Evolution is the name of the game in payment processing, and at every turn, there are new opportunities for resellers and solution providers to further engage their customers (and hopefully sell some new technology). From new guidelines (EMV) to mobile technologies (digital wallets, NFC payment processing), the payment space is creating a bevy of new reasons for POS VARs and ISOs to further expand their product offerings. Here, VSR takes a look at what is topping the list.
The Mobile Wallet
The digital wallet category includes incarnations that leverage near-field communications (NFC) and quick-response codes (QR) to transmit credentials to POS terminals in order to process transactions. NFC is used by Google for its Google Wallet and by the Isis carrier consortium (comprised of AT&T Mobility, T-Mobile USA and Verizon Wireless) for the Isis Wallet. Apple’s Passbook wallet, which stores tickets, boarding passes and coupons, but only accepts payments at a few retailers, falls into the latter category. PayPal is reportedly exploring the use of QR codes for mobile payments in a window-shopping test in Europe.
Moreover, the use of PayPal to process mobile payments in-store by allowing customers to swipe a PayPal payment card or enter their mobile telephone number and PIN has taken hold, with this option now available in about18,000 physical stores. Transitioning retailers to PayPal payment acceptance should be a straightforward proposition for VARs in light of several recent developments.
Notably, AJB Software Design’s (www.ajbsoftware.com) Retail Transaction Switch has been integrated with the PayPal platform so as to support in-store payments via the PayPal platform. Similarly, an agreement between PayPal and NCR (www.ncr.com) calls for the integration of PayPal’s digital wallet technology with several NCR solutions. For restaurants, the PayPal mobile wallet platform is being integrated with NCR’s Mobile Pay application and Aloha Online Ordering software, while the vendor’s Convenience-To-Go application facilitates PayPal integration at petroleum and convenience stores. Further, PayPal is being integrated with NCR’s Netkey Endless Aisle application, wherein in-store kiosks allow online shopping at physical stores.
In order to fully sell customers on any form of consumer-initiated mobile payment processing—be it tap-and-go or digital in nature—retailers will need to add considerable value to the equation. Denee Carrington, senior analyst, Forrester Research, notes that because traditional payments do not present any significant hurdles to use, the true promise of digital wallets, in particular, lies not in replacing traditional payments, but in their ability to deliver such value-added services as integrated, personalized coupons and offers; enhanced product information; open payment accessible from multiple channels, and custom-tailored loyalty rewards. The delivery of integrated, personalized coupons and custom-tailored rewards is the beginning of a concept known as “contextual commerce.”
“The winners…will be more convenient than the process of using a traditional credit card, plus offer at least one other commerce feature, such as loyalty rewards, in a single transaction,” Carrington asserts.
Additionally, if digital payments are to be propelled forward, there will be a need, over the next few years, to engage in an even higher level of contextual commerce, wherein such customer data as location and transaction history/patterns is used to create predictive offers sent to smartphones, states Nick Nayfack, director of product, Mercury Payment Systems (www.mercurypay.com). Carrington concurs, deeming this the wave of the future.
Nayfack says VARs have questioned where they can play a role in contextual commerce, adding that the answer is simple. “VARs can function as information brokers,” working with processors to obtain, and subsequently sell, anonymyzed transaction data to retailers, as well as helping SMB merchants to leverage this information, along with any data (e.g., preferences) customers may have shared, to create targeted offers and more.
“There will eventually be a point where, for example, an app has been created so a smartphone knows I drop off my dry cleaning every Friday and pick it up the following Monday—and uses my credentials to process the payment ahead of time,” Nayfack notes.
Don’t Wait on EMV
Much talk about payment processing has also centered on migration to equipment that complies with the EMV (Europay/Visa/MasterCard) standard and, as such, accommodates chip-and-PIN transactions. Some major issuers, including Chase, Bank of America, Citibank, U.S. Bank, Wells Fargo and American Express, have started to distribute EMV cards to U.S. cardholders. There are also incentives for merchants to deploy EMV-ready hardware. In October 2015, liability for fraud shifts to those that do not process at least 75 percent of their transactions on an EMV-enabled platform, and in October 2017, the same becomes true for petroleum retailers.
However, selling SMB retailers on migration to an EMV platform remains a challenge for VARs, especially in the short term. Chalk it up in part to consumers, who—except for those who travel to destinations abroad where EMV has already replaced magnetic stripe technology—do not see a point in demanding chip-and-PIN cards, states Rob Bertke, senior vice president, research and design, Sage Payment Solutions (na.sage.com/sage-payment-solutions). Merchants may not want to invest in EMV-capable hardware until the pressure rises, despite the liability shift and any pressure from card issuers.
