In Mercator’s merchant acquiring coverage over the last few years, we’ve looked at how the industry has shifted focus from traditional business models and revenue streams to the incorporation of value-added services and products, as evidenced in many acquirers’ market strategies. In the last year, these strategies have increasingly emphasized tactics that hinge upon the expansion of the mobile device market among businesses and consumers.
Mercator has tracked the developments surrounding mobile payment acceptance as well as the wider implications of mobility for merchant services generally and e-commerce specifically. We’ve also covered the payment gateway space from several angles, including the ways that payment service providers help merchants manage risk, aggregate a wide range of transactions from sometimes distant locations and customers, and facilitate more robust customer experiences both online and at the point of sale. These issues will remain in focus throughout Mercator’s research in 2012 as we broaden our knowledge base around three central themes: mobility, multichannel merchant services, and risk management.
We expect that acquirers’ focus on mobility will not ease in the slightest in 2012 as early adopting providers of mobile card acceptance solutions continue to expand that market. Such solutions currently accommodate magnetic stripe cards, but a small number of providers in other regions have begun to develop or actually enable mobile acceptance of EMV chip cards. Near Field Communication (NFC) contactless chip card acceptance will not be too far behind. We also anticipate that the infrastructure that supports card acceptance solutions will enable their evolution into consumer-facing mobile payment origination applications à la Square’s Card Case.
Already we’ve seen major market initiatives from Google, the mobile carriers in the Isis network, and a bevy of start-ups from outside the payments industry developing mobile wallet applications that leverage NFC chips to initiate contactless payment transactions. Alternatives to contactless mobile payments (such as Card Case) are cropping up, some of which may pose a competitive threat to the open-loop card payment value proposition. For instance, alternative mobile payment scheme Dwolla leverages the ACH network to settle funds between merchants and mobile consumers. Other schemes and applications (like Apriva Wallet, Visa’s Mobile Wallet, and PayPal) utilize the bankcard process and could potentially support acquirers’ expansion into mobile-oriented services and products.
The latter group—an array of vendors that is somewhat more entrenched in the payments industry—may be best suited to walk the fine line between the existing synergy among value chain participants and the necessary ecosystem disruption that is providing market momentum. Conversely, disruptive upstarts (though quite adept at changing the tone of the industry conversation) may not possess the expertise to grab major market share from innovative entrenched players. Isis in particular will seek to partner with the independent sales organization channel to gain the expertise needed to proliferate as a brand and install the infrastructure required to support NFC.
Please join me again next week (same Bat channel), when I turn my focus to the second of the aforementioned themes: multichannel merchant services.