Merchant acquirers reaching the tipping point for technology refresh
Many merchant management systems currently in use across the globe were designed and constructed in the 1980s and 1990s. For decades these systems have been working effectively, but their age is starting to show.
They are becoming increasingly costly to maintain, difficult to update with compliance mandates, hard to scale as electronic payments grow, and often do not support new card products and channels such as contactless and mobile payments.
The case for technology investment is clear. This will allow acquirers to lower costs, and provide a better service to existing customers, but will also give them the opportunity to create new revenue streams through new products and services, or through expansion into new markets.
Costs can be significantly lowered through the use of modern technologies to streamline operations. Just one example is the real time on-boarding of new merchants remotely, by leveraging new technologies. This typifies the benefits an acquirer should be looking for since it ensures customer satisfaction, facilitates growth and provides for improved efficiencies in customer service. Other ways of lowering costs through technology are through scalability. It pays for the acquirer’s return on their investment to ensure that their platform can support future growth through linear scalability. It means they can grow their merchant base without further significant investment.
Other issues to consider include ensuring that a system can acquire payments from multiple international card schemes, and provide global processing through support for multiple currencies, and support central and cross border acquiring. With globalization continuing its march forward, being able to deal with a range of countries and their domestic regulatory requirements is a must.
In a competitive market, flexible pricing options are essential. The ability to offer merchants incentives such as volume based rebates, revenue sharing or dynamic currency conversion (where they can enjoy the benefits of exchange rate gains along with the acquirer) are all ways of growing market share. The spread of different standard pricing offerings such as interchange-plus, tiered and blended rate pricing are increasingly in demand by larger retailers due to the industry trend towards unbundling of merchant fees. In order to be able to support these demands, acquirers must ensure that they are qualifying transactions for the best possible interchange rate. In addition, providing the larger retailers with the MIS information necessary for them to submit transactions that qualify for the cheapest possible fee programs, is a real value-add service.
Once the tipping point has been reached and all the considerations have been taken into account, the next step is to decide on how to migrate to a new system. In the first instance, it is vital that the acquirer teams up with a trusted partner with a strong track record in migrations. It sounds obvious, but it can’t be over-emphasized – any migration must go smoothly with no downtime, merchant impact or lost payments.
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