Payment innovation requires merchant providers to be a Jack of all trades

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The voice of the merchant is becoming stronger and louder. Vendors and service providers have to reshape their business strategy in order to maintain importance.

This means taking over roles which were previously done by other companies. Rather than working with several groups, merchants are willing to cut the process down and find the one vendor who can offer them the full package.

Moving forward, independent software vendors (ISVs) and payment service providers (PSPs) will have to evaluate the risks and rewards associated with taking on their new roles and fight to keep others from taking over. The new payments ecosystem is becoming more fragmented and more focused on innovation and all parties will need to stay open and agile in order to stay relevant.
Within the payments ecosystem we’re continuing to see rapid change as channel lines are blurring together.

ISVs and PSPs are seeing the largest impact as continued disruptions are forcing them to change their overall business models and strategies - causing all parties to rethink their place and business.

The rise and acceptance of Software as a Service (SaaS), Platform as a Service (PaaS) and cloud based consumption has influenced how channels interact within the payments industry. Advancement in technology has given way to SaaS/PaaS providers and digital natives who prefer to work via APIs and build on to or build their own platforms rather than adhere to the static applications of yesteryear.

And with technology having a significant impact on how channels within the payments space interact with one another, the voice of the merchant is causing equally as much disruption.

Traditional ISVs once thrived on simple software which showcased set features and capabilities. Software vendors are being forced to move away from the once product-focused, independent units and transform into a network player with a more service-delivery focus. ISVs will have to depend on a community of service providers and suppliers in order to survive the transition.

Ultimately, this new change pushes ISVs into the role once held by PSPs. Merchants will seek to integrate payments with other business functions, so an average payment-only software is no longer practical for company needs. Matched with the fact that modern-day payment platforms are becoming heavily focused on agility, ISVs must also support the possibility of fast go-to-market trends.

Software providers have to adapt to their new market and they must move away from the idea that their role is to simply make and sell software products. New era ISVs need to ensure scalability, multi-tenancy and much more in order to stay relevant to merchants. This will create more mergers and partnerships throughout the channel, helping to push ISVs more into the payment service provider space.

The roles of PSPs and acquiring banks have always been clearly defined. Recently, PSPs have seen their function grow tremendously in part to PCI data security compliance measures increasing, higher demand for global payment solutions and due to the technological knowledge of merchants expanding.

As these constraints continue to evolve, payment service providers are seeing their capacity turn more service focused, similar to ISVs. Unfortunately, as they see more dependency from merchants, they are also feeling the pressure to keep up with demands.

Due to high costs, competition is encroaching from all sides. Acquirers, logistics companies, software vendors and more are taking on the traditional services provided by a PSP in an effort to take business.

Merchants expect PSPs to provide them, at the least, with a wide scope of payment offerings, support with risk management and offer reporting and analytics services. In order for PSPs to offer this comprehensive package and as value added services continue to be an important merchant request, they will need to look to complementary PaaS and SaaS providers who can help them round out and differentiate their service proposition.

If PSPs are able to adhere to the new requests made by merchants, and work to keep costs low they will maintain their position and have to focus solely on ISVs as competition. If done right, they will quickly see the reward of the close connection to the merchants, as merchants will also begin to depend on PSPs far more than financial institutions, placing PSPs in a great positio

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