As we enter a new decade, there is a lot we can look back and learn upon from previous years. Victor Fenix, our Business Development Director, puts 2019 payments in review whilst explaining his predictions for payment trends in 2020.
Navigating 2020 payment trends and challenges
In spite of the US economy remaining fairly robust throughout 2019, many smaller acquirers and independent sales organizations (ISO’s) still have concerns for 2020 and beyond.
So, what are the trends and challenges both, merchants and service providers, are facing in 2020?
- Uncertainty as to when the current prolonged economic growth will slow down, something very few can predict
- The speed at which technology and competition are developing
- Mergers at the high end of the market, i.e. FIS – Worldpay
- The commoditization of payment services, and competition from payment facilitators, aggregators, independent software vendors (ISVs) and value-added resellers (VARS)
- Side-effects of the growth of online commerce – stores closing amidst the shift to online purchasing
Battle of the giants
According to Deloitte’s Payments Trends 2020 report, large banks are shifting away from partnerships that allowed them to offer payments-related services. It is therefore no surprise that big acquirers are attempting to bulk up and fill this gap. In 2019 there were 78 mergers and acquiring deals in the merchant acquiring/processing sector, the disclosed monetary value amounted to $98.04 billion! (Source: Nilson Report January 2020 issue)
The consolidation will certainly affect the future, but not necessarily immediately. The larger the merger, the longer it can take for internal organization to be completed. Even then, larger companies will look to stand out from the crowd, increase reliance on their partners, and look to acquire smaller, more nimble players, to add to their talent pool.
Winning in a commoditized market
Nimbleness is key for industry players in 2020 and beyond. With payments becoming increasingly commoditized, companies must compete for market share or develop new revenue streams – or both!
With large companies slugging it out, smaller acquirers and ISOs must deal with the ever-present challenge of technology companies and new payment players attempting to disrupt the traditional merchant/payment solution provider relationship.
Combined with large acquirers and non-traditional players having access to a wealth of funds, the advice to smaller acquirers and ISO’s is to PARTNER UP! By joining a large ecosystem, they can leverage innovation and the resources of others, to complement their own unique skill set. As a result, they can increase their opportunities to thrive in an evolving market.
Open or closed business model?
Continual advances in technology deliver lots of options for acquirers and ISOs to leverage, whilst looking to maintain their relationships with merchants and fight off new competitors.
One of the most significant choices involves whether to pursue business through closed traditional solutions, or to embrace open platforms which offer greater flexibility.
- CLOSED relies on embracing a particular vendor or two – hoping its strategies and execution are sufficient to stay ahead of the competitive wave
- OPEN embraces a mix-and-match approach where any device can be delivered to a merchant, regardless of the hardware manufacturer, and work out of the box
Whichever path the merchant payment solution provider takes—and we at AEVI obviously have our bias—don’t expect the merchant to be wowed by insider talk, or technological jargon regarding apps.
The merchant wants a tailored “solution” that will provide the tools they need to operate their business profitably, whilst meeting consumer expectations. For this to happen, the payment solution provider must offer simple communication, demonstrating the tailored solutions unique to the merchant. This will ensure the system is accepted, and most importantly, used, it should be a strategy for the merchant’s success, not just an updated product. (More reading on Fintech Future)
Our recommendation for merchant services providers in 2020
Our 2019 payment review and the 2020 payment trends indicate that those who package a simple, relevant solution, consisting of the right combination of terminals and apps tailored for the merchant needs, will be best positioned to enjoy success in the evolving payments market. That’s the only way to stay ahead of competitors who offer lower cost deals, and one-size-fits-all solutions.