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The Transformative Role of Software for Payments: Synergies, Opportunities and the Retail Experience

By Amy Zirkle, Vice President, Industry Affairs, Electronic Transactions Association

Amy Zirkle, Vice President, Industry Affairs, Electronic Transactions Association

There are few industries yet untouched by the tidal wave of technological innovation. Where there is a product to be developed or a service to be delivered, technology is rapidly transforming its related workflows, supply chains, and relationships. And by now, any company that has not yet realized how to leverage the opportunities afforded by technology is at risk of obsolescence.

In particular, technology can help bolster the central pillar of retail: customer service. As startups and other disruptors introduce new ways for retailers to engage with their customers across a variety of platforms, anyone who wishes to compete in this new world order must find a way to blend traditional approaches with the new tools. This is not an invitation to try every latest gadget, CRM software, or app on the market, or to jump around from tool to tool as the mood strikes. Rather, the most successful retailers are thinking carefully about their overall strategy—which consumers they want to attract or retain, and how those shoppers are using technology—and selecting the right tools to make it happen.

"Software products can enhance the retail experience both by providing additional services on demand, and by supporting critical operational concerns"

The payments industry plays a crucial role here. Historically, the payments business was all about dropping off a standalone terminal—some readers may recall the knuckle busters of days past—and supporting back-office operations. But that is changing. Payments providers offer a growing suite of value-added services that further retailers’ opportunities to engage with their customers and maximize efficiencies across their commerce chain. These value-added services include: embedded rewards, integrated ecommerce and brick-and-mortar sales channels, advanced customer relationship management (CRM), the option to check out anywhere in the store. All of this allows merchants to focus on what is truly important: selling their products, building brand loyalty, and serving their customers.

Much of this transformation is driven by software. Software developers can dramatically expand the capabilities of a POS terminal with just a few upgrades. Their ability to iterate quickly means that they can keep up with changes in retailers’ needs. Software products can enhance the retail experience both by providing additional services on demand, and by supporting critical operational concerns. Software providers that have enabled payments acceptance are now realizing that they can integrate additional functions and features to serve merchant needs, making payments a component alongside other services. ISVs are playing a greater role in acquiring channels and establishing a growing presence in the payments ecosystem overall. In general, the ISV market is highly focused towards serving specific vertical segments with specialized services and solutions. According to research by First Annapolis Consulting, among the most popular verticals served by ISVs include e commerce (18 percent), professional services (14 percent), and QSR/Restaurants (11 percent).

Taking a closer look at the restaurant vertical alone, according to Hospitality Technology’s 2017 POS Software Trends Report, for Q4 of 2016, close to 60 percent of restaurants are planning to add new software functionalities to their current POS systems.

From the perspective of the payments ecosystem, ISVs and payment processors are natural partners. An emerging trend across the payments industry is that more than half of the ISVs are integrating payments into their products. And as such, processors are looking to work with the ISV community to better serve their merchants. Hardware manufacturers are designing new product lines with an eye towards seamless software integration and one-touch convenience. Retailers now have more options than ever. The question is no longer “should my POS do more than just swipe cards?” but rather “how do I leverage software to create a unique, seamless experience that keeps my customers coming back?”