We cannot call 2018 a Year of Change, for that would imply that we completed a journey. Rather, we are changing — and are still in the early stages of a transformation of the payments industry that is gathering speed and far from over. It is a process that is going to take two to three years to play out, and once it does, it likely will set us up for a new wave of even greater innovation.
In February, Ingenico announced its Android-based payment platform. Following similar moves by Verifone and PAX, this signaled recognition by the legacy terminal companies that the industry is transforming from its traditional focus on hardware to a more open approach to software and services-based merchant payment solutions.
We are turning the corner on an era in which industry leaders competed based on proprietary hardware differentiation. In truth, there was little differentiation, and the hardware was most effectively locking in customers and making it difficult to switch. Terminal vendors grew through acquisition, rather than innovation; as a result, their numbers dwindled in a pattern remarkably similar to the mainframe computer industry of the 1970s and 1980s, and customers had fewer and fewer choices.
As digital transformation sweeps through industry after industry, choice, openness and flexibility are the key elements to success. Mini computers and PCs forever loosened the chokehold of mainframe computing. Blockbuster gave way to Netflix. Brick-and-mortar booksellers are diminished by Amazon’s new distribution model. Newspaper classified ads are a dying breed as the internet offers a more cost-effective, more immediate channel for the “Help Wanted” and “For Sale” listings.
Now it is time to turn our backs on proprietary payment device lock-in that stifles innovation and inhibits the ability of acquirers and merchants to shape their own digital strategies. Where those strategies will lead is still unclear to many, but no one can afford to ignore the changes that eCommerce has brought to traditional brick-and-mortar retail.
Acquirers and merchants must be free to boldly experiment, but most small to medium-sized merchants have scant resources or time to commit to the effort. They need payment solutions that are able to integrate countertop payment seamlessly with other functions such as delivery or appointment booking, online ordering and in-store pickup, loyalty and discount redemption. If existing solution providers can’t help them do this, then they have no choice but to seek out alternatives and open their arms to upstart suppliers who are intent on disrupting the existing order.
Consumers are far ahead of merchants in the adoption of digital technology. Merchants must race to catch up, or risk falling so far behind they will never recover. Acquirers must provide merchants with the tools and services to accommodate those consumers. Providers must offer solutions that enable next-generation acquirers to become true value-add service providers who can innovate quickly, efficiently, and profitably.
B2B companies in the payments space must adopt a B2C mentality. Solution providers must be willing to let go of older business practices in favor of constantly and pleasantly surprising customers. Change is not a one-and-done phenomenon. Instead, we are in the process of changing — and it is very exciting.