche field.
This was the underlying question many people faced at this year's Midwest Acquirers Association conference, which took place in Chicago last week.
Ultimately, if there was a consensus, it was this: Choose an area of payments or security in which you excel, but understand how to balance that expertise with other offerings that can generate revenue.
Even well-known payment processing companies like First Data and TSYS are branding themselves as payments technology companies, due largely to the many diverse technologies they have gained through acquisition in recent years.
ISOs too often "are trying to be good at everything and they are constantly changing their strategies," said Brian Goudie, senior vice president of business solutions at First Data.
Any time an ISO hears an executive from a hot startup mention that ISOs will someday be irrelevant, they start calling First Data to determine what they should do next, Goudie said.
"They are wanting to change a strategy, but may not have had one to begin with," Goudie said. Ultimately, an ISO has to pick an area as its main core competency, and augment that income by learning about or developing software applications that work with payments.
That sort of strategy could address a specific niche, or a payment acceptance problem that has always existed, such as taking fees from players in youth or adult recreation leagues.
"Innovation will change who you are," Goudie told ISOs and acquirers during a presentation at the MWAA conference. "You no longer will just be the processor guy or gal. You will be making 50% of your revenue in other areas."
As for the disruptors who still put a bit of a scare into traditional acquiring, Lloyd Cato, vice president of global acquiring for Visa Inc., said ISOs simply "have to be ready for that ride."
"Businesses like Square, PayPal, Stripe and others are all trying to find the better mousetrap," Cato added. "Many are trying to see what it means to be a merchant acquirer."
While there is a place for these alternative payment providers, they can't deliver all of the needed services and are challenging traditional acquiring processes, Cato said. "On the positive side, they do increase the size of the pie, but they stretch the boundaries of how we think about merchant acquiring that stresses know your customer and anti-money laundering mandates."
Ultimately, ISOs that are able to accept change can also add value for their clients, even when selling traditional terminals.
"The mobile POS is becoming very popular," Goudie said. "But Verifone and Ingenico are not going away anytime soon."
Major terminal manufacturers are well positioned to produce new devices and stay on top of emerging technology, Goudie added.
Indeed, well-rounded ISOs will be in a good position when major players come knocking on the door for some distribution help. Verifone recently stated it was stepping up use of ISOs in an effort to reach smaller merchants.
Knowing your strong point is vital for an ISO in what is becoming a crowded and ever-changing merchant services market, said Nicole Palella, chief customer officer for business-to-business payments technology provider BluePay Processing LLC.
"We picked a lane to specialize in, and we now consider ourselves as a tech company first," Palella said. "Everyone wants to do more, but you have to concentrate on being the best in one area, whether that is POS, B2B or security technology."
"We have to always be aware that merchants want things that save them time and money," she said.
To that end, experts at the conference also advised acquirers that the complexity of the payments industry creates an opportunity for ISOs to also become payments consultants for clients, rather than simply service providers.