Taking Merchants to School

Merchant education can be a strategic advantage if you do it right. That starts with showing merchants how they can benefit from technology.

Keeping up with payment technology is not easy for merchants. As if the learning curve for EMV, which is still rolling out in some merchant segments, wasn’t steep enough, merchants are grappling with such newfangled technologies as mobile payments, contactless dual-interface cards, tokenization, biometrics and QR codes.

Not surprisingly, the speed at which payments technology is being introduced has created a substantial knowledge gap among merchants. Enterprise merchants tend to be knowledgeable because they have dedicated staff following the latest tech news. But small and medium-size merchants often have only a vague familiarity.

This knowledge gap, coupled with the rise of fintechs baking digital-payments capabilities into their business applications, has significantly altered the way acquirers and independent sales organizations educate merchants. Instead of getting bogged down in explaining how new technology works, acquirers and ISOs are showing merchants how technology can grow their business.

“Merchants, small and medium ones in particular, don’t have the time to keep up with advances in technology, nor do they really want to know about the technology behind an application,” says Todd Ablowitz, founder and chief executive of Infinicept, a Denver-based platform provider for payment facilitators. “What merchants really want to know is whether a new technology can help drive revenue in a user-friendly way.”

‘An Advisory Role’

While the educational model has changed, the good news for processors and acquirers is that the primary education channel has not changed.

Sales representatives remain the lead educators. But sales reps now must have a deeper understanding of a merchant’s business needs and competitive challenges so they can suggest technologies that can help merchants grow.

This makes the sales rep more of a consultant than an account manager.

“There is no more valuable asset when it comes to merchant education than the sales rep, because he has the relationship with the merchant that allows him to proactively talk about a technology that solves a business problem,” says Ryan Malloy, senior vice president, partner sales for Troy, Mich.-based North American Bancard. “A good sales rep is always learning about the merchant’s technology needs.”

For example, a yoga studio wants to offer class scheduling online as a way to attract new customers. Knowing this, the processor’s sales rep recognizes that a payment option embedded in the scheduling application will enable the merchant to boost sales by collecting payment at the time of booking.

The rep recommends an online scheduling application developed by a third-party partner that includes a payment option developed or supported by the processor. The application enables secure payment through tokenization of cardholder data. Rather than go into a detailed explanation of tokenization, the sales rep simply tells the merchant that no actual cardholder data will be exposed online and that the cardholder’s information is stored in a secure vault.

Tokenization is the process of replacing actual cardholder data with random data. Actual card data is securely stored by the card issuer.

“More processors are positioning themselves as tech companies, which means they are taking on more of an advisory role when it comes to merchant education,” says Jared Drieling, senior director of marketing and business intelligence at The Strawhecker Group, an Omaha, Neb.-based consultancy.

Self-Service Tools

Educational tools include video tutorials about how a new technology can benefit a merchant’s business and articles about new technology. These self-service tools can typically be found on a processor’s Web site. Elavon Inc., for example, delivers a monthly digital newsletter covering industry trends, technology updates, and industry-specific information.

The company also shares information through its customer portal, which is a central repository for all payments-related topics, and by email for the more time-sensitive updates. Elavon also hosts conferences to deep-dive into topics.

“We ensure our customers have regular touchpoints (when it comes to education about new technology),” says Joe Myers, chief revenue officer and president for North America at Atlanta-based Elavon, a unit of U.S. Bancorp, by email.

What makes self-service tools effective is that they help put information about new technology in context so merchants can determine its relevance to their business. Merchants can access these tools at their leisure. It is essential, however, to continually make merchants aware these tools are available, payment experts say.

Once a sales rep has showed the relevance of a new application, he can get into some of the nuts and bolts of the technology and integration issues. The key here is not to overload the merchant with information.

Merchants “don’t really need to know all about tokenization, just the basics of what it is, that it works, and it’s secure,” says Rick Oglesby, president of AZ Payments Group, a Mesa, Ariz.-based consultancy. “Merchants only need to understand the technology behind an application up to a point.”

Much of a merchant’s understanding of how a technology works can be achieved through training. Clover Network Inc., a provider of point-of-sale systems for restaurants, retailers, and service providers, automatically schedules an hour-long training session when a merchant buys a new POS system or app.

Processors are also becoming more aware of the need to educate merchants that they can shoulder the responsibility for PCI compliance. With Visa and Mastercard heaping more responsibility for data security on merchants, the sellers are looking to outsource data-security management, Oglesby says.

As a result, merchants are increasingly asking themselves if spending information-technology dollars to manage data security in-house is the best return on investment. “Merchants can spend millions on data security and still not grow their business,” Oglesby says.

There’s a large opportunity for processors to educate merchants about how they can manage data security on merchants’ behalf while also providing solutions that grow their business, Oglesby adds.

Key Partnerships

Positioning themselves as technology providers means processors must choose software partners that offer applications that can grow a merchant’s business or operate it more efficiently, such as a loyalty program, analytics to track customer behavior, online invoicing, or inventory management.

“When it comes to partnering, we look for developers we want to integrate our payment tools with,” says Steven Madow, director of product for Fattmerchant, an Orlando, Fla.-based processor. “Partnerships are part of how we do tech outreach.”

In some cases, Fattmerchant will reach out to a software developer that serves a market segment in which the processor’s customers operate about including payments technology in the app. Conversely, software developers have contacted Fattmerchant about adding its payment app to their software. Fattmerchant services health-care and wellness providers, retailers, and professional and field-service merchants.

One advantage of partnering with developers is that processors can reach more merchants than they might have been able to otherwise. The same holds true for the developer. “When we put a new merchant in an integrated solution, we gain a new client and so does the developer,” North American Bancard’s Malloy says. “We have a lot of partners that want distribution, just as we want solutions.”

When sharing their application programming interfaces with third-party developers, processors are careful to retain control over the payment application being integrated to ensure PCI compliance and other compliance issues.

“Payments are complex for a lot of developers, so we make sure our partners stay outside the scope of this area,” Madow says. “It’s simpler for us to handle that end of it.”

Conversely, processors are partnering with developers because their expertise does not extend beyond payments. “It’s a bit much to expect processors to own all the technology their solutions integrate with,” says Oglesby. “A business solution that brings payments with it puts the processor in touch with a new client.”

Another benefit of processors being a technology provider is the opportunity to do business with other large platform providers. Clover, for example, was approached by Alipay to provide its mobile and online payment services to Clover merchants.

“They saw we had a lot of merchants that did business with Alipay users, but that did not accept Alipay,” says Clover co-founder and Fiserv Inc. vice president Mark Schulze. “Because we build in a modular way, it’s easier to integrate new apps.” Clover became part of Fiserv this year when Fiserv acquired its parent company, First Data Corp.

Once a merchant is onboarded to the Clover platform, Clover pushes information about other applications to the merchant that are relevant to its business. The goal, Schulze says, is to shift merchant education to topics about how to grow the business and run it more efficiently.

With POS technology and business applications expected to get more sophisticated, specialized, and intertwined, payment experts agree that processors will continue to shift merchant education so merchants feel comfortable they are choosing the best service. “If merchants don’t feel they have chosen the right solution, they are not going to stick,” says Malloy.

 

Best Practices for Merchant Education

Recommend solutions that will help a merchant grow its business

Demonstrate how a new technology will benefit a merchant’s business

Keep explanations of how the technology works simple

Provide self-service educational tools such as videos and articles

Keep merchants up to date about new technology via newsletters, email, text, or end-user conferences

Monitor how the merchant uses the technology and provide training as needed