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Tough being a merchant as payments battle continues

NOTE: This is the final part in Aviso’s four-part series of blog posts focusing on the evolution of the payment industry.

It’s an exciting, if not daunting, time to be a merchant. The battle against fees has led to an abundance of new options, all undercutting each other, for accepting and processing payments.

Yet choice can sometimes be the key problem for merchants: who is the leader in the field, whom to follow?


In this evolving world of payments the objectives for any merchant are to stay up-to-date with technological changes, operate more efficiently, ensure that a customer’s payment data is never at risk, and to provide value.

Growth of mobile payments

Merchants can sometimes feel as if they’re in a payments maze and it can be hard to find an exit. They always need assistance. There are hundreds of payment options (NFC, contactless, mPOS, loyalty cards, etc.) on the market and more are coming downstream with new developments weekly.

Merchants need to realise that existing systems can be easily transformed to accept all of these new mobile payment options. The messaging remains the same. The process remains the same. It’s the acceptance that needs to change.

With the proliferation of mobile payments merchants now need to understand what they can and cannot accept. It would not make business sense for merchants to ignore, or exclude, certain types of payments. Unless, of course, they are part of the MCX group in the U.S. that has developed the CurrentC app in opposition to Apple Pay. The MCX group – including major merchants such as Target, Walmart, and BestBuy – recently refused to allow Apple Pay acceptance in member stores.

Outside of Apple Pay other payment types include the traditional mag stripe, EMV chip cards, QR codes, chip-and-pin, contactless, and NFC. The modern-day merchant needs to be encouraged and enabled to accept all these payment types.

There’s a war for the customer’s wallets (physical and mobile) with merchants on the frontline as they battle to provide a universal acceptance terminal.

Mobile payments, then mPOS

As customers have become more tech-savvy their shopping expectations have changed. In line with this mobile migration the POS terminal has undergone surgery.

The ‘future-proofed’ mPOS is now becoming a must-have for merchants. There’s also a long list of options for merchants, further muddying the waters of whom to follow.

There’s Poynt (founded by former Google and PayPal executive Osama Bedier, currently only available in the U.S.); SumUp (backed by AmEx, Groupon, and BBVA Ventures); the Swedish option iZettle; the Indian-based Ezetap; bindo POS; Square Register, and a PayPal mPOS offering called PayPal Here.

Square has experienced some issues with its three-year deal with Starbucks becoming a loss maker, but last week revealed that they processed $100 million in sales in just one day with merchants across the U.S.

iZettle founder Jacob De Geer recently wrote a feature on the potential of mPOS, quoting an Omlis Global Mobile Payment report predicting a $506 billion industry in 2014:

“Another reason to be optimistic about growth is that mPOS is, as the market matures, no longer about accepting cards. Tech-savvy SMEs have moved beyond asking simply how they can easily and cheaply process cards in their business, but are now asking what else the technology can give them.”

De Geer added, “SMEs are increasingly expecting mPOS platforms to help them with customer analytics, accounting, stock facilitating, and loyalty schemes.”

The needs of merchants vary, but the key to the mPOS revolution is that it allows a merchant to meet the demands of their customer base, while also providing critical value. Value is a two-way street. The merchants gain priceless data on customer behaviour while the customer benefits from using a merchant that has kept pace with the changing technologies.

The omni-channel approach – remember 90% of commerce still takes place offline – is a crucial strategy. This distinction between brick-and-mortar stores and online stores is fading as more merchants adopt the omni-channel approach.

Merchant issues with new technology

Consumer adoption will make or break any new payment technology. Let’s take recent developments in the U.S.: Apple Pay and EMV.

This open letter to Apple Pay by Robert McCarthy, a technical advisor at Mobiquity, illustrates the problems that Apple Pay is having on the merchant side since its October 2014 launch. There’s a lack of knowledge and the ‘representatives’ of Apple Pay at the POS – the clerks – are placing Apple in a precarious position through no fault of their own. As McCarthy states:

“Something has to change, and quick. Education, knowledge transfer, call it what you will, but these thousands and thousands of people who now represent your [Apple] product, and need to explain it to the general consumer, have the potential to trounce on all the good that you’ve built.”