Additionally, even those SMBs that do not care about waiting for consumer demand to rise—or about competing with larger retailers that have jumped on the EMV bandwagon or are preparing to do so—present challenges for VARs. Besides cost concerns, many merchants do not fully understand the risk of non-EMV compliance and what is required to adopt an EMV-enabled processing platform, sources say. Payment processors are working to increase overall awareness—a strategy VARs, too, can implement, in cooperation with processing partners or as an adjunct to their efforts. At least one processing entity—Epicor Payment Exchange (www.epicor.com), the payment processing arm of software vendor Epicor—has moved in this direction with written materials and webinars designed to educate retailers as to why they should not delay EMV adoption, the benefits of doing so, the financial risks of saying “no” to EMV, and how the liability shift schedules work.
Offering more affordable, mobile EMV-compliant systems may also help VARs along here. Vendors working in this space include Revel Systems (www.revelsystems.com), which has just unveiled an EMV-enabled POS system that operates on the iPad platform; Ayden (www.ayden.com) whose EMV-compliant Shuffle solution enables wireless chip-and-PIN-based payment acceptance on iOS and Android smartphones and tablets via a Bluetooth connection; and VeriFone (www.verifone.com). The latter’s offerings encompass PAYware Mobile e105, a PCI PTS (Pin Transaction Security) debit approved solution that lets smartphones, tablets, and other smart devices function as mobile POS terminals; the VX 675, an all-in-one, ruggedized EMV-capable wireless hand-held device suited to “pay anywhere” applications; the VX 660 3G, a portable, EMV-ready system with 3G wireless communication speed; and the VX 520 LE, an entry-level device that can be combined with the vendor’s VX 805 PIN pad to pave the way for what the company deems an affordable EMV migration path.
Contactless Payment Processing
NFC is also being used for contactless, or tap-and-go, payment processing, but merchant adoption remains limited to date.
Experts say VARs will probably be unable to garner much traction in this area until a clear business case for NFC-based mobile payments has been established and merchants are willing to make the necessary hardware investment to enable NFC payments on upgraded EMV-capable POS terminals.
Payment Companies Lead with BI
The adoption of business intelligence solutions in the SMB POS space has been slow over the past few years, but now the payment processing providers are taking the lead by opening up their APIs to software vendors that can tether business analytics tools to processing product. It makes sense, considering payment products are already used to scan loyalty and gift cards. At the recent meeting of the Electronic Transactions Association, dozens of ISVs showed off new software that instantly analyze sales, isolate top customers and products and manage inventory.
Integration will also be key on the merchant front, no matter the customer-initiated and merchant-facing (e.g, smartphone- and tablet-based POS) payment processing model(s) they choose to adopt. For VARs and other channel players, maintaining a toehold in the business will necessitate ensuring that customers have in place solutions that enable the processing of payments on all devices to be handled in uniform fashion rather than through separate silos. If such solutions are not made available to merchants, they will be less apt to migrate to any new payment processing platform, says Henry Helgeson, CEO, Merchant Warehouse (www.merchantwarehouse.com). Those SMB retailers that are inclined to make a move, but cannot obtain an integrated solution from or through their existing VAR, will likely seek out another partner to get the job done. Hence, ignoring the integration imperative is leaving money on the table.
Merchant Warehouse has begun to address this issue with the launch of its cloud-based Genius Customer Engagement Platform. The platform is said to aggregate and integrate all payment types, programs and transaction technologies into a single platform. Merchant Warehouse has also partnered with LevelUp (www.levelup.com) on a $1 million co-sponsored development fund designed to support the creation of custom-branded mobile payment apps running on the LevelUp White-Label platform. Qualifying merchants will be able to use the fund towards 25 percent of the cost of a custom-developed LevelUp White-Label mobile payment and loyalty app, and to integrate it with Genius.
“Small businesses need a single point of integration with access to all payment types, all industries, and all platforms—anywhere,” concurs Brian Goudie, senior vice president of payment technology and processing concern First Data (www.firstdata.com). It is incumbent on payment partners, including VARs, to help small business owners identify these solutions and new technologies; those that do not, stand a chance to lose business, he claims.
Clearly, new flavors of payment processing will continue to emerge. Those channel players that investigate all angles now, rather than later, stand the best chance of profiting from merchant and consumer adoption of these models in the short- and long terms alike.