As digital and mobile capabilities have taken hold on payments and data security, acquirers and independent sales organizations have needed to quickly ramp up their tech knowledge.
At first blush, some seven years ago, the acquiring and ISO community may have looked more like a deer in the headlights than an eager and willing participant in technology that would essentially change their successful and relatively comfortable business models.
"We certainly talked about current events in the market, and for a couple of years there was a pretty grave concern growing around our futures," said Marc Castrechini, vice president of product management at Boston-based Cayan, formerly Merchant Warehouse. "Some of it was that some of the industry was ripe for consolidation, but mostly it was about keeping up with the pace of evolution and change."
Fast forward to 2017 and many of the organizations wondering about whether they had a place in the new payments landscape have instead found that technology has been a savior on many fronts — from better payments experiences, to enhanced customer service and faster merchant registration.
"Ultimately, we were saying it doesn't seem as bad as we thought it would be," Castrechini said.
The reasons for the sudden optimism lies in the fact that technology has cured headaches that ISOs battled for years.
The merchant underwriting and boarding process sometimes took weeks. Now, there's technology to do that in real-time. The ability to provide all payment method options for a merchant could mean time-consuming complexities. Now, there's technology in place to provide all of that, in some cases from the same provider.
Real-time payments and even a same-day Automated Clearing House option were only dreams in the past. Technology makes that all possible now.
Poor communication tools, to the point where a merchant might never find the salesperson or customer service rep to immediately solve an issue, did nothing to help retention. Technology now provides 24/7 customer service help and online chat rooms to solve issues.
There are others changes, depending on the merchant and vertical, but the message is the same: The technology that had the potential to destroy the livelihood of an ISO has very likely saved the industry. As such, far more ISOs are creating opportunities for all types of sales and customer retention value-adds that help merchants do more than just plug in off-the-shelf terminals.
"The ISO doesn't want to go away and the small community bank doesn't want to go away," said Richard McShirley, chief marketing officer for Oxnard, Calif.-based linked2pay, which has been scoring good marks with ISOs needing a one-stop shop for all of these technological advances. "It's about automation for the banks and the ISOs to provide these services and cut the cost of delivery."
Acquirers and ISOs that have fully embraced new technology know it has resulted in an increase in their most valuable commodity: time.
"A big benefit for me is when I go to a town two hours away, I can get a merchant instantly approved now while I am there, and won't have to go back another day to do it or get a signature," said Jim Malcolm, president of sales at Veritas Payment Advisors in Oklahoma City. "That's important to me because I have customers all over the U.S., and now I can get things done remotely and train them right there."
In the ISO game, wasted time is wasted money.
"You are losing money if you are waiting a week to start processing payments," Malcolm said. "If I can get them approved that day, I can start making money that day."
It explains why ISOs were so concerned when disruptors or third-party providers sought to streamline the sales process by removing ISOs from it. But many of those innovations could be applied to the ISOs' own business practices.
"ISOs are sales organizations, so from their mentality, any time you can free up a sales person time to sell more, the more successful the organization will be," said Chris McNulty, president for Louisville, Ky.-based Wimsett & Company, an acquiring and payments consultant for business owners, banks and ISOs.
"Anything that streamlines the paperwork or improves the boarding process and results in less rework or chasing paper, that's more time to spend on the next sale," said McNulty, who also serves on the linked2pay board.
Another piece of the technology puzzle is retention.
"If a merchant gets the info they need in the easiest way possible, the ISO is going to retain that merchant and it will result in more sales and keeping the sales you make," McNulty said. "It grows your organization and that's true whether it is an ISO or a bank; basically whoever is out touching the customer."
New technology can not only help ISOs resolve issues with equipment problems easier, it also provides an option that cuts down on the maintenance needs of POS hardware through the use of cloud-based virtual terminals.
"Virtual terminals are really big," Malcolm said. "If someone has a question about this terminal, you can just resolve it through the chat button."
Technology has also narrowed the gap between companies like Cayan and the smaller linked2pay. Cayan operates as an acquirer seeking to support ISO partners and their merchants with technology, but also looking to drive transactions through its own system. Linked2pay's role is more under the hood, as a white-label service provider targeting the banks that partner with ISOs. In this role, linked2pay could integrate with a company like Cayan and other service providers to enhance its offerings.
"I don't think we ever really considered that it wasn't such an obvious choice for merchants to just dive into the next level of technology," Cayan's Castrechini said. As such, providers had to step up to their education efforts as they exposed merchants to the latest innovations.
Fintech disruptors produced a wide range of mobile terminals to compete with the traditional POS market, causing acquirers to make significant adjustments. The flood of technology also exposed ISOs' shortcomings, such as lack of an ACH option.
"People have matured on the product and technology side," Castrechini said. "But they really seem to be doing a good job of augmenting the tech side with the softer operational side, including basic training, marketing and materials."