Payments paradigm shift: Closing sales, opening relationships
Yesterday’s champions of industry carried demo bags and pitch books, like something out of a black-and-white newsreel. Selling products may have been simpler back then, but it wasn’t any easier. It wasn’t easy to differentiate in an era when everyone was selling the same two or three products and services.
A former client would give me a purchase order and say, “We’re done here; you got your order. Go celebrate; take the rest of the day off.” That was the prevailing attitude, whether you sold merchant services or equipment by the pallet. We went, we saw, we sold and, inevitably, we moved on.
When product ruled
Over time, closing a new merchant account became more of a beginning than an ending. As a subset of a larger retail ecosystem, payments became interactive, personalized and immediate. Merchant level salespeople (MLSs) also evolved, as they became embedded in the merchant community. Today’s MLSs partner with merchants to develop unique processing systems that go beyond simple products and services. The payments industry needs to find a new word for “product.” Even the word “solution” has a set-and-forget feel, as if you could identify a problem, solve it and exit stage left. Today’s MLSs need to stick around and help merchants nurture their emerging business ecosystems.
When platforms replaced products
The digital world has disrupted many industries, replacing legacy systems with virtual, cloud-based infrastructures widely accessible to business owners and consumers. Mobile wallets, mobile banking, fitness trackers linked to healthcare providers, smart homes that can be remotely controlled by smartphone apps – the list goes on.
POS devices must be more than the sum of their parts to remain relevant in the digital world. They need to exploit the inherent possibilities of their underpinning technologies. That may sound like a tall order, but Oren Levy, Chief Executive Officer at Zooz Inc., said technology has always been the key to payments. Zooz, a global technology company, provides a data-driven payment platform designed to optimize payment performance for large retailers by strategically routing transactions to multiple processors and technology service providers.
“Old time acquirers based their solutions on technology that has since become outdated,” he said. “But technology, when used effectively, can be a big differentiator.” Some payment providers still use mainframe computers and data centers; companies like Zooz combine risk assessment technologies with 3D Secure Level I Payment Card Industry Data Security Standard compliance and human oversight, Levy noted. Payment providers can use data files in advanced, innovative ways.
“Electronic transaction processing and other core offerings have become commoditized,” he said. “Everyone offers fraud protection, which may not mean much as a standalone product. But if I use data analytics to target the right audience, create efficiencies and optimization, that’s a different story.”
When big data got bigger
Levy has observed resistance to cloud-based technologies, particularly among small to midsize merchants, but he is confident this will change. “If I’m a tech-savvy merchant, the service providers that stand out are the ones that progress over time and remain open and adaptable,” he said. “Retailers have only recently begun to ask for data analytics that can help them better understand their customers and identify where failures occur.”
Business analytics enables retailers to dissect their data by region. Retail leaders who formerly operated on hunches and gut feelings can make data-driven decisions based on statistical information. And it isn’t just their data that is valuable to retailers, Levy said. “Today, a lot of companies use machine learning and algorithms to analyze behavior,” he added. “That’s creating better optimization and getting us closer to reducing fraud.”
Payment card brands and acquirers are rich sources of aggregated, anonymous statistics and metadata. Mastercard Sector Insights works with a knowledge base of real-time transaction data. “With a strong commitment to privacy, we can transform vast amounts of big data into actionable insights for your short- and long-term business goals,” Mastercard Advisors wrote.
When fraud detection got wiser
Dallas-based Chargeback Gurus specializes in chargeback prevention and recovery. The company created FPR-360, a chargeback solution designed to prevent, contest and remediate all forms of chargebacks, including “friendly” ones. The solution combines artificial intelligence, machine learning and human oversight. Its risk mitigation experts help ISOs and acquirers educate merchants about how to prevent ecommerce fraud.
Suresh Dakshina, Chargeback Gurus President, cautioned against a one-size-fits-all approach to fraud prevention. “It might be better to call it fraud minimization, because you’ll never eliminate 100 percent of ecommerce fraud,” he said. “And using machine-learned, rules-based systems to optimize a website may inadvertently penalize good customers who don’t fit the profile. For example, if a traveler in California wants to send a present to his wife in New York, the transaction may be rejected due to mismatched billing and shipping addresses.”
The best fraud mitigation methods are sophisticated and nuanced, using an arsenal of tools, each with distinct pros and cons, Dakshina added. He cited the following examples:
- Human oversight: This traditional method is superior to machine learning at detecting fraud but lacks the ability to scale. When you have high volumes of orders, the tool becomes obsolete.
- Rules-based fraud prevention tools: These tools can be useful in blocking certain types of fraud but require time and effort to be properly implemented. Fraudsters will do everything possible to see how they can break through.
- Machine learning: This self-learning system can become highly proficient at identifying certain patterns in fraud and evaluating the efficiency of select fraud prevention tools, but artificial intelligence will never replace human oversight.
When numbers got personal
Dakshina warned against fraud prevention tools that cost more than losses due to fraud. He advises small business owners to use human oversight until their transaction volumes justify the investment in automated prevention tools. He also advises them to review merchant services applications to understand fees and pricing and protect their personal information.
“We evaluate and prequalify some merchants on behalf of ISO partners,” Dakshina said. “We upload their documents in a secure server and directly forward to their processor. It’s a value-added service that makes the underwriters’ jobs easier.”
This service and others like it have transformed merchant services from transaction-based interactions into richly rewarding, creative relationships among merchants, customers and service providers.