Thirty-two percent of the acquiring executives surveyed for a recent report by Aite Group said mobile payments represent a “great risk.

Granted, many more see it the other way, with 64% calling mobile pay “a great opportunity,” a view more in line with recent pronouncements from acquiring industry pundits.

“Merchant acquirers understand how uncertain the industry is now in regard to mobile payments, but at the same time they intend to be aggressive in obtaining the technology,” says Richard Oglesby, senior analyst and mobile payments expert with Boston-based Aite Group.

“Doing nothing is not an option,” Oglesby says.

He wrote the report, “Merchant Acquiring: Full Speed Ahead Into the Mobile Payments Era.”

To research the report, Aite surveyed 25 executives from ISOs, other merchant acquiring organizations and payments technology vendors.

Aite then compiled the report in partnership with the Electronic Transactions Association.

It conducted the survey from May through July.

Survey respondents cited rapid technological change, card brand and regulatory change and competitive pressures as the top three challenges facing merchant acquirers over the next two years, according to Aite.

And change is indeed occurring rapidly.

Not one respondent mentioned Square Inc.’s mobile wallet in the survey — and until last week it was one of Square’s least prominent offerings.

But the recent news that Starbucks would use Square’s digital wallet technology and invest $25 million in the mobile-payments company illustrates just how quickly things change in the acquiring industry these days.

Oglesby acknowledges if the survey were taken this week, Square may gain far more consideration.

Conversely, Square was perched at the top of the list when researchers asked respondents which ISOs, acquirers or technology providers impressed them most in the last two years.

Acquirers identified Square’s ability to innovate and open new markets for merchant acquiring as the reason for placing the company at the top of the list of tech companies.

Meanwhile, acquirers can adapt to wave of change by focusing on increasing their investments in the flexibility of the technology at merchants’ point of sale, Oglesby says.

“Legacy systems are not designed for maximum flexibility and acquirers need to make the investment in their systems so they are able to handle a lot of different payments in the future,” Oglesby tells ISO&Agent Weekly.

However, some acquirers may seem reluctant to make such investments because of an industry mantra that says, “legacy systems make money, new systems don’t make money,” Oglesby says.

Still, they should start using systems with new services “in front of legacy systems” and then leverage the legacy system to perform payments, he contends.

In the past, members of the acquiring industry generally have viewed payment gateways as flexible, but that perspective also makes sense these days at the POS in preparing for mobile and cloud-based payments, Oglesby notes.

From a competitive standpoint, survey respondents indicated to the researchers that they detect a rising wave of fear stirred by the threat of losing customers to new entrants in mobile payments that offer competing alternative technologies, the report states.

Yet, respondents also indicated “a great respect” for companies that develop products that create a value beyond a payment mechanism for consumers because those companies will ultimately stand out from companies content merely to offer conventional merchant services.

Respondents chose Isis, the mobile commerce joint venture of American telecommunications companies, as the digital wallet developer they would most likely recommend to their merchants.

Google Wallet, Visa Inc.’s and PayPal Inc. rounded out the top four choices.

Clearly, acquirers do not like bogging down merchants with new fees, especially after introducing so many levies in the past few years.

As a result of the Durbin amendment to the Dodd-Frank Act, fee caps on debit transactions, acquirers now also feel the burden of having to collect on fee assessments levied by the payment networks, the report states.

A majority of respondents, at 76%, disagree that new network fees “are a welcome change” to the established pricing structure.

Only 16% report thaty they feel comfortable with the fee assessments, the report indicates.

Data security and fraud prevention remain important concerns for merchant acquirers because they understand a data breach represents a potential economic catastrophe for themselves and for their companies. Nearly half of the respondents said merchant acquiring will witness more major security breaches in the next two years.

However, as Heartland Payment Systems has shown, companies can survive a breach by promoting the use of new data security software and hardware that goes beyond Payment Card Industry data security standard compliance, the report stated.

In the U.S., security measures will receive a boost with the adoption of the EMV smart card standards, which all major card brands are promoting.

“The EMV mandates are really a mandate to prepare for Near Field Communication technology and chip-card acceptance,” Oglesby says.

“EMV is not going to go away, because plastic cards are not going away,” he adds.

But that doesn’t stop the potential uncertainty for merchant acquirers.

“If NFC is not making progress soon, other technologies may move past it,” Oglesby says.


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