Acquirers could find themselves looking a lot like marketing firms in the near future.
Theyll 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 ISO.
Those features include data crunching that helps merchants run their businesses more efficiently and profitably as well as digital approaches to loyalty and gift-giving, according to a panel that convened Wednesday 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 its true that mobile payments arent 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 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 Boston-based LevelUps promotions, she notes.
Then theres 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 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 dont like to get out of their cars when its raining, so they go to the drive-up window to order food when the weathers bad.
Subway doesnt have a drive-up, and business plummets by 40% in inclement weather. The solution? Link the loyalty program to weather data, and offer an extra 10 loyalty points if its 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 doesnt 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 of conference attendees how many had made mobile purchases. Only a smattering raise their hands.
Thats not right, he says. Youre in the payments space.
Helgeson notes that his company strongly urges employees to use the latest payments technology.
Youre not doing your job if you dont, 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, doesnt provide the technology to enable a customer to run up a tab, so its 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 dont try to bring merchants into a new era of technology before theyre ready, Abruzzio observes.
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 theyd 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 theres no longer any attrition.
Paying with phones will find a home in transactions in roughly five years, according to the panel.
As soon as I can put my drivers license on my cell phone, says Dorobek, Ill throw my leather wallet away.