Fiserv: Is it time to add payments acceptance to your service mix?
By Adam Bowman, Vice President, Acquiring as a Service in EMEA at Fiserv
The ability to accept payments is essential to the functioning of any business, and enabling payment acceptance often results in resilient, lasting relationships for the providers of these services. With this in mind, it’s no surprise that interest in offering payment acceptance capabilities is booming among companies that provide services to small and mid-sized merchants, including fintechs such as Software as a Service (SaaS) providers and Independent Software Vendors (ISVs). Companies that seize the opportunity and enter the payments space with a sustainable model can reap significant benefits as they grow their business offerings and deepen customer relationships.
With credit and debit cards being the most common forms of payment for goods and services worldwide, enabling card payment acceptance is a must for any company looking to include payments as part of their services mix. The emergence of acquiring-as-a-service (AQaaS) has made it possible for a broad range of companies beyond financial institutions or large payment processers to become merchant acquirers, whose primary role is to enable merchants to accept card payments.
For companies that already serve merchants, adding acquiring services can create new revenue opportunities, allow them to own more of the payments supply chain and deepen customer relationships.
Fiserv is working with a number of fintech SaaS providers, ISVs and Independent Sales Organisations (ISOs) to embed payment capabilities, enabling them to become payment facilitators (PFACs). We’re also seeing an appetite among fintechs that are already PFACs and among payment service providers (PSPs) to move up the payments value chain and become merchant acquirers in their own right.
These companies are interested in expanding and protecting the relationships they have with their merchant clients. There is also an increasing realisation among companies that serve merchants that standing still is not an option in this dynamic space.
ISVs and ISOs are typically very focused on end user functionality and experience, and by becoming PFACs themselves they can secure increased control over the end-user payment experience and entering new functional niches.
In addition, companies currently providing payments via referral agreements or as PFACs are realising only a fraction of the value available from being a payment provider. By offering acquiring services they can increase their share of acquiring revenue while bringing more control to their underwriting and boarding processes and increasing merchant loyalty.
Similarly, many PFACs have realised that, as successful as they’ve been, they are still subject to their sponsor banks’ priorities, underwriting policies, and technology limitations, which can limit growth, revenue and their own valuations. Becoming an acquirer is increasingly the way forward, and their existing scale, know-how and ecosystem relationships make this final step a less risky one.
So what’s to be considered before moving into payments or enabling acquiring? Certainly these are strategic decisions for companies, requiring broad and deep financial, operational, legal and HR analysis. Nonetheless, a few guideposts can be useful:
- How much of the technical burden can the company undertake? Payments are a scale game, and availability, reliability and latency management are critical. The technical requirements to move into payments shouldn’t be underestimated — not just the initial build, but the ongoing operations and maintenance.
- Can the company manage regulatory requirements? Different payment models have different regulatory, licensing and compliance requirements. Keeping abreast of these and achieving compliance can be a challenge.
- Can we keep up with the market? It’s critical that payments players set their pipeline so that they “run to where the ball will be, not where it is now.” Here again, the need to focus is not only on the initial build, but on the offering needed in 3 or 5 years.
Undertaking more control in offering payment options doesn’t imply abandoning partners and doing it all yourself. On the contrary, it makes the selection of a partner even more critical, as their advice, experience, flexibility and reliability have greater, not lesser, impact on businesses with greater regulatory and compliance responsibilities.
While robust technology and rich functionality are obviously the baseline requirements for any processing partner, our experience shows that it’s the advice, experience, flexibility, reliability and forward-looking attitude of the people that will bring an organization success as a payments provider.
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