1. Blockchain: Speed and Accuracy

Bitcoin may be the most well known use case for blockchain technology, but it’s not the only useful application. In B2B payments, the use of blockchain and other distributed ledger technologies can cut settlement time from days to minutes. And just as with bitcoin, ledgers remain accurate and tamper-proof, easing security concerns. With blockchain, FIs can easily share Know Your Customer data and maintain compliance with anti-money laundering standards. Between shortening the payment cycle and reducing fraud risk, blockchain technology brings great benefit to B2B payments.

2. Real Time Payments: Moving Toward Reality

Real Time Payments (RTP) in the B2B space is gaining traction in 2019. What’s unusual is that in this space, growth is being pushed from the bottom up. Due to the complexity of our financial systems, some smaller FIs haven’t prioritized RTP functionality. But consumers, on the other hand, have been quick to adopt real time payments with Venmo and other P2P platforms. In fact, Venmo has gone so mainstream that it’s earned verb status. This grassroots shift in P2P payments is influencing expectations for B2B, and we are finally seeing some real commitments from smaller FIs to make RTP a reality.

3. But First, Baby Steps

Just as many FIs aren’t ready to jump headfirst into RTP, businesses are cautious about moving into new B2B payment options. Although the rate of adoption is slow, businesses are showing a greater willingness to move beyond traditional paper invoices. Online payment links have proven to be an easy gateway into B2B payments. For SMBs with straightforward payment needs, it might be enough to set up a merchant account with a payment gateway to process these transactions. Others might look at incorporating AR automation and payments into their ERP systems. In fact, AR automation software is a great area of growth for B2B. Either of these solutions is bound to provide significant improvement over the typical 30 day payment cycle.

As B2B technology continues to advance, we can expect payment solutions to become increasingly seamless and user friendly. B2B payment solutions are as varied as the businesses and industries that utilize them. But no matter what sector you fall into, some things are universal: incorporating B2B payments helps businesses minimize risk, cut traditional accounting expenses and optimize cash flow. Fortunately, this technology is here to stay.

Integrated POS systems significantly level the field between small businesses and large corporations with deep pockets. However, many merchants never explore what their systems have to offer. Sure, it’s easy to carry on with business as usual and leave POS systems to handling payments. But merchants need to know that they are leaving profit on the table as well.

Integrated business software tools and apps can provide a real advantage to your merchants. Here are some important POS system features merchants should know in order to maximize efficiency.

Loyalty Programs

Consumers today are all about loyalty. In a world of endless options, there’s a backlash against mass-produced anonymity. Consumers want to do business where they are appreciated, and they want to get value for their money. Digital loyalty programs are a win for both of these objectives. It’s important to teach merchants how to use their loyalty options to roll out user-friendly and effective loyalty programs.

Labor Management

Managing employee work schedules and payroll functions is easy with tablet POS systems. There’s no need for a separate time clock; employees can simply clock in on the tablet. Real time hourly data can be exported to your merchant’s accounting software or payroll/scheduling service of choice. Using labor management features built into the POS cuts down on both hardware redundancy and wasted time. 

Inventory Management

Integrated POS systems are second to none for inventory management. Real time inventory levels, reporting and predictions are easy to produce. This level of control improves supply chain efficiency for your merchants, decreasing overhead and minimizing waste.

Your merchants’ POS systems may come loaded with every feature under the sun, but these tools are only profitable if merchants use them. During your onboarding process, make it a priority to teach merchants about the tools at their disposal. For existing merchants, it’s a good idea to touch base regularly to review the options they have available. This customer service investment can result in ongoing dividends in loyalty for your merchant relationships, as a deeply engaged merchant is more likely to remain committed to their payment service provider in the long run.

One year ago today, The Clearing House debuted RTP, its Real Time Payments system for the US financial market. Supported by all the member banks of The Clearing House, RTP is off to a strong start. It’s estimated that 50% of eligible demand-deposit accounts will be able to receive an RTP transaction by year end. 

