By Stacey Finley Tappin, Vice President, Sales & Marketing, Apriva
For Years, Merchant Service Providers Have Been Hindered By Tough Competition and Tight Margins. Will Offering Mobile POS Technology Get Providers Back into the Fast Lane?
Merchant acquirers and independent sales organizations (ISOs) have seen a lot of innovation over the years. Point-of-sale terminals have evolved from clunky, cumbersome machines into slick devices. Back office systems keep track of multitudes of transactions, and deliver relevant data in digestible and actionable chunks. And the speed of transactions has quickly accelerated to the point where payments are approved before consumers can notice.
But while these innovations have all made the mechanics of payment faster and seamless—certainly a noble act—does providing payment services in today’s environment translate into a compelling and profitable business for the solution provider?
This is the question that many providers are asking themselves, particularly in this age of anytime, anywhere mobile commerce. While offering card-payment services has long been the focal point of the merchant services sectors, the rapid growth of smartphones, plus a bevy of new competitors, has thrown a monkey wrench into the tried-and-tested business model.
Merchant services providers recognize this changing business dynamic, and have taken the leap into the mobile commerce world. Many offer a host of new offerings, such as mobile marketing, loyalty, data-based analytics, and fulfillment services like couponing and tickets for events, in addition to traditional payment processing solutions and POS systems.
So, what’s involved with making this transition? Are these solutions easy to integrate with existing services, and easy to support? The following is a list of five questions that solution providers should ponder when considering mobile point of sale technologies as a viable business option.
Isn’t mobile POS just an app on a phone? For some providers, it may very well be, because that’s all they have to offer. But why limit yourself in terms of the scope and capability you can offer your end-customer? Almost every solution in the market has a payment element. Paying by mobile phone is important, but that in itself does not excite merchants and consumers. In fact, a compelling solution should incorporate a number of services and features that are appealing to multiple audiences. These include marketing, which allows merchants to identify and convert prospects through incentives and coupons, loyalty programs, which rewards consumers for brand allegiance, and of course, payments services. While mobile commerce programs can come in all shapes and sizes, the most appealing for everyone in the ecosystem—providers, merchants and consumers alike—are solutions what work across all major phone operating systems, and integrate with the leading processors and financial services providers. Reducing friction will make the mobile commerce ecosystem much more accessible and appealing to everyone involved, and an easier sell for the provider.
What’s the rush? It used to be that consumers could only buy goods and services when they paid a visit to the local butcher, baker, lawyer, accountant and doctor. Business was local. But the Internet changed those dynamics, and people became very comfortable making a lot of purchases from their home or office computers. The smartphone revolution has taken these experiences to an entirely new level. Consumers can make purchases from anywhere, at any given time. Through analytics and location-based technology, merchants can identify prospects and customers, deliver them timely and relevant offers, and close transactions through cloud-based and NFC payments technologies. This tool is incredibly useful for merchants who can use mobile commerce to run incentive programs and attract buyers by delivering offers that are uniquely appealing to specific consumers. Mobile POS gives merchants and consumers the ability to find each other, interact, conduct business and remain in touch, all through the personal mobile device. It’s where commerce is heading, and companies who need to keep ahead of the competition—which means every merchant—need to think about integrating this technology into their operations. This translates into a wide-open opportunity for the savvy merchant services provider to make a profitable entrance into the mobile POS marketplace.
What’s the business reason for you to offer mobile POS? Simple: You can make more money. Merchant services providers have become experts in selling payments and card processing services. While that’s been a solid business over the years, competition has tightened margins, and payments have become, well, not all that exciting. In a commoditized business, merchants are drawn to the lowest prices, and there’s little loyalty being thrown to traditional payment processing providers. But mobile POS changes that dynamic. By offering new revenue generating services to merchants, providers become much more indispensible to those customers. And that’s the name of the game: Demonstrate value for the merchant community—again and again. Mobile POS takes the merchant services provider to entirely new levels of customer engagement and satisfaction.
Is mobile POS easy to deploy? In a majority of cases—yes. Cloud-based mobile commerce platforms do all the heavy lifting behind the scenes. These platforms enable merchant services providers to deliver brandable, multi-faceted solutions to merchants, who can pick and choose the services they want to leverage. Through the cloud, retailers have total control in how, where and when they run promotions. It avoids the friction, and gives everyone in the ecosystem a chance to participate.
What are the risks associated with mobile POS technology? Merchant acquirers are certainly familiar with risk. That’s the nature of the business. The good news is that Mobile POS isn’t all that different from traditional risk management processes. In the current environment, card-not-present interchange rates usually fluctuate from brick-and-mortar card present rates, but the impact is really minimal—a fraction of a percentage point. Many analysts in fact believe that mobile POS is more secure than other transactions. It’s easy to locate the origination of a transaction through GPS technology, and wireless networks are not easily breached. But more than that, the ability to introduce an entire cadre of profit-generating mobile commerce services certainly outweighs the miniscule cost increases required for card-not-present transactions. It’s basic math. Offer new services that are appealing, have high margins, and watch the profits grow. The interchange is the cost of entry. Don’t let it dissuade you from making a solid strategic decision for your business.
Where providing card processing services once satisfied the needs of merchants and translated into a healthy business for providers, new technologies, new competitors, and new demands from both consumers and merchants have forever changed this business model. Rather than resist change, or ignore the evolution that is taking place, providers would be well advised to carefully evaluate the opportunities and practicalities of offering a new generation of mobile point of sale services. Products and services that are differentiated by location-based marketing, loyalty, and analytics solutions, integrated with robust mobile payment services, can ensure that providers stay relevant—and even indispensible—to merchants through multiple waves of innovation.
Happier customers, reduced churn, expanded revenue streams and greater profitability. Ideas that were once considered impossibilities by merchant services acquirers may now be within reach—but only if acquirers do their homework and carefully introduce mPOS services that are appealing to their customers and consumers, are simple to deploy, and require minimal administrative effort on the part of the merchant.