Banks and merchant acquirers can adopt a commerce proposition and leverage customer data to turn payments into a competitive advantage.
- Global Fintech and payment companies supplant banks and hold a dominant position in providing merchants with payment processing services.
- Increased online commerce has driven banks and merchant acquirers to differentiate their service offerings beyond pure transaction processing.
- By adopting a “commerce proposition,” banks can offer commerce-related products and services to help merchants drive customer engagement, loyalty and growth.
It’s no secret that the payments industry has undergone, and is experiencing, rapid transformation. Transactions are no longer simply transactions, with banks holding the dominant position in providing payment services to both consumers and merchants alike. In the recent past, when payment processing was just that, facilitating the transfer of funds between customer and merchant, banks provided their merchant clients with the payment processing services that their customers expected — to shop, pay and send money securely.
However, in recent years, there has been an accelerated shift to consumers using digital payment channels, with global Fintech and payments-processing companies, like Fiserv, FIS and Global Payments +TSYS, becoming the definition of scale players in the payments industry.
In response to increased competition, more stringent regulations and the need to reduce costs, some banks have outsourced their core payments platform technology and operations to these nontraditional payment providers. But, while some banks may have outsourced the transaction-focused share of the payments business, banks and scaled merchant acquirers are, in fact, best positioned to thrive as the payments industry enters a stage that moves beyond the transaction itself.
Making payments the center of a growth strategy
As commerce continues to evolve, rapidly moving from in-person, point-of-sale purchasing to virtual, electronic online transactions, this shift in consumer purchasing/transactions underscores the need for banks and acquirers to update and differentiate their merchant services.
Banks and acquirers can accomplish this distinction by developing and implementing a comprehensive payments strategy — transforming payments from a simple financial transaction, to a data-fueled commerce engine that bolsters sustainability and drives growth. By making payments the center of their growth strategy, by embracing a “commerce proposition,” banks and acquirers can expand both the scope and the breadth of their business by monetizing an all-inclusive range of commerce-related products and services to help merchants optimize costs, enhance the customer experience, and drive revenue and growth — essentially becoming a comprehensive resource for “all things commerce.”
Today, payment leaders are adopting this commerce proposition, expanding across the commerce value chain, and they often use data as the “glue” between their strategy and accompanying commerce-related services. For example, to aid customer decision-making, Afterpay provides product and retailer recommendations to its customers based on transaction data, while PayPal Honey helps price-sensitive consumers find deals while providing PayPal with extensive price sensitivity data and consumer insights through a browser plug-in. And to assist airline and travel services providers in bolstering customer loyalty, JP Morgan Chase acquired exLoyalty, which is integrated with its co-branded card proposition.
In addition, GlobalPayments was an early adopter of the commerce proposition when it acquired ActiveNetworks to help events and clubs manage both participants and events, and Mastercard embraced the commerce proposition when it acquired APT to provide merchants with insights into locations, consumers and shopping trends.
Leveraging data to provide customer insights
One of the toughest challenges for merchants is attracting new customers. Creating marketing programs to increase awareness, generate new customers and drive sales can be difficult, when the typical merchant lacks both relationships with and/or contact information for potential customers, and may continue to do business the old-fashioned way — without any data backing their decisions. Limited access to data-driven insights may inhibit merchants from making better business decisions, prevent them from aligning products and services to sell to specific customers, and hinder them from benchmarking their performance against peers to both guide and grow their business.
Borrowing a page from the payment leaders, smaller banks and acquirers can leverage the customer data they have accumulated through their merchant services to help merchants market themselves, as well as provide data-driven customer and business insights to help them increase revenue and grow their business. For example, Google Pay displays merchant advertisements in its mobile app, helping merchants target customers, while DailyIQ by Commonwealth Bank provides its merchant customers with data-driven customer insights and recommends well-defined actions merchants can take to grow their business.
Organize around a commerce proposition
Today, banks and acquirers have the unique opportunity to organize their business strategy, operations and processes around a commerce proposition to enhance relevancy, increase sustainability and drive growth. Where to start? Here are a few practical steps:
- Understand the broader commerce needs of your merchant customers (don’t talk only payments): What are their business challenges? What could help them grow? What keeps the teams up at night?
- Determine how you could help them with their commerce needs:
- Could you use payments data to help them grow their business? For example, could you help them better target and convert customers?
- Could you optimize their business? Is there manual work that automated integrations could reduce? Could you identify and rectify challenges early (e.g., POS systems going offline in-store)?
- Collaborate across the value chain to develop new products: For example, could you help forecast future sales (and better plan inventory accordingly)? Could you work with tech companies to help them get online rapidly?
Banks and merchant acquirers are under extreme pressure to remain relevant in today’s evolving payments ecosystem. Fintech and payment companies have entered the payments industry, but banks and merchant acquirers can turn payments into a competitive advantage by adopting a commerce proposition to successfully monetize an all-inclusive range of commerce-related services to become comprehensive resources for “all things commerce.”
By leveraging the customer data they have accumulated through their merchant services, banks can fuel their merchant customers’ business with data — to become critical not just to payments, but to the overall business of the merchants they serve.