Lets take NFC as a case study. There are some 9 million merchants in the U.S. yet only 220,000 have upgraded to NFC, still a lot of work to do before we see wholesale adoption.

Therein lies the problem for merchants: whom do they follow, who are the leaders? As the payments industry is constantly churning over new technology it becomes increasingly difficult for merchants to tie their colours to any particular mast.

Ten months out from the October 2015 EMV deadline and the Aite Group have estimated that just 14% of U.S. terminals have upgraded to support the use of EMV chip cards.

These new cards, of course, change the way customers shop. They require the customer to insert their card into a reader and use a PIN, rather than the current swipe and signature method. For merchants this will lead to headaches as queues lengthen and frustration grows, but the key benefit is the anticipated reduction in POS fraud.

Fraud issues

The EMV mandate has piled the pressure on U.S. merchants to upgrade their POS terminals. Now the rush is on to be compliant.

This mandate, crucially, heralds a fraud liability shift. From October 2015 the least-compliant stakeholder in the credit card transaction processing chain will be liable for any fraud that occurs.

POS fraud has become all the more prevalent as the deadline for EMV approaches. It’s as if the hackers are clocking up the pay days before going out of business.

POS or card-present fraud (CP fraud) is the bane of brick-and-mortar stores, simply because the existing payment processing system is an easy target. The most common attacks are POS malware.

Here too merchants need assurances. David Cole – Director Europe at EFTlab Pty Ltd and a smart card consultant – had some advice in a recent Aviso EMV webinar for merchants planning an EMV upgrade:

“You do things when it makes sense to do so. Don’t do it all in one go. Card schemes will say that you have to do everything. I don’t agree. Do what makes sense to you. A migration needs to be a very well controlled and well laid out plan and it needs to take time. I know there are mandates in the US, if you are moving you will be left alone by the card schemes. Understand the priorities within your own organisation. Plan and do it properly.”

How Aviso can help

At Aviso we recognise that the payments world is evolving at a rapid rate, leaving merchants in the position of having to place bets on which technologies will succeed and which will become irrelevant.

We have developed some key products to enable our customers to improve their existing systems without wholesale change. Our core product is Novate. It allows users to rapidly and cost effectively adapt their EFT payment switching and POS management infrastructure to meet changing requirements.

From Novate we branch out and offer bespoke solutions for particular problems.

There’s our EMV Wrapper that surrounds the existing payment system and handles the complexity of EMV while leaving existing mag stripe applications unaffected.

Our Novate/VAS offering gives our customers value-added services in a cost-effective manner. It’s flexible interface simplifies integration with a wide range of value-added service providers. Quicker implementation, of course, means a faster flow of new revenues.

Aviso’s merchant payment platform can empower merchants to deploy a flexible and adaptable payments infrastructure, which will deliver short-term benefits such as:

  • A reduction in payment processing costs (by giving merchants flexibility to dynamically route transactions on a lowest-cost basis)
  • Improved customer service (by enabling more payment types at the point of sale)
  • Incremental revenues (by enhancing the payment options at the point of sale for customer)

This infrastructure will evolve to support the merchant’s on-going requirements and to provide the business services and options. Consequently, this will allow companies to offer the services that they deem fit for their business model and to support their customer’s demands, while dealing with a single vendor.

This technology allows merchants to seamlessly integrate with acquirers across the globe, giving our customers much more power when it comes to negotiating acquiring contracts wherever the merchant chooses to do business.

We understand that a merchant’s payment processing budget can be tight, so we provide a variety of licensing options to fit your requirements. This enables you to upgrade your existing infrastructure by selecting appropriate modules that meet your particular needs.

Additionally, the merchant platform can be provided as a service to merchants, removing the PCI and compliance overhead that comes with operating your own payment system.

Contact us

For more information on our products and services contact us at info@aviso.io, or follow us on Twitter and LinkedIn.

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