The Future of Merchant Services: What to Expect in 2020

January 15, 2020

As we start off this year, we can already see how the financial services ecosystem has evolved and become even more complex, especially in the realm of merchant services.

When we talk of merchant services, we refer to a range of financial services for business: the acceptance and processing of electronic payments; the behind-the-scenes process that allows merchants to accept payments; the service providers merchants work with; and the hardware and software needed to run the entire process. 

Through the years, we’ve seen how the trend seems to lead towards the digitalization of payments and now includes mobile payments into the mix. With more players coming into the field, we can foresee that there is no other way for the industry to go but go big. Financial and business news website Business Insider even reported that merchant service providers, or MSPs, will likely thrive this year since they are the ones that will mostly benefit from the payments ecosystem becoming more digital.

However, there are some parts of the world that may not agree with this forecast of growth. German fintech company AEVI has also released its own report, stating that the growth in Europe’s mobile payments and merchant services market might be curtailed in 2020. The report, which studied merchant services trends in Spain, Italy, and France, raised the ongoing issue of merger and acquisition activity as a response to companies like iZettle, PayPal, and Square attempting to invade Europe. This might leave the smaller MSPs with an even lesser fighting chance, something that they should be looking into.

Aside from these reports, a number of active and influential players have also shared what they believe will shape the merchant services world in 2020, trends that both merchants and MSPs should look out for:

    • Accenture – mobile wallets is the next big thing. According to a survey by multinational professional services company Accenture, 64% of consumers are now planning to use mobile wallets in 2020. This is mainly thanks to the emergence of more application programming interfaces (APIs) and open banking, which made it possible for other players to deliver more valuable, consumer-focused payments experiences that consumers would love to benefit from.
    • Bluesnap – small and medium businesses will transition to digital operations. IT services management company Bluesnap predicted that more digital operations will take off this year, especially for small- and medium-sized businesses. For years, these industry groups have been lagging behind in digitalizing activities associated with payments such as invoicing and account receivables, but this will now finally change as consumer needs evolve. 
    • Entrepreneur – cryptocurrency continues to trend. From Ernst & Young developing Nightfall for private transactions to the state of Wyoming enacting 13 laws around blockchain, it seems that cryptocurrency is not slowing down as it enters the new year. As reported by online magazine Entrepreneur, this is a testament of how digital assets have become an influential part in this merchant services ecosystem. With more global players building their own infrastructure to support cryptocurrencies, we don’t expect this to be slowing down anytime soon.
    • Deloitte – new standards to govern flow of payments. In their 2020 payment trends report, Deloitte has divulged that the increasing globalization of payment transactions is just calling for a greater need to put in new standards on the flow of money and protect cardholder data. At present, all companies that accept, process, store, or transmit credit card information must comply with the Payment Card Industry Data Security Standard (PCI DSS). Additionally, payment transactions in the US and European Union are regulated by central authorities. But with the introduction of new global payment rails and open solutions in 2020, MSPs facilitating inter-regional transactions may encounter challenges when countries start developing new protocols on how money can be sent cross-border.
    • Ekata – there is a greater need for speed. With the world generally moving at an even faster rate, it comes as no surprise that consumers would expect more of their day-to-day operations to be more immediate. As revealed by software company Ekata, consumers are no longer willing to compromise on speed. In a survey it has conducted, 65 percent of customers have admitted to abandoning payment transactions more than once due to friction, including processes that have taken too long. So MSPs, take note.
  1.  Juniper Research – beef up security. While card-present fraud may have been successfully curbed over the years with the development of EMV technology, the same may not be the case for card-not-present transactions. As soon as online payments have become the norm for most consumers, fraudsters have become even more creative in stealing information from card-not-present transactions. A new study from Juniper Research has found that if retailers are not careful, they are set to lose over $130 billion in digital card-not-present fraud between 2018 and 2023. To combat this, merchant services providers must put on more detection and prevention efforts on card-not-present fraud. Already anticipating this, companies around the globe have already developed other security innovations to address this.

While there may be some of these outlooks that seem contradictory, all of them stressed how merchant services have become a competitive multi-billion industry, and one of the only ways to win in this seemingly cutthroat world is for MSPs to improve their customer experience and adapt to the ever-changing trends. No matter how large the industries these MSPs may be serving, they have to be agile enough in their strategies so they can meet 2020 head-on, with great success.

When working with a merchant services provider, choose one that understands your evolving needs so you can continue to grow your business. Agapay has worked with a number of merchants with great success; agility is our expertise.

If you’re ready to find out how you can make 2020 your year with premium payment processing solutions, we are here to help. Just reach out to us at 800 644 3909 or contact us here

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