Unlocking the potential of an open ecosystem: going beyond transaction fees and plastic
14 May 2017
Merchant banks and acquirers are trapped in a vicious cycle when it comes to payments. Hardware vendors currently have the upper hand in a closed market, where a lack of choice in payment terminals is crippling banks struggling to keep pace with the needs of their increasingly digital merchant customers.
Before the explosion of Fintech over the past few years, there had been little or no alternatives for banks and acquirers to break this closed market. Now, a pioneering new concept has emerged that is set to put the power back into the hands of the banks. An open ecosystem, based around a marketplace of value-added apps and services, to bring banks and acquirers closer to their merchants by enabling them to offer solutions that go above and beyond simple payments.
The future of digital retail transformation lies in the openness of payment terminals. Increasingly, we are seeing merchants that need not only cost-effective payment solutions, but complete business functionality – functionality that is only made available via an open ecosystem of additional apps and services. 2016 saw a 42 per cent rise in mobile payments, and for small merchants to compete with online retail giants like Amazon, they need to be able to offer payment solutions that meet the changing needs of their customers. Acquirers will need to think outside of the box to bring together the best available payment options on one side, and to meet the needs of the far more demanding merchants on the other. This makes the move towards an open and collaborative ecosystem the logical evolution for the payments market.
This new open payments platform’s greatest asset will be in the value-added B2B apps and services (VAAS) that are available to merchants via bespoke marketplaces, much like Google’s Play Store or Apple’s App Store.
VAAS enables banks to create bespoke transaction solutions that are more suited to the requirements of modern SMEs, which include not only omni-channel payment capabilities, but everything from integrated digital loyalty schemes to back-office business tools. It is estimated that by 2017 46 per cent of all point-of-sale systems will be mobile-based, with apps and services playing a major role in the transaction process. With the combination of apps and a choice of compatible mobile SmartPOS terminals, banks and acquirers will be able to regain control over customer retention by offering their small merchant clients innovative ways in which to compete in an increasingly competitive environment, without having to sacrifice control to the hardware vendors. This will finally allow banks to break free, and differentiate themselves to prospective merchant customers, on far more than just price point or technical specification.
Consumers and merchants are demanding more from their payments experience, and banks and acquirers are in desperate need of a way to keep up. An open payment ecosystem is the perfect alternative for banks to finally break from the shackles of hardware vendors once and for all, and set about pioneering a new frontier in payments based around choice and innovation.
Mike Camerling, Chief Product Officer, AEVI
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