Merchant acquirers, like many bankers, are facing a critical shift in consumer expectations. Merchants, when they are not at work, are consumers. And in the last few years, there have been dramatic changes in consumer expectations. The most notable example of this is the smart phone. The software available on smart phones today is far easier to use and far more responsive than anything we’ve ever seen before. In addition to ease-of-use, consumers now expect instant gratification in every aspect of their life. When merchants come to work, these expectations impact their perceptions of interactions with their vendors. For merchant acquirers, meeting these expectations may require a significant change in how they do business.
Acquirers who focus on the largest “platinum” merchants have the advantages of scale and high transaction volumes to fund outstanding customer experiences. Those acquirers who focus on micro-merchants have the advantage of a huge volume of clients, in spite of the low transaction volume for each. As a result both of these groups are able to build a software infrastructure capable of meeting their customers’ evolving expectations.
The merchant acquirers who serve the middle market, have neither the volume of transactions nor the volume of clients to fund significant investment. They will be the most adversely impacted. Without a large volume of business, they will be hard-pressed to build new easy-to-use software interfaces or to build automated systems that provide rapid onboarding of new merchants. While strong customer relationships and local presence have allowed these organizations to maintain their sales volume, the ubiquity of payment solutions like Square will soon begin to impact the bread-and-butter clients of many merchant acquirers. Ensuring a great customer experience will soon be a necessity to protect their portfolio.
Marketing leaders are focusing on three best practices to positively impact customer perception. Smaller merchant acquirers would be well served to consider how they might apply these lessons to their onboarding and monitoring processes.
The first of these is speed of responsiveness. By speed, I mean the time is required to apply for a merchant account through its activation. While managing risk in the onboarding process remains as critical as ever, tools are available today that allow significant risk management to be performed in a matter of seconds. In fact, by incorporating new alternative data sources into the process it is actually possible to provide a higher level of risk management through an automated solution. That said, there remain many scenarios in which a human review is absolutely necessary to handle certain exceptions. Far from advocating the elimination of manual reviews, I believe that future onboarding processes will automate the vast majority of merchants and apply valuable underwriter time to reviewing unusual, unpredictable, and indeterminate applications.
I spoke with a merchant acquaintance of mine who shared his experience signing up for a new merchant account. He contacted a merchant acquirer with a strong local presence in his community and applied over the phone. He was then placed on hold while his application was reviewed. While on hold, he began exploring an alternative provider’s website. Although the rates seemed comparable, he was sufficiently intrigued by low equipment cost that he began completing the online offer while still on hold. He actually completed the online offer, was accepted as a merchant, and ended up hanging up on the local acquirer. Their inability to respond fast enough to keep up with today’s pace of business lost them a sale.
The second best practice relates to scale. While scale is not something we often think of as a benefit to consumers, it can actually have a tremendous positive impact on customer experience. The easiest way to think of scale is how long it takes for the acquirer to inform them of a problem or to handle exceptions. The more manual processes the acquirer uses, the more staff time will be required to handle any situation. The more staff time is required, the more difficult it will be to scale your organization as new merchants come on board. The end result is inevitably a loss of quality and customer service when the existing staff is unable to keep up with volume.
Consider this in your account monitoring process. Every merchant acquirer monitors accounts for unusual or risky behaviors. The more manual this process is, the more likely it will be that risks are missed or that the merchant will not be informed of the risk in time to address it directly. A scalable automated infrastructure enables merchant acquirers to handle the ebb and flow of risk without suffering due to staff limitations.
Finally, the third best practice is to focus on creating frictionless customer interactions. Think about your onboarding process; is it intuitive? Can it be done on any interface, from a mobile phone or the web? Gone are the days when merchants would spend months setting up their storefront before opening. Online storefronts can be set up in one day. Brick-and-mortar storefronts in large cities are often set up in 1 to 2 weeks to reduce the rental expense of an empty space. Selecting cash registers and merchant solutions has changed from an important step in the process to a last minute urgent need. Even if weeks are spent evaluating solutions, once a decision is made there is always a rush to get the system live. Like the merchant I mentioned before that went with an alternative payment provider, any level of friction or delay in the process can drive merchants to consider alternatives. And today, the alternatives are abundant.
The question I am most frequently asked is how can we implement these best practices. The answer, simply stated, is a merchant onboarding and monitoring solution that provides the automation and scalability necessary to meet the emerging needs of merchants. Except for the smallest of merchant acquirers, manual underwriting and monitoring processes will fail to deliver the level of service required today. To be fair, I am biased towards Zoot’s zMerchant solution, but I realize that it may not be the perfect fit for everyone. Whatever solution you select, I encourage you to evaluate it based on the evolving expectations of your customers rather than comparing it to your current business processes.