The purpose of RTP is to provide instant transfer of funds between member banks, reducing expenses and streamlining reconciliation. Faster and simpler than ACH transactions, RTP brings the convenience and speed to banking transactions that businesses expect in today’s instant-digital world. And in the case of card transaction settlement, RTP provides a vastly superior means for merchants to receive their money fast. However, while RTP is a system long overdue in the US, it comes with its own set of risks.  

Oftentimes, increased transaction speed goes hand in hand with decreased fraud controls. And fraudsters are quick to jump on opportunities. That’s just what has happened in the UK, which has had an RTP system since 2008. Invoice fraud has become a serious problem for consumers. Fraudsters manage to trick consumers into paying a valid-appearing invoice from a trusted vendor. Keep in mind that with RTP, money is transferred instantly, and once it’s gone, it’s really gone. Thieves are quick to move funds, making it nearly impossible to recover.

In addition to invoice fraud, thieves are taking advantage of transaction speed to take over and drain consumer accounts using stolen credentials. Again, because it’s so easy to transfer funds, fraudsters can quickly move money through multiple burner accounts until it’s no longer possible to track. Really, all forms of money laundering are made easier with RTP.

So what are FIs in the US doing to combat this risk? RTP security requires a multi-step approach. Since RTP eliminates the opportunity for manual risk evaluation, member FIs are turning to advanced machine learning and behavioral analytics that can spot questionable transactions much more effectively than the old system ever could. Another area of risk is account number theft. While we’ve made great strides safeguarding consumer account data for credit and debit cards, with RTP it’s imperative to secure bank account numbers. Fortunately, just as tokenization has cut fraud for card account purchases, tokenization can also protect bank account data.

While FIs are stepping up their fraud-prevention game in response to RTP risk, it’s a shift that needed to happen anyway. Investing in cutting edge fraud control technology can only help clear the way for additional innovation in B2B and C2B transactions in the future.

For years, we’ve been hearing that checks are dead. It seems that most consumers have ditched their checkbooks (except for the slowpokes in front of you at the grocery store.) So why should retailers consider accepting check payments? These four reasons may encourage you to promote check acceptance to your merchants:

Continued market demand Much to the surprise of doomsayers, the decline rate of checks has largely flattened out. For reasons ranging from insufficient payment alternatives to persistent consumer preferences, check use has stabilized among consumers.  While it’s undoubtedly true that checks will eventually go the way of the telegram, for the next several years we can expect consumer checks to keep the same market penetration as ever. The Federal Reserve Bank reports that 3% of consumer retail transactions are made by check in a given month. While that may be a small number nationwide, if it happens to include your merchants’ customers, it could add up to a sizable chunk of revenue.

Customer appeal As always, the goal in payments is to make it easy for customers to pay. Checks appeal to certain groups of consumers. Consider your merchants’ clienteles and the payment options they may desire. National chains like Joann Fabric attract older consumers that have a history of everyday check use. Discount chains like Dollar General appeal to consumers that may not have the option of paying with credit cards. Check out this list of national chains that welcome checks. You might be surprised how extensive it is.

No more bounced checks Bounced checks no longer need to be a deal breaker for your merchants. Be sure to let your merchants know about check verification services. By processing paper checks electronically at the point of sale, your merchants can deposit checks with guaranteed acceptance and minimal handling. Rates are typically lower than card transactions, and the funds are available within 24-48 hours.  In light of this, many merchants may wish to reconsider checks as a positive payment feature.

Faster handling Historically, accepting checks has been a physically tedious and time consuming process for merchants. Fortunately, check scanning options have really improved over the past few years. Many all-in-one POS systems don’t require a separate check scanner at all. Instead, their built-in cameras can be used for image capture and electronic check processing. For POS systems that do require a separate check scanner, today’s hardware options are faster and easier to integrate than ever.

Clearly, accepting checks isn’t for everyone. But for many merchants, checks can actually be a profitable option. Don’t let common objections like bounced check fees and physical hassle dissuade your retailers from considering checks. In the right merchant setting,  checks can be a relatively frictionless  and profitable feature of a well-rounded customer payment portfolio.

