Merchant acquiring is going through a sea change. No longer is the goal simply to sign up new merchants. Independent sales organizations and others managing merchant relations now must have sophisticated conversations with their clients, essentially working with them as business-building partners.
As such, the days of the one-dimensional, “show me your merchant statement and let me save you a couple tenths of a penny or let me provide a free terminal,” strategy are over, according to Tim Munto, group executive, sales and client relations, at TSYS. It’s a much broader value proposition today, he says “The exciting news is there are a lot of things to talk about, whether it’s encryption, EMV, merchant growth tools – go down the list,” Munto says. “A lot of exciting things that, at end of day, can help the merchant improve the performance of their business.”
PYMNTS.com recently had a chat with Munto, who relayed his thoughts on today’s merchant-acquiring business needs and how players in the space can effectively address market changes to stay on top.
The acquiring business, both bank and nonbank, is going through a major transformation as new players with new technologies enter the space. How are acquirers adapting to thrive?
Munto: Having recently come out of the ETA, there was a quote that came to mind. It’s a Ben Franklin quote. It’s ‘When you’re finished changing, you’re finished.’
I think that sums up a lot of things. Given the amount of change, the amount of innovation, it has really forced all acquiring organizations to take a step back and challenge what I’ll term the status quo. There’s a good probability that if acquirers continue to do what they’ve done in the past, their success in the future will likely be diminished.
Historically, there’s been a primary focus on just going out and acquiring new relationships, given the attrition metrics across our industry at 15 to 20 percent. Obviously, some of that is controllable, some of it is not. It’s important going forward that organizations focus on the new relationships, but be equally focused on protecting, retaining and growing what they already have. I believe that’s a fundamental shift that’s occurring. We’re seeing much larger investments in product-development departments, and product-development capabilities.
Based on your experience, can you provide examples of new ways acquirers are competing in the marketplace to acquire merchants?
Munto: If you look at recent events, integrated point of sale is obviously top of mind, not only from its ability to provide expanded functionality at the point of sale, but it tends to support a stickier relationship. It’s helping retain clients on the back end. Some of the recent M&A activity validates the value that having an integrated POS strategy can deliver. We definitely have a trend developing here.
How acquirers are competing – they’re changing the conversation that they’re having with the merchant. No longer is it one-dimensional, ‘show me your merchant statement and let me save you a couple tenths of a penny or let me provide a free terminal.’ It’s a much broader value proposition today. The exciting news is there are a lot of things to talk about, whether its encryption, EMV, merchant growth tools – go down the list. A lot of exciting things that, at end of day, can help the merchant improve the performance of their business. It sets the stage to have a different conversation, a much more engaging conversation. At the end of the day, you position yourself well to not be one of the 20 independent sales agents pounding on the door competing on pricing and pricing alone to displace an incumbent.
How do you see the ISO market evolving?
Munto: A number of individuals have predicted the demise of the ISO. Personally, I believe that’s premature. Are there some ISOs that are not as successful today as they have been in the past? Yes.
Why is that? It comes back to a lack of willingness to address the status quo and to do things differently. But there are many more that have embraced change and have adapted to a new environment and, quite frankly, are doing quite well.
One thing ISOs will always have over most other organizations is tremendous distribution with a localized presence. They have great affinity with the small merchants, the SMBs. In the community, they’re involved. They see them at church, at the “Y,” their kids go to the same school. They just have a relationship that a lot of organizations can’t support in a cost-effective manner in the long term.
If you look at the recent M&A activity, they all are by definition ISOs. So to say that ISOs are not thriving is shortsighted. Do they have to change? Do they have to do things differently? Absolutely. But the model continues to work well.
Has the introduction of tablets to displace stand-alone terminals affected the ISO business?
