Digital Transactions - April 2014 - (Page 16)
April 2014 digitaltransactions
How Merchant Aggregators
Are Shaking Up Payments
Merchant aggregators are leading the charge to simplify merchant
on-boarding and add value to payment technology. Can traditional
ISOs catch up?
t's only been a few years since Visa
Inc. and MasterCard Inc. relaxed
their rules to officially recognize
merchant aggregation, but in that short
time the aggregator model has spread
rapidly across the payments landscape.
Aggregators' ability to simplify
the account-application process and
package with their core technology
easy-to-install payment solutions that
merchants can white-label has been
an unequivocal hit, especially with
Consequently, aggregation is no
longer the dirty word it once was in
some circles of the payments world.
But then again aggregators have been
misunderstood entities, since they don't
service the same kind of merchants that
independent sales organizations do.
In its most basic form, aggregation involves the processor or specialty provider standing in as the merchant of record for card transactions
generated by its micro-merchant clients ("The Rise of Merchant Aggregators," April 2013).
Micro-merchants are a different breed
of payment card acceptor with different
needs from those of traditional storefront and card-not-present merchants.
* digitaltransactions * April 2014
The prototypical micro-merchant is an
individual who sets up shop in an
online marketplace or has a booth at
a fair and views himself less as a merchant and more as someone who needs
to accept credit and debit cards to facilitate a sale to another individual.
Micro-merchants want fast, frictionless setup. The more hoops they
have to jump through to obtain a merchant account, the more difficult it is
to integrate payment solutions into
their store, and the more steps their
shoppers have to take to complete
a card payment, the less likely they
are to buy into the traditional ISOacquirer model.
"The Internet and mobile technology have made it so much easier for
merchants to set up shop and market
their business that the model ISOs
have used to sign and service merchants is changing fast," says Jareau
Wade, co-founder and vice president of
growth for San Francisco-based Balanced Inc., an aggregator specializing
in online marketplaces. "Aggregators
are allowing new merchants to accept
payments that a lot of ISOs and banks
would have otherwise overlooked."
Indeed, most micro-merchants
don't even appear on ISOs' radar
because they are too small. That's
ironic since ISOs were created to reach
the small businesses that merchant
acquirers' direct sales forces couldn't.
Nor do most micro-merchants
even know how to go about finding
an ISO or acquiring bank. Those that
do are usually so put off by the extensive application and credit-screening
process that they set out in search of a
less cumbersome way to obtain a merchant account.
But most telling as to why aggregators are thriving when it comes
to servicing micro-merchants is that
they typically provide a core technology such merchants need to get
their businesses up and running, such
as Web-site design or access to an
online marketplace where consumers
can discover them.
"Aggregators are technology companies that see payments as a way to
add value to their solutions, which is
something ISOs and acquirers have
been challenged to do," says René
M. Pelegero, president and managing
director of Woodinville, Wash.-based
Retail Payments Global Consulting
Group. "Prior to aggregation, merchants
had to have separate relationships with
acquirers and their technology suppliers, which could be cumbersome for
small merchants to manage. Aggregators simplify it by putting it all together
under one umbrella."
Intuit Inc.'s QuickBooks Payments,
for example, allows small businesses
to accept payment on a purchase or
Table of Contents for the Digital Edition of Digital Transactions - April 2014
Transactions - April 2014
The Gimlet Eye: Data Security's Weak Link
Trends & Tactics
Acquiring: How Merchant Aggregators Are Shaking up Payments
Acquiring: A Smoky Incongruity
Cover: The Googleization of the Traditional ISO
Opinion & Analysis: The Furious Battle to Control Tokenization
Components: A Dongle Do-over
Endpoint: Why PCI Is Winning
Digital Transactions - April 2014