Value-Added Services in Payments
In the payments industry, change can come at you fast. New trends and innovative technologies can have a sudden and dramatic impact on consumer behaviors. Merchants, in turn, start looking to their acquirers and merchant service providers to help them keep up with new demands.
To keep pace with the rapid evolution of digital payments in the global economy, these providers need to offer a greater level of value and service than ever before. What sort of value-added services are merchants hoping to get from their service providers, and what can acquirers and payment processors do to meet their expectations?
Many factors have contributed to the recent shifts in the payment landscape. In addition to the ongoing rise of e-commerce, we’ve experienced a pandemic necessitated huge changes to our shopping habits.
We've also seen open banking initiatives that opened the door for disruptive fintech startups to introduce brand new ways of making electronic fund transfers.
Consumers want what’s new and convenient. Merchants want to keep their customers happy. This leaves the acquiring banks, payment processors, payment facilitators, and other merchant service providers (MSPs) who make digital transactions possible faced with new expectations, stiffer competition, and a rising tide of online fraud and disputes.
What will keep merchants happy—and loyal—are value-added services that go beyond the basics of processing and settling transactions. Acquirers and other “traditional” MSPs now have to compete with a new generation of integrated software vendors, or ISVs, who legitimately have a lot to offer the typical small business retailer. To stay relevant, providers need offer compelling add-on solutions of their own.
What are Value-Added Services in Payments?
In the context of the payments industry, value-added services can describe any features or solutions that go beyond the minimum requirements of processing and handling payments.
Here are some of the value-added services that merchants are most interested in:
- Alternative Payment Options
The ability to accept payments from digital wallets, fund transfer apps, and other alternatives to credit or debit cards is highly sought after by merchants. Consumers are embracing these platforms, especially in international markets and younger demographics that don’t have easy access to credit cards. For merchants, more payment options equals increased sales.
- Fraud Prevention
Payment fraud is a problem that never seems to go away—in fact, it keeps getting worse. MSPs can leverage their resources, data, and positioning to block it more effectively than merchants can at the point-of-sale alone, making fraud prevention services a highly valuable offering.
- Chargeback and Dispute Management
Disputes and chargebacks go hand-in-hand with fraud, and can also result from customer dissatisfaction and, increasingly, from first-party misuse of dispute processes. Dealing with disputes can be time-consuming and difficult for merchants, but MSPs can mitigate the problem by offering improved communication and a broader range of deflection and resolution services.
- Accounting Solutions
When you’re handling all of a merchant’s transactions, it’s not too much of a leap to provide assistance with their accounting as well. MSPs are in a particularly advantageous position to provide invoicing services, assisting merchants with billings and collections for deferred payments.
- Data Analytics
Customer and transaction data has tremendous potential to generate important insights for merchants, but small businesses don’t always have the resources needed to build the analytical framework needed to uncover them. One big advantage of MSPs assisting with analytics is that it’s more secure—the provider already has access to the data and the merchant doesn’t need risk a security breach by sending it off to another third party.
- Lending Services
Consumers may be stepping away from credit cards, but that doesn’t mean they aren’t interested in short-term loans. Payment plans such as Buy Now Pay Later have become increasingly popular, and it’s easier for merchants to offer this option when it’s supported by the payment providers they’re already using.
The possibilities don’t end there. Corporate credit cards, customer relationship management integration, and loyalty programs are just a few more ideas for value-added services that have been gaining traction in the payments space.
How Can Traditional MSPs Compete with ISVs?
Many smaller retailers are flocking to ISVs like Square, who combine easy onboarding with a suite of helpful features designed to make payment acceptance easy and hassle-free. To compete with them, MSPs need to be able to offer comparable services and value.
As things currently stand, about half of all small businesses are choosing ISVs for their payment processing needs. Providers who operate on a more traditional model may be more cost-effective and scalable as retailers grow, but that doesn’t mean you have to cede the field to the upstarts and wait (and hope) for merchants to outgrow them.
One of the smartest things MSPs can do to level the playing field is to partner up organizations who specialize in particular value-added services.
Rather than creating services for invoicing, fraud prevention, data analytics, and chargeback management in-house, MSPs can form partnerships with companies who already have a proven track record in those areas.
For merchants and their customers, partnerships between exciting ISVs and trusted MSPs are a best-of-both-worlds solution. They get the value-added services they’re looking for, but they can grow over the long haul with a payment processor that has experience, deep resources, and robust infrastructure.
This combination of innovation and reliability will be particularly important for merchants who are trying to navigate the challenges of the new omnichannel-focused global marketplace.
In an increasingly interconnected and technologically advanced world, it’s no longer business as usual for acquirers and other MSPs. To support your clients through the many challenges they face—whether it’s reaching diverse customer segments across a multitude of channels, accepting the latest cutting-edge payment solutions, or fending off sophisticated cyberattacks—you have to be willing to provide a multitude of value-added services.
Given the prevalence of online fraud and the high costs of the payment disputes that accompany it, offering fraud and chargeback services is one of the best ways to provide real value to merchants.
By partnering with a company that has expert knowledge and years of experience dealing with chargebacks, you can help merchants protect their revenue and avoid the worst consequences of fraud and first-party misuse.