As in many other areas of life, COVID-19 has accelerated changes evident in merchant acquiring over the last five years. These changes go beyond the obvious, such as the shift to online payments.
The old acquiring model is dead – what’s next…
Underneath the move online lies a shift to accessibility and convenience in shopping.
At the same time, consumers’ spending habits are evolving to a more diverse palette of payment methods – and these trends have huge implications for merchant expectations of their acquirer.
In the first of a two-part series, Carl Churchill Managing Director of Technologi outlines the strategic reasons why acquirers need to change their business model in response to new trends in shopping and payment.
The bottom line
Simply put, the old model of providing a terminal on a multi-year contract no longer applies – even if that model continues to prevail across Europe at present.
Instead, we’re moving to a multi-channel world in which even the smallest merchants will be looking at how to monetise their online presence and accept a wider range of payment types, from crypto to Buy-Now-Pay-Later (BNPL) and digital wallets.
Other trends, including the emergence of integrating payments with ordering and logistics, or “embedded payments”, promise further change.
Across the board, acquirers will distinguish themselves in tomorrow’s market through their capacity to deliver innovative solutions to their existing merchant base – and new types of merchant.
The dining out segment is a great example of these changes in action. In the dining segment, acquirers have managed to grow revenues through the pandemic thanks to the huge rise in online ordering for take-out food.
However, the way consumers pay for take-out meals is changing, with consumers now preferring to pay via an app, rather than keying in their card details via a website. This trend shifts the acquirer’s target merchant from an individual restaurant to the app or platform delivering a payment service to that restaurant (think Uber Eats or Deliveroo).
What’s more, payment methods are becoming increasingly diverse, with Buy-Now-Pay-Later (BNPL) growing at 36% per year[1], and 40% of the world’s businesses planning to accept crypto in the next 18 months[2].
A similar trend is happening in clothing and apparel, with players such as Lyst and ShopStyle bringing together leading brands like Harrods and Saks of Fifth Avenue in one place for shoppers to browse and purchase.
For acquirers, the key takeaway is to expand the range of merchants being targeted to include aggregator websites and apps.
Alongside merchant aggregators, Independent Software Vendors (ISVs) are building apps that link businesses with their target consumer segments, particularly for specialist verticals. Most ISVs are not payments experts, but need to add payments as part of their proposition. Serving these ISVs and the merchants associated with them is a huge opportunity in the new acquiring landscape.
Marketplaces, ISVs and payment facilitators should be focus areas for acquirers in the years ahead – alongside expanding the range of payment types offered, and innovation at every level of your business, be that merchant onboarding, reporting, contracts, terminals or payments integration.
In our next blog, we’ll go deeper into how acquirers should innovate for success across every area of their business.
For a discussion about growing an acquiring business in today’s dynamic market, contact us: getintouch@technologi.co.uk
[1] See: https://www.forbes.com/sites/ronshevlin/2021/09/07/buy-now-pay-later-the-new-payments-trend-generating-100-billion-in-sales/?sh=4b769d582ffe
[2] See: https://www.pymnts.com/cryptocurrency/2021/capturing-global-crypto-payments-opportunity/
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