MWAA Wrapup: Where ISOs Should Butter Their Bread; The Fed on Faster Payments

The annual MidWest Acquirers Conference concluded Thursday in Chicago with a series of sessions addressing several hot-button payments issues. Here’s a rundown of the more salient remarks:

—Whither the independent sales organization? With the fundamentals of the acquiring business rapidly turning towards mobile and cloud-based technology, ISOs are finding themselves in an uncomfortable position. Selling terminal leases and transaction services is a tough business when small merchants want informed advice on tablets, app integration, and the acceptance of EMV chip cards and mobile wallets.

One approach is to wrap payments into a larger context by making it a logically positioned part of a presentation on point-of-sale systems and solutions, advised Brian Goudie, a senior vice president at First Data Corp. In fact, he said, even though payment processing is ISOs’ historical bread-and-butter service, it might be better to leave it up to the merchant to ask about it after hearing about the broader range of business-management tools the ISO can deliver. “Don’t even mention payments,” Goudie advised the audience.

The new bread-and-butter service, he said, lies in tools that can simplify both the point of sale and the merchants’ need to keep track of employees, monitor sales trends, and deploy targeted promotions. “Hopefully, you’ll wake up five years from now and 50% of your revenue will have nothing to do with leasing terminals or transaction processing,” Goudie said.

—The Slow Road to Faster Payments. While payments may recede into the background of ISO pitches, the clearing and settlement function is going to speed up significantly within a few years. Already, NACHA, the industry body that regulates the automated clearing house network, has won approval for a same-day settlement regime that will start taking effect Sept. 23, 2016.

Speaking on the topic of faster payments, Dan Gonzalez, vice president of industry relations at the Federal Reserve Bank of Chicago, previewed the Fed’s plans for the broader effort to improve the nation’s payments system, an effort that includes both speedier settlement and more stringent security. “You can’t have a faster payments system if it’s not safe,” Gonzalez told the audience.

The Fed is overseeing the effort in a role Gonzalez described as “leader-catalyst.” He stressed that the central bank isn’t in a position to mandate any particular faster-payments approach. “The Fed doesn’t have the capability to do that,” he said, perhaps mindful of some critics who have expressed impatience with what they see as an overly slow and bureaucratic process.

That process includes two task forces, one dedicated to faster payments and the other to security, that are at work under the aegis of the Fed. More than 320 executives from the industry sit on the former panel, which is expected to wrap up its work with a set of recommendations by December 2016.

Once the process is finished, it will have ushered in a huge change in the way the nation processes payments. As Gonzalez reminded the audience, “We have not made any major changes to the payments system since the ACH in the ‘70s.”