In today’s highly personalized and competitive retail world, data is gold. Modern POS systems specialize in collecting data so that merchants can improve business operations and profitability. But there’s another valuable tool that your merchants may overlook: the IoT.

The Internet of Things refers to any combination of devices that connect and communicate with one another wirelessly. On the home front, we see a growing number of  IoT devices controlled by a consumer’s smartphone: think thermostats, fridge settings, even remote controlled lightbulbs.

In business settings, IoT applications are even more diverse. We’ve long known that retailers can use IoT technology to broadcast sales beacons to customers. But IoT has a much broader use than just promotions.

IoT technology is a valuable source of data for retailers. Not only can IoT data improve the customer experience, it also helps merchants improve their internal operations.

4 Benefits IoT can bring to retailers:

1. Improved customer experience through personalized recommendations. Data collected from the consumer’s app allows the retailer to promote attractive, targeted promotions through push notifications and in-store digital displays.
2. Better shopping experience through superior store layout and inventory stock. With IoT data on shoppers’ browsing and purchasing patterns, retailers can design a more effective store.
3. Greater profitability through internal controls. IoT isn’t only for customer-facing applications. Tagging inventory items with RFID, installing remote temperature monitors, and tracking employee activities are all ways merchants can use IoT technology to control internal expenses.
4. Increased sales by removing friction. Connected devices make it easy for customers to pay how and when they want, and it’s not just through a smartphone app. Down the road, we can think bigger – from connected cars paying for a car wash with the push of a button, to payments integrated with NFC wearables or other forms.

What about IoT and payments? The payment brands are already on it. Visa is gearing up with Visa Ready, a protocol that allows manufacturers to embed tokenized Visa payment options into their IoT products. Mastercard, Amex and others have similar plans in their pipelines. We’re still a few years out from mass adoption of IoT purchasing in retail settings, but there’s no doubt it’s where the industry is heading.

How can retailers get ready? Whether merchants use marketing and business management apps through their POS system or stand-alone programs, it’s important that they be designed to easily incorporate new data streams.

As IoT connectivity moves into the retail sphere, it will  provide amazing opportunities for merchants. New technology is always intimidating, but it’s important for merchants to realize that ignoring IoT integration means leaving data on the table – and data is the greatest tool merchants have to build profitability.

Are we finally getting ready to ditch the plastic card? Are wearables the next big thing? Judging by the buzz in the industry, you might think so. However, form innovation is just not ready to take off in the US.

Four key factors inhibit the adoption of innovative payment forms. Understanding these influences can help you judge what’s hype and what has real value.

1. Financial Complexity
2. Lack of Standardization
3. Consumer Habits
4. Security Shortcomings

Lagging Behind

The US is notorious for lagging behind in new payment adoption. Around the world, we see widespread adoption of more secure technologies. EMV standards are universal outside the US. In most of Europe, EMV accounts for 98% of transactions. In the US, it’s still only at 41%.  The situation is even more dramatic with newer technology.  In Australia, tap and pay with contactless cards makes up over 90% of electronic payments. In the US, that number is less than 1%. 

1. Financial Complexity

So why does the US lag so far behind? Put most simply, it’s because of our complexity. It’s a whole lot easier to effect change on a smaller and more homogenous scale.

In geography, population and competition, our country is enormous. We have an absolutely vast number of FIs, along with a confusing web of state and federal rules. And with the pressure of various lobbies on regulatory agencies, passing real change is monumentally difficult. EMV was fully adopted overseas years before the US even began to attempt the process.

2. Lack of Standardization

On top of that, we’ve failed to standardize payment technology in the US. For contactless payments at major retailers, you might pay by NFC or bar code. It’s ridiculous that developers can’t put their efforts behind one technology, but rather find themselves at the retailer’s whim. While this is in line with our independent and diverse market, it only serves to hinder technology in the long run.

