Full version of article originally published in The Green Sheet, 8.9.2016 Edition. Written by Adam T. Hark The future of payments processing is certain. Unless your notion of viability contemplates the continuity of a provincial, mom-and-pop, payments processing company, you are now an official member of the “new order” of merchant acquiring: providing merchants with end-to-end business management solutions or point of sale that also happens to integrate payments. As such, you’re now faced with the challenge of identifying which payments or financial technologies to “hitch your wagon” to. Allow me to share some insight into the rationale that drives this strategic decision and better positions your company for a prosperous future.
Understand Where Your Existing Company’s Portfolio is Already Strong, and Acquire a Technology That’s Complementary
Any qualified payments consultant will (should) advise you that the first step in acquiring value added products and services through the acquisition of a financial technology is introspection. Understanding your existing business, and areas where you have already had success selling to specific merchant types, is the most critical aspect of making a sound decision in identifying which technologies might be complementary. Complementary technologies are key: there’s no reason to rush willy-nilly into “uncharted waters”, where you as an owner/operator have no preexisting familiarity with the types of merchants being serviced by the technology you’re acquiring. By way of example, a payments processor with a concentration of auto dealers in his or her portfolio should be investigating SaaS based dealer management solutions, not looking at content management systems for local municipalities. The idea is to leverage what you’ve already built. Run a thorough SIC/MCC distribution analysis on your existing portfolio to identify material concentrations of merchant types. Understand why these concentrations exist: is it happenstance or do your agents have a history and expertise in certain segments which has facilitated their ability to sell so effectively? The answers to these questions will help guide you.
Choose a Financial Technology That Won’t Overwhelm Your Existing Operational and Sales Capabilities, and Budget
Understanding the premise of your new business model, where it’s really the technology that’s the primary product/service, you need to know what your organization’s operational and sales limitations are in anticipation of your expanded offering. There likely won’t be any “1-800 number” to pass off customer service and tech support to as is the case with pure payments processing. Op-ex (operational expenses) will go up with the additional payroll needed for IT resources and bringing your sales channel in-house (selling technology more often than not requires an internal sales force, where quality control of a highly educated and knowledgeable sales force can be closely managed). All of the preceding add up to increased overhead, increased workloads, and a renewed emphasis on budget management, so you need to be careful and choose a technology that you can implement that won’t negatively impact the financial health, sales and production, and operational efficiencies of your company. As a proponent of incrementalism when employing a new strategic direction, I would suggest starting off with something simple, that won’t put too much stress on your existing platform. By way of example, an integrated appointment booking and rewards/loyalty solution may be a better technology to start with than a full-fledged enterprise resource management (ERP) system. Know your limitations and choose a technology that your existing payments platform can handle.
Find a Technology Solution That Satisfies Your Existing Clients’ “Wants”
How often do you, your salespeople, or your customer service representatives ask your clients how their business environment could be made better? You know that they need to accept payments safely and securely, but if they had their druthers, what would they want that would make their business run more efficiently, and enrich their customers’ shopping experience? The answers to these questions will provide valuable insight into which complementary technologies you may want to explore.
Acquire a Technology That Does What It’s Supposed to Do
Whichever technology you embrace, make sure that it’s going to do what any good payments or financial technology ought to do for your payments processing business: enhance customer acquisition, boost customer retention, and bulk up bottom line through higher margin products and services.
Take Time to Explore the All the Different Technologies That Are Out There
It’s very important to familiarize yourself with the vast number of different payments and financial technologies that exist today. I mentioned SaaS based business management solutions in the examples above, however there are “infrastructure” technologies that also ought to be evaluated – a good example of this is omni-channel. Allocate sufficient time to properly evaluate all of these different options.
Don’t Lose Sight of the End Game
The premise for acquiring payments and financial technologies for integration into your existing payments processing platform is fairly straightforward: creating more value for your customers through additional product and service offerings ultimately translates into value creation for your company. Think beyond the payments transaction. Understand all of your merchants’ wants and needs, and acquire the technologies that will help satisfy them. Also know that “acquiring” a technology doesn’t necessarily mean you need to buy it – you can achieve the same result by establishing any one of a multitude of strategic relationships with interesting technology providers.