Acquirers could find themselves looking a lot like marketing firms in the near future.
They'll make that transformation by offering merchants the value-added features that come with mobile payments, says Henry Helgeson, CEO of Merchant Warehouse, a Boston-based independent sales organization.
Those features include data crunching to help merchants run their businesses more efficiently and profitably as well as digital approaches to loyalty and gift-giving, according to a panel that convened this week at the Northeast Acquirers Association 2014 Winter Seminar and Outing in Mount Snow, Vt.
But the first task in the shift to using smartphones as payment devices is convincing consumers to make the change, Helgeson says, noting that skeptics view mobile payment as a "solution in search of a problem."
While it's true that mobile payments aren't faster or easier than card swipes, the newer technology offers other advantages, panelists maintain.
Mobile payments can offer merchants lower transaction costs and provide a wealth of data on consumers' habits, says Christina Dorobek, LevelUp's vice president of partner development. Her company offers 2% transaction fees and can alert merchants to their customers' visits to other stores that participate in the Boston-based company's promotions, she notes.
Then there's the greater security that comes with mobile payments, contends Tony Abruzzio, business development executive at Isis, a joint venture of AT&T Mobility, T-Mobile USA and Verizon Wireless. Smartphones support EMV-chip and Near Field Communication is more secure than magnetic stripe cards, he says.
Moreover, he foresees a time when consumers will embrace mobile payments. "It is not a big leap to believe consumers will be paying with their phones," Abruzzio maintains.
But convincing the public to make the change will require rewards, according to Jed Rice, senior vice president of business development at Wellesley, Mass.-based Paydiant Mobile Systems. And technology can sharpen the focus of those rewards, he says.
To illustrate, Rice offers the case of the Subway sandwich shop chain. A lot of Americans don't like to get out of their cars when it's raining, so they go to the drive-up window to order food when the weather's bad.
Subway doesn't have a drive-up, and business plummets by 40% in inclement weather. Its solution was to link the loyalty program to weather data, and offer an extra 10 loyalty points if it's raining, Rice says.
A host of companies are vying to offer that kind of cutting-edge approach, and Paydiant is keeping an informal scorecard. The long list of service providers is ever-changing as companies impetuously enter the fray and then quickly exit.
The chicken-and-egg analogy fits the situation, Dorobek says. Merchants hesitate to commit themselves to mobile payments because not enough consumers pay with their phones. A consumer may go to a single store that doesn't accept smartphone payments and immediately lose faith in the app.
"They have to grow together for either to succeed," she says.
The resulting uncertainty leads companies to meander in their search for the right approach, Abruzzio says. He points an accusing finger at Google and PayPal for changing their mobile-payments programs.
The fluidity doesnt help ISOs and sales agents, panelists agree. They suggest acquirers respond to the uncertainty by learning as much as possible about mobile technology so theyll make the right decisions when advising merchants.
With that need to learn the landscape in mind, Abruzzio asks the crowd how many had made mobile purchases. Only a smattering raise their hands.
"That's not right," he says. "You're in the payments space."
Helgeson notes that his company strongly urges employees to use the latest payments technology.
"You're not doing your job if you don't," he maintains.
By learning as much as possible about new developments, ISOs can speak with authority when they advise merchants on tech choices, Rice says.
Dorobek provides an example. Her company, LevelUp, doesn't provide the technology to enable a customer to run up a tab, so it's not the best choice for a bar. Pub owners might want to consider using TabbedOut, she suggests.
"Look at the business and what their goals are," Dorobek advises. "Gather data before making a recommendation."
But don't try to bring merchants into a new era of technology before they're ready, Abruzzio says.
Retailers who have been using punch-card loyalty programs may prove the most receptive to digital loyalty tech, Dorobek says.
"You know the merchants who are forward-thinking," Rice notes.
Reluctance to embrace mobile payments reminds Helgeson of the resistance to card acceptance that he saw 15 to 20 years ago when he was calling on merchants in upstate New York.
Reluctant prospects used to tell him they'd take cards if customers wrapped them in a wad of cash.
Overcoming objections paid off then, and it will now, too, the panel agrees.
By helping merchants grow their businesses with better loyalty programs, ISOs' revenue increases, too, says Dorobek.
A "wise old ISO" once told Abruzzion of the "octopus theory" that dictates that when an ISO sells a merchant eight value-added services there's no longer any attrition.
Phones will be a home for transactions in roughly five years, according to the panel.
"As soon as I can put my driver's license on my cell phone," says Dorobek, "I'll throw my leather wallet away."