Editor’s Note: Richard McShirley is chief marketing officer for payment solution developer linked2pay. McShirley has worked for years in the payments field and shared his thoughts on what banks need to be aware of when looking for payment solutions and how the technology behind them is changing.
Q: There’s a lot of competition in the payments business these days.
Richard McShirley: Agreed, and that has driven innovation even against the powerful headwinds of long and well-established legacy players.
Q: What has changed in payment processing in the last five years?
R.M.: The complete move of risk management and payments to Software As A Service (SAAS) delivery. In the coming years you will see more payment acceptance environments enjoy less friction in the payments process, and the instant settlement of more and more transactions, giving merchants optimized cash flow.
Q: What’s a good way to gauge the value of various payment solutions?
R.M.: Before a bank even considers entering payments in a direct manner they need to engage in a preparation process that considers key factors for board review and buy-in, like fraud prevention, oversight compliance, and automation of the underwriting and onboarding processes. With these in place evaluating the solution side is the easier part.
Q: If I’m looking for better ways to manage payment processing of all types, where’s a good place to start assessing what needs to be improved?
R.M.: Gather your evaluation team, which should include risk, operations, treasury management, and merchant services and contact companies to ask for a complete solution demonstration. Then talk to bankers who are using the SAAS platform approach. The most important items to nail down are fraud prevention, oversight and automated underwriting. With those elements in place, and on a single SAAS platform, you will be miles ahead.
Q: What are common requests made by small businesses when it comes to payment processing?
R.M.: Small businesses want low cost and simple solutions. The challenge for a bank is that the needs of small businesses vary, so rather than directly provide payment solutions, they partner with and rely on merchant service providers. Today that model may no longer make sense for a number of reasons, since a turnkey risk management and payments platform lets a bank white label and control the merchant relationship to avoid the reputation risk a merchant services partner may raise.
Q: What do you hear from small businesses in terms of payment products? What do they most want from their financial institution?
R.M.: They want everything from their bank. The issue is that in most cases they cannot get a full range of solutions, or even the basic ones. For example, a business needs to accept credit cards and automated clearing house. Nine out of 10 times the credit card solutions are provided by a merchant services partner of the bank and the ACH comes from the bank’s treasury management department. The approach falls short in terms of reporting and solution quality.
Q: What are some of the things bankers should think about when making sure the payment systems they pursue won’t become outdated soon?
R.M.: They should remember that in the battle between instant versus delayed risk and payments, the choice is simple and obvious. Not only is instant superior, it enables perpetual development to avoid becoming outdated.
Q: What differentiates the various methods and products offered by different companies?
R.M.: The products and methods depend on what sliver or section of the payments delivery realm a company sets out to provide. For some it might be security, for others it might be hardware or software geared for general or focused vertical application. The typical categories that companies which participate in payments, including banks, fall into include sponsor, acquirer, processor and gateway, and includes software and hardware providers.