3. Consumer Habits

To understand the impact of consumer habits on payments, we have to ask: what comes first, the chicken or the egg? Because of our highly competitive, privatized market, FIs have to keep their customers happy to stay in business. And that often means delaying or avoiding security measures that are necessary but might provoke a popular backlash.

For instance, the global standard for secure payments is chip and PIN. But here in the US, we’ve stuck with inferior chip and signature (and we even dropped the signature requirement last spring.) Why? Because consumers don’t like entering a PIN, and no one wants to risk losing business to the issuer down the street with more relaxed standards.

4. Security Shortcuts

Essentially, the US’s cavalier attitude toward security cuts off payment innovations at the root. Without universal EMV standards, contactless (RFID) cards are a non-starter. Without PIN requirements across the board, it’s impossible to provide secure wearables or other non-standard forms of payment. Because FIs are unwilling to push a little friction onto consumers, there’s little room for innovation.

Where does that leave American consumers? Married to our bulky wallets. Until payment standards are meaningfully updated, consumers will still need to juggle plastic cards. Mobile wallets haven’t proven to be an appealing alternative to plastic. Smart watches are only minimally useful, as they have to be within range of their linked phone. There’s just not an option for anything else.

The Future Is…. Still Bright

While US payments are maddeningly complex, PCI is doing an exemplary job managing this rodeo. Slowly but surely, our payments ecosystem is becoming more well regulated and uniform.

Eventually we’ll see a trickledown of payment innovations that make their way into the US, though it won’t be anytime soon. However, for an economy that continues to lead the world, there are worse things than a little reliance on the “old ways.” After all, plastic cards may not be glamorous, but they still get the job done.

In payment processing, acquiring new merchant accounts is time consuming and costly. And with churn rates running up to 22% every year, it’s a never-ending hassle.  But there is one profitable vertical that acquirers have yet to tap: mobile merchants.

Who They Are

So where are these merchants? Mobile businesses are a hot market. Look outside the box, and you’ll find them everywhere:

• Food trucks are enjoying a surge in popularity. Much more than just a hot dog stand, today food trucks can offer really excellent meals, along with complex menus and premium prices. You’ll find them at festivals, along city streets, next to local breweries, and parked near tourist sites.
• Mobile fashion boutiques are cashing in on the trend toward customization and local shopping. These merchants offer a handpicked selection of clothing and accessories, curated for a particular demographic. They can set up shop at home parties, upscale festivals and outdoor markets.
• Mobile pet services are booming. Americans are placing increasing value on the wellbeing of their family pets, but have less time available for maintenance and appointments. From veterinarians to groomers, you’ll see kitted-out Sprinters trolling the streets of suburbia.
• But wait, there’s more…florists, booksellers, barbershops, recyclers, paper shredders, repair services. Truly, the list of mobile businesses is endless.

What’s the Catch

Historically, acquirers have dismissed mobile merchants as too small to bother with. For micro merchants just testing the waters, that’s probably true. If you’re running a handful of transactions per month and need simple business management tools, third party processors like Square are a fine option. But as businesses succeed and need to scale up, it’s time for a merchant account.

Winning on Price

As transaction volumes increase, differentiating interchange rates becomes a big consideration. Here’s where acquirers can offer a real pricing advantage. If you can show merchants how they’re leaving cash on the table by staying with all-in-one pricing, you’re likely to convert new customers.

Managing Complexity

Simplicity is Square’s calling card for success. Pricing is simple, business management tools are user friendly, and hardware is minimal. For new merchants, this value is almost as important as price.

But as businesses grow, this simplicity becomes a limiting factor. Successful merchants need business management tools and payment options tailored to their specific verticals. By moving to a standalone merchant account, businesses can choose the POS system that best supports their needs – and there are plenty to choose from. Some great choices for mobile merchants include Revel, TouchBistro and ShopKeep.

Keep an eye out for merchants with innovative mobile businesses. As these merchants succeed and look to expand, they’ll need your support. Mobile merchants can be a profitable market segment for payment service providers.