Anyone who remembers the cover art from the film “The Perfect Storm” recalls a vast wave looming over a small fishing boat. That’s the image that Agreement Express’ CEO David O’Brien conjured in a recent conversation with PYMNTS on how payment firms must ride out the squalls of competition.
“I very much look at things that way in the payments industry today,” O’Brien said. “You’ve got the changing client experience. What I wanted [as a consumer] three years ago versus today is vastly different. The industry needs to keep up with that. And look at the changes the pandemic has delivered. You never would have thought there’d be grandmothers on Zoom. People think technology change is linear, and it is not. It’s actually exponential.”
That exponential change is challenging to many who are trying to grow their portfolios and increase their processing volume, while also attempting to manage risk levels. Trying to juggle an increasing portfolio in uncertain market conditions endangers ROI, while competitors with strong partners are not only able to ride the worst waves, but can also harness that momentum to gain a competitive advantage.
When asked about the secret to remaining competitive in a payments services marketplace rife with rivals, O’Brien said: “History has spoken. Companies that have done really well have focused on the front-end, and they’ve been able to create a seamless onboarding experience. This enables merchants to start processing payments quicker than ever before.”
He noted that the firm has seen a trend where companies that have solved the puzzle of scaling merchant acquisition and underwriting tend to either get acquired or become a successful acquirer, tapping into higher valuations for acquisitions.
“If you look at the disruptors and their growth, if there’s one thing they’ve done right, it’s the focus on consumer experience. That’s going to be the laser focus [for the strongest competitors] as we roll forward,” he predicted.
Clearing Bottlenecks Like An Amazon, But Faster
Addressing the growth plateau still commonly faced by PayFacs and PSPs, O’Brien said, “A lot of that has to do with what has changed in the world [with] consumers. You look at Amazon and [it’s] fast and easy, to the point of [being] absolutely ridiculous.”
However, in the age of one-click commerce, even the proven traditional Amazon buying experience might not be enough anymore, he said — and that should have PayFacs on alert. “You look at how easy and great it was, and even that wasn’t good enough. So they introduced the one-click buy feature. There’s a reason for that: We want it faster, tighter and better. The same thing goes on in the payments industry — it’s what merchants are expecting.”
Companies like Stripe are so successful because they ask for the absolute minimum upfront and get a merchant set up within minutes. There are now many payment providers that deliver a lot of value to their merchants, but they’re struggling because they can’t get this one piece right. Any so-called solution that takes days instead of hours for a merchant to be onboarded draws an instant negative inference – and that’s a hard truth in the remote onboarding space, which is getting crowded and competitive as payments go horizontal.
According to O’Brien, entrepreneurs and business owners want a “fast, seamless experience. It can’t be bottlenecked by a bunch of bad workflows, human intervention or things like that. It absolutely must be seamless.”
Study The Competition — With Urgency
When going up against the giants of payments disruption — Square, for example — it pays to study why they created a simple digital payments solution that effectively galvanized SMBs into a base to compete with the Amazons and Walmarts of the world on a more level tech playing field.
“If you’re not studying what folks like Square are doing … you absolutely have to. You’ve got to embed it into your [own] strategy … by looking at [their] success and what they’ve accomplished,” O’Brien said, summing up Square’s triumph as follows: “The biggest difference [is that] they [believe] the payment should just be a communication. Again, [it should be] completely seamless and easy, so that when you go to a merchant to sign up, you’re not talking about days, you’re literally talking about hours.”
As PSPs and PayFacs seek out merchant clients in new markets, they’re under new margin pressures and competitive threats, which means investments in key operational areas can lead to dividends down the line. That’s where automated underwriting can have a dramatic impact.
Noting the accelerated pace of technological change in the waning days of the pandemic, O’Brien said, “You’ve got ROI needed. You’ve got pressure on payment fees. So, a lot less money for [PayFacs] to invest into change. Therefore, you need to have improved underwriting. You need to have the tools to be better … and you’ve got to do it faster.”
“Overlaying all of this is urgency, the market is moving quickly,” O’Brien told PYMNTS. “You have a sense of urgency today, or a sense of regret tomorrow. It’s a very fascinating time to be in this industry.”
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