It’s been a wild ride for payment and merchant services in 2019. Big mergers have changed the landscape, instant and same-day payments are gaining ground, and integrated services and point-of-sale (POS) systems are reshaping transactions and even some business operations.
What’s happened in those areas, and what’s to come, was the subject of a recent PYMNTS podcast that featured Karen Webster and Neil Randel, CEO at First American Payment Systems.
The discussion took place as the year’s megamergers – which have reset the merchant services chessboard – are in the rearview mirror, but before all of those expanding companies involved in the deal have fully integrated with their new payment outlets and services. Things are still settling, but trends are being set for the 2020s.
So, has the wave of mergers in merchant services and payments reached its height? Probably for the largest players out there, at least for the time being, Randel told Webster. But merger and acquisition targets still remain, as do companies with appetites for that type of growth and expansion.
“There are still a certain number of companies out there, more mid-market or mid-cap,” Randel said. “Private equity will still be active in the space. There are a fair number of mid-market firms that might be targets of acquisitions. There are also those opportunities – those people, employees or merchants – who get lost in the shuffle.”
That’s not all that has happened over the last year or so, or all that will continue to develop in the new year or new decade. For instance, companies as nimble as PayPal and Stripe have played a part in changing the payments ecosystem, driving innovation throughout the industry and likely upending the traditional merchant services model. Randel said these megamergers show that the traditional incumbents tend to react to increased competitive pressures in perhaps the only way they know how.
And for the 2020s, there is also the continued growth of instant and same-day payments, disbursements and settlement solutions. “It’s still picking up momentum,” Randel told Webster when asked about that trend. “It’s a merchant-by-merchant decision.”
So far, much of the appeal of those speedier payment systems has come from small restaurants and businesses that have deep needs for constant cash flow and working capital. Otherwise, the case to take on those extra costs of instant or same-day payments is not as easily justified, he said. Is it even worth the cost? “Not from my experience,” Randel answered, “but I’m not a merchant.”
That’s not the only challenge in this area of payments.
The fact that customers want instant payments can hardly be contested. The problem that businesses often fail to grasp is that while nearly every customer prefers an instant digital payment, not everyone wants to get that payment in the exact same way. Even so, financial institutions are increasingly looking at real-time payments and other emerging payment networks as a key competitive differentiator, including in their small business banking operations.
“Who utilizes this going forward will be very telling,” Randel said when looking ahead to the new decade.
Gateways, too, promise to play a significant role in payments in the 2020s. Randel said his company owns and works with gateways – and at a bare minimum, those gateways need to practice PCI compliance. “We want to make sure they [follow] best practices and don’t get hacked themselves,” he told PYMNTS.
Finally, he said, we can look toward integration for some of the growing trends that promise to dominate the 2020s. “Integration with third parties will continue to be game-changers,” Randel said. “Or light POS integrations. Larger merchants are clamoring for a lot of change.” And now that energy is coming to smaller operations as well – some of them woefully behind the payments curve.
Buckle up. The 2020s will be an exciting time for payments.