The future of payments lies ‘beyond payments’ and encompasses a much broader range of services that can be delivered by banks if they harness the transformational power of synthesized data.
Revenues from acceptance are being reduced by intense competition and by ongoing regulatory demands aimed at lowering the fees incurred by merchants and consumers. At the same time, small businesses are searching for suppliers that can provide answers to the ongoing challenges they face in the tough economic climate, with a focus on providers who deliver outcomes (such as a more product sales or increased customer numbers) without adding to the merchant’s workload.
While small businesses adopt a bank-first approach, if they can’t find the answers they are looking for, disruptive digital-first competitors are carving out a growing customer base by delivering needs-based solutions to SMBs.
They recognise that merchants value integrated digital experiences that reduce the daily challenges of doing business. SMBs are time and resource poor, so they like services that reduce the distractions caused by administration, analysing data, resolving queries through call centers and so on, so instead owners can focus on their core role of building and growing their business.
Delivering these value-added services relies on harnessing the power of data and synthesising multiple sources of insight, which can then be used to support a range of seamless services for SMBs.
For example, during onboarding, banks can use information they already have about a customer to pre-populate forms for additional services, which increases conversion, reduces friction and avoids drop-outs.
Similarly, banks can provide merchants with insights from payments data to transform their view of their business at-a-glance. Instead of owners having to search through spreadsheets to understand how their business is doing, the workload becomes a simple mouse click.
The benefits of synthesized data
Synthesized data brings information sources together into a single place, so banks can present actionable insights back to merchants in a way that is meaningful to them, ensuring they can be used to improve and grow the merchant’s business.
In the case of queries about payments or chargebacks, banks can deliver self-serve capability to merchants by harnessing the power of data, so owners can review and resolve issues when it suits them, instead of being limited to call center opening times.
And when SMBs need to source a new service, it is much quicker and easier to use a supplier that has already been reviewed and approved by someone they trust, such as their bank. Owners didn’t start a small business to spend their time integrating new systems, so data connectivity between the bank and new providers offers a quick and simple way to add new services without becoming overwhelmed in supplier searches, paperwork and technical infrastructure.
Additionally, through the clever use of data and integrated technology, banks can actively help merchants to grow their business. Capabilities such as Pollinate’s simple and intuitive offers and rewards platform mean acquirers can reduce the dependency many small businesses have on large ad platforms, marketplaces and intermediaries (which charge sizeable fees), giving retailers new, cost-effective ways to find and nurture customers.
Industry focus on added-value services
The role of value-added services and the future of acquiring for banks was a key discussion point at a recent PSP & Acquirer forums hosted by Mastercard, where I debated the key issues with other industry leaders at events in Melbourne and Sydney, Australia.
During the discussion, I argued that businesses aren’t focused on the actual making and taking of the payment; that is just table stakes, and they expect that to happen seamlessly. Instead, they place a high value on the services built around payments.
This perspective is supported by research that indicates for every $1 of acquiring revenue, banks could generate $4-6 from added-value services.
As payments becomes commoditised, value-added services will also become an important differentiator, where banks can make it easy for customers to do business, while also establishing strong long-term relationships.
The challenge for banks is that this is a fast-moving market, with digital challengers adding millions of merchant customers to their books each year. Rivals are setting much higher standards in experience design, threatening to leave behind traditional acquirers and processors, whose partners have tended to focus on running payment infrastructure at scale, rather than experience design and the clever use of data.
Furthermore, traditional acquirers don’t recognise the valuable asset they have in data, which can be used to help merchants run a better business; data is currently used simply to show transactions and settlements. By defining themselves as payment companies, and not data companies, financial institutions miss the huge potential embedded in an underused asset to drive revenue and improve the experience for their merchants.
Indeed, our recent global report ‘SME Banking’s Inflection Point: Traditional banks’ opportunity to win customer primacy‘ found that 38% of traditional banks believe they have already lost customers because they are unable to offer the required data and insights.
Taking banks from inertia to momentum
In moving a large bank from inertia to momentum, partnerships will play a critical role, as they help traditional finance providers to overcome the challenges of legacy systems and processes, and inject the expertise and innovation needed to launch transformational programs in a timely way.
Partners can also play a key role in helping traditional acquirers compete in the battle for fintech talent.
Pollinate adds value to traditional acquirers by providing award-winning experience design, clever use of data, and through a smart partnership approach that deploys our incredible talent pool throughout the journey, from development to launch and growth of new services.
Our solutions, powered by payments data, are based on an in-depth relationship with partner banks, which encompasses more than the merchant experience to include the banker experience and the end-user customer experience and provide an integrated approach to adding value.
Through our global S.M.E. (Small Merchants Everywhere) Alliance of non-competing banks, we enable merchant acquirers to share common problems and combine expertise, to develop solutions that enhance their capability to compete and win against disruptors, which are deployed rapidly using our expertise in go-to-market strategy.
By harnessing the power of issuing and acquiring data, banks can introduce highly valued services to their merchant customers, offering actionable insights and an intuitive, real-time picture of an SMB’s business, laying the key foundation stones of customer primacy. Added-value services, from marketplaces to offers and rewards programs, then drive bank differentiation and the long-term relationships under which primacy is secured.
With the right partnerships and guidance, data can be the rocket fuel that launches bank services to a new level. Banks have all the assets needed to win against digital disruptors, they just need the right tools and support to reach the launchpad, where the sky is the limit for future growth.
Linda Minassian is managing director of the Asia Pacific region for Pollinate.