Munto: It’s both an opportunity and a threat. The opportunity is, finally the industry has motivation to go out and do a technology refresh at the point of sale. I’m always amazed that I’ll walk into a local merchant and see an old Tranz 330 or even a Zon Jr. still just chugging away. The technology is 20 years old. With all the developments currently occurring, it’s a great opportunity to go in and talk about why a technology refresh is a good thing to do and, with that, comes revenue opportunities.
ISOs are recognizing it’s not a requirement to go out and develop all this capability themselves. Even for an organization the size of TSYS, we no longer have the luxury to go out and build everything.
As part of every strategy we have a buy, build or partner conversation. Recently, with more of those decisions, we end up partnering just for speed to market. Technology is evolving so quickly, we can partner with best-of-breed providers and get to market quicker and still retain the flexibility in the future so when things shift, we can shift with it. And we don’t have a significant investment we’re looking to make a quick return on.
ISOs are in that same boat. There are a number of providers they can partner with to bring their clients a competitive value proposition.
You mentioned a more consultative approach to sales and client service as one of the adaptations made by acquirers. Can you elaborate on how this approach can help improve the merchant experience while securing market position for acquirers?
Munto: Historically, successful sales outcomes were likely to be more around the art of the sale, where today, given it’s a greater emphasis on solving a more sophisticated, more complex integrated POS experience, there’s as much science involved as there is art. So organizations need to evaluate what are the right skills and training that they need to provide their field force to make sure they’re well versed and capable of having more of a consultative conversation.
There’s a shifting of the conversation from saving on a cost dynamic versus supporting the merchants with a much broader set of tools to grow the business. As far as topics of the day, you’re talking now on multiple dimensions. It’s loyalty, its wallets, its analytics, and it’s security. It’s just a more robust conversation. To execute against that, the skills required have definitely changed.
The other dynamic we’re seeing is it’s no longer a one-and-done conversation. You don’t go out and secure the relationship and never go out and talk to the merchant again. You have to be very disciplined and focused on a continuity program and constantly, with the right cadence, get back in front of a merchant, either through industry updates, just staying top of mind and continuing to capture share of wallet as the industry continues to evolve and change.
What recommendations would you provide to acquirers and their channel partners looking to reinvent the relationship with the customers they serve?
Munto: Some will fear technology as the enemy. They instead need to embrace technology as a friend. When you do that, it’s really amazing what can be accomplished.
I read somewhere in one of your articles recently that a star rating in Yelp can translate into 8 or 10 percent sales growth. A pretty impressive statistic. Acquirers and their partners can educate merchants on social media and the impact. The cost to entry is not high. In many cases, it’s free. So leveraging those platforms and tools to solicit the voice of the client to the customer, to drive client satisfaction surveys and scores is very powerful.
That willingness, that acknowledgment to really take a look at what you’re doing and why and what you should start doing differently is important. Square and others will make us all better organizations. Some 24 to 36 months ago, not many of us were talking about self-enrollment or instant enablement. Today, there are few acquirers who have not adopted that process improvement.
The health of the industry and the fundamentals remain solid. That’s why we continue to see the level of private equity investment across the space. These are definitely exciting times.
As a sales expert for the payments and banking industries, Munto brings more than two decades of experience to TSYS Acquiring Solutions. A proven leader and market specialist, Munto offers a distinguished background in sales and client relationship management with a track record for success in a wide variety of market verticals, including retail, petroleum, quick service restaurants, travel, and entertainment. His expertise in joint venture support and integration is a tremendous asset to TSYS Acquiring Solutions.
Munto most recently served as senior vice president and sales executive for Bank of America Merchant Services where he was responsible for delivering millions of dollars in sales. Prior to his time at Bank of America, Munto spent five years as senior vice president of merchant services for National Processing Company (NPC). He also served as senior vice president and general manager of national sales at NPC. Known for his keen relationship management skills, clients can see and feel the high value Munto places on every personal interaction.
Munto holds a master’s of business administration from the University of Dayton and a Bachelor of Science degree in business administration from Wright State University.