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As social distancing became a necessary way of life in 2020, so did the need for new and alternative payment solutions. While the COVID-19 crisis accelerated consumer adoption of various contactless payment methods, retail will continue to face disruptions as new payments solutions emerge and evolve in the months and years ahead. As consumers adopt these new ways to pay, merchants will be required to meet them where they are — integrating new technologies in order to stay competitive and thrive in the post-COVID world.
To learn more about where the payments industry is headed and what businesses need to know during this digital transformation, PaymentsJournal sat down with Jarrod Newman, Director of ISV and Channel Partnerships at Blackhawk Network; Dan Coates, Solution Evangelist at ACI; and Don Apgar, Director of Merchant Services Advisory Practice at Mercator Advisory Group.
Two years of payments upheaval, and more on the horizon
Payments technology has been advancing for decades now, but nobody could have predicted just how much growth would occur in the past two years because of the COVID-19 pandemic. “I’m seeing an overall season of disruption that’s happening within the market,” said Coates. BNPL, cryptocurrency, and other alternative payment methods (APMs) have created an ever-changing payments landscape. There has also been an increased focus on safety and security, which has led to a resurgence of the QR code within the payments ecosystem.
The more salient point may be that no one can say with total certainty what the next big change will look like. “I think everybody is wondering now, ‘Well, what’s next?’” suggested Apgar. “And it doesn’t really matter what’s next, what matters is, ‘How fast can I get it to market?’” Having the architecture to support both the product and the rollout will be crucial in the short-term. Expect to see an increase in blended payments experiences, a continued transition from physical to digital markets among the younger generations, and a substantial shift towards removing friction through biometric identification.
All of that technology can be delivered from its point of genesis to retailers, grocers, or whomever. “That was the thought behind Blackhawk’s SpendIt product and why we’re working with partners like ACI to bring an alternative payments product to market, and allowing merchant partners to engage those younger customers with whatever payment product they deem essential,” said Newman. “Blackhawk and ACI are obviously on the leading edge of that revolution.”
Biggest players, disruptors, and alternative payment methods
Card brands and big banks are the old guard of the payments sector, but digital-only payment types like PayPal and Venmo are gaining serious ground. As a result, FIs have been snapping up fintechs to diversify themselves. “They want to continue to be those big players, but they are also recognizing that their bread and butter – the standard card payment – is decreasing,” Newman pointed out. “They are trying to be everything to everybody, and making their bets now.”
Coates did not mince words: “My view is that cards have peaked now.” One clear example is that BNPL is siphoning major shares of the market away, in part because younger generations prefer the transparency and customer experience, and merchants enjoy the higher confidence in payments. ACI is capitalizing on this trend with their PayAfter product, which takes BNPL to the next level.
“It turns out that 30-50% of people who apply for Buy Now, Pay Laters don’t actually get approved,” explained Coates. “We’re offering the ability, through one single application, for them to apply for multiple BNPLs, and whatever the best one is that they can be approved for is the one that they’ll get an offer for. This enables greater approval rates for merchants, greater satisfaction with the customer, and overall is driving up number of visits and basket size.”
But the buzziest APM of all? “It’s crypto, hands down,” answered Newman. Cryptocurrency is held by 20% of consumers, and although it is still not well understood by many lay people, consumers are interested and want to get involved. Merchants that offer cryptocurrency payments will differentiate themselves from their competitors. Blackhawk’s Spendit payments product suite offers all of these APMs, with a live digital wallet, BNPL making its in-store debut, and crypto and digital payment offers in development. And since independent service vendors and technology providers such as ACI are also making a big splash at the moment, their partnership with Blackhawk portends a multitude of exciting offerings.
Critical technical elements for competitive payments integration
It is important to know that payments integration is never as easy as it sounds. More consumers are choosing to shop based on what payment types are offered, so payments must be part of strategic planning. Those leveraging a payments platform will have an enormous advantage in terms of time to market and lower integration costs. Thankfully, there are ways to make it easier, particularly with the help of ACI and Blackhawk.
Blackhawk’s SpendIt product allows for multiple APMs in a single integration, and ACI has done the heavy lifting on behalf of their customers by engaging in this partnership. “It’s not just the card brands anymore, you have to have a payments platform,” Coates emphasized. “Otherwise, you’re going to spend all your time and resources and effort building all these different connectors, and it’s going to be a very high barrier to entry and a high barrier to exit because you’ll have invested so much.”
Here are just a few of the features ACI uses to ease the payments integration process:
- Normalized APIs
- Point-to-point encryption
- Flexible support for a variety of tokens including their own omni-token
- In-store use of PayPal, Venmo, and SKUpay
- Next-generation digital coupons
Merchants will also have access to Blackhawk-driven services such as:
- Private label gift card activations and reloads
- Third-party stored value activations and reloads
Overall, the partnership between Blackhawk and ACI is a natural fit for both parties, and any business would find myriad benefits in utilizing their services. “Multiple studies show the value of these new payment methods are really going to start coming to the forefront of the payments ecosystem in the very near future,” concluded Newman. “Blackhawk is very excited to be working with ACI to make that happen.” Learn more about Blackhawk’s emerging payments solutions here.