Speaking to Payment Expert, Alex Reddish, Chief Commercial Officer at Tribe Payments underlined just how significant Acquiring-as-a-Service can be for firms, providing a different approach and leveraging new technology.
Payment Expert: Firstly, for readers that don’t know, can you give us a brief description of what Acquiring-as-a-Service is – and its key benefits?
Alex Reddish: To explain Acquiring-as-a-Service (AaaS) we need to first revisit traditional acquiring.
Acquirers effectively facilitate the processing of transactions between the merchant and the consumer’s card issuer. Traditional acquirers