The future of merchant payments is software
I WAS INTERESTED recently to come across a report published by McKinsey five years ago. Though it was published in 2014, its insights are as relevant as ever today. The consulting group was exploring the future of the U.S. merchant payments landscape as it underwent technology-driven change at a rate never seen before. The authors, Robert Byrne and Jason Hanson, described the way new technologies have revolutionised consumer access to information and "sparked demand for new services that can support multichannel commerce, big data analytics, enhanced loyalty programs and targeted advertising".
Consumers use the new tools to move dynamically between computer, mobile device and in-store experiences while shopping. For merchants, these cross-channel ‘journeys’ create opportunities to integrate business-to-consumer sales channels and to leverage generated data to understand consumer behaviour. To capitalise on this opportunity, merchants need payments solutions that integrate adjacent business services and enable new functionalities that enhance loyalty programs and advertising performance.
What Byrne and Hanson predicted is that the merchant payments industry would stagnate. Growth in this area would instead be around software, they predicted, as cloud computing lowers the barriers to entry for software firms looking to provide merchant services. "Point-of-service (POS) systems are transitioning from payments-only terminals to software solutions that help merchants operate their business," the authors wrote. We’re seeing this take place already. American Express has pointed out that increasingly, small and midsize enterprises are choosing cloud-based POS systems for both domestic and global payments, citing the simplicity, mobility and extra level of security that cloud-based services provide.
What the authors are essentially describing is a move towards holistic, fully integrated systems that can be used in a range of different contexts, such as order management in restaurants or practice management in surgeries and hospitals. The greater the integration, the more efficient the entire process becomes. The cloud-based POS solutions whose use is increasing among SMEs also have the advantage of offering lower up-front installation costs, subscription pricing and remote servicing. And this tech-driven evolution in merchant payments, which is underway but will continue in the years to come, "will rival the changes prompted by the introduction of the electronic terminal 30 years ago".
With the advances in tech, we will undoubtedly see the boundaries around other industries start to blur. But we should welcome any kind of industry disruption that leads to greater efficiency, simplicity and accuracy.
