Despite technology’s move to the cloud over the past decade, many payment processors still use old, outdated platforms that are inflexible and costly.
Payment processing companies such as PayiQ, a division of Quisitive, are creating new payment processing platforms that use cloud technology. These systems provide everything traditional payment services do but also leverage cloud-based architetcture to make transactions faster, more secure, and automated.
During a recent PaymentsJournal podcast, Dan Devlin, Senior Vice President of Solutions & Strategy at PayiQ, Tom Byrnes, Senior Vice President of Marketing at PayiQ, and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, discussed the many benefits of cloud-enabled payments processing and how it better positions specific industries, including retail and food service, amid economic and demographic headwinds.
What is Cloud-Enabled Payments Processing?
Cloud-enabled payment processing has two main components. The first is processing payments quickly and reliably. Cloud technology helps with this by spreading servers out across multiple locations, so if there’s an issue in one geographic area, the system can still work without disruption. This also helps with response time because there are multiple routes that can be optimized in real time for the transaction data to travel.
Cloud architecture is designed with the latest security protocols in mind, which help protect it from threats such as hacking and data breaches. In PayiQ’s architecture, its cloud-enabled platform also acts as an integrated order processor in addition to handling payments. This means the platform allows merchants to consolidate both payment and order information in one place, creating a single lens into both transaction and individual order data that makes it easier and more efficient for them to run their businesses.
“In the past, if a merchant wanted a report of their transactions, it would be a time-consuming and custom project,” Devlin said. “Traditional payment processors had to create a special report to get access to that data, and downloading those reports was a difficult, frustrating, and often expensive process for merchants.”
With modern cloud-enabled technology, accessing and downloading such reports is both much easier and faster. This is especially true for public clouds such as Azure, which can enable merchants to get reports far more quickly and efficiently.
Using Data as a Value-Added Product
Payment processing technology is generally based on pre-Internet technology stacks that are just starting to move into the information age. This can be seen most clearly in the operations of independent sales organizations (ISOs), which are specialized third-party companies that partner with credit card processors and acquiring banks to sell payment processing services to merchants.
ISOs have been slow to adopt new technologies—the industry has traditionally relied on paper-based processes, such as filling out applications and contracts, and using Excel spreadsheets for record-keeping.
PayiQ recently commissioned an independent national survey of ISOs and found that the process of getting new merchants on board—vital for this sector—is slow and expensive, often requiring a lot of people.
“For most ISOs, the average onboarding process alone takes three people, as much as three to 11 days, and anywhere from hundreds to thousands in overhead,” Byrnes said. “While every account is different, the longer boarding times can be attributed to incomplete applications, higher risk profiles, or issues that emerge during the underwriting process.”
To help improve this situation, PayiQ has designed a platform that can support a suite of automated tools that make the onboarding process, chargebacks, and residual management fully digital, faster, and less expensive. What’s more important, the platform allows merchants to see the behaviors and product preferences of every customer that pays with a card across all channels, including in-store transactions. This data can help merchants personalize their communication with customers to better align with their business goals and objectives.
“Because we sit in the payment flow, when somebody pays for something, our platform sees whether that card has ever been presented in our system before,” Byrnes said. ‘If not, we grab it, do a mathematically secure one-way hash (cryptographic encryption), secure the card as an identifier in a cloud, and then pin all the transaction and order data to that card to create an individual-yet-anonymous profile for each customer.”
Value-Added Products in Payments Processing
The phrase “omnichannel payments” has become a buzzword, but most of the companies claiming to do it are not living up to the hype.
What helps PayiQ be omnichannel, as opposed to other payments processors, is that it tracks payments and orders not just in digital or mobile channels but also across brick-and-mortar locations. The company provides real-time tracking of behaviors and purchase preferences of all card-paying customers across every channel, including online and offline, even for orders that are placed online but are for in-store pickup.
“Despite the rush to online buying that we all made during the pandemic, roughly 86% of all goods and services are still sold in a brick-and-mortar location,” Byrnes said. “That is a massive blind spot for the current crop of “omnichannel” tracking systems that really only focus on digital transactions. With PayiQ, you can see online and offline in real time, even if an order comes in online for pickup, which is increasingly common now.”
Data Security is Critical
In today’s economy, processing payments is table stakes and PayiQ believes that innovation comes from creating value-added products that harness the data from those transactions and makes it actionable.
While the company offers data capture and analytics as a value-added product by providing a single view of the behavior of previously anonymous customerss across online and offline channels, security features are just as important.
Cloud-enabled processing is secure because the system is designed to allow access only through payment transactions with specific credentials. At PayiQ, the sensitive payment data is instantly tokenized, or encrypted, to make it unusable to hackers. Merchants can access the data in a secure-but-anonymous form that doesn’t reveal sensitive customer or payment information.
“Handling changes in regulations is extremely important because they’re changing so rapidly,” Keyes said. “Data needs to be taken care of very carefully, and it’s difficult for merchants to do because they’re busy selling stuff. Having support with handling regulations can really help businesses thrive.”
Value-Added Benefits for Merchants
Having a cloud-enabled payments processor also carries additional industry-specific benefits, particularly for the retail and restaurant sectors. To understand these benefits, it’s first important to know that these industries are going through two seismic shifts.
The first is that the pandemic has changed how consumers shop. Many have turned to digital channels for their everyday needs, making it hard for businesses to make personal connections with their customers.
“What I’ve seen is an explosion of what is known as the unattended space,” Byrnes said. “On a recent trip to Southern California, I saw automated kiosks selling sandwiches at the airport and a toiletries kiosk at my hotel. Also, the third-party delivery services for meals or shopping that have become so common keep the personal customer data and order information. That’s a domain that has always been with the merchant.”
In both cases Byrnes cited, the customer is at an extra level of removal from the merchant. “That impacts their ability to engage and develop a meaningful, long-term relationship with that customer,” Byrnes said. “In the case of even a delivery system, the delivery company keeps the personal data, the order data, (and) not the restaurant—and that’s a huge problem for them because it reduces the frequency of direct touches or engagement with a brand that is critical to providing the kind of customer experience that builds lasting loyalty.”
The second big shift lies in demographics. In the 2020s, the population movement will be profound. Baby Boomers are a large generation that is now retiring from the workforce in huge numbers. It is being replaced by smaller generations, and that’s resulting in fewer workers to go around, according to Byrnes. What’s more, Millennials are not like their parents were. They are more technologically sophisticated, educated, and brand-centric, plus they are aware of the value of their personal information “All of a sudden, you’ve got merchants struggling to find employees and new ways of connecting with their customers to deliver a consistent brand experience. To fill the that gap, they are starting to put more technology between them and their customers,” he said.
Ultimately, merchants are trying to navigate these changes while maintaining a strong connection with their customers. As demographic trends continue to change, new technologies will likely be doing the same amount of work with fewer people. An advanced cloud-enabled payment processor designed to deliver customer insights with advanced security can help merchants move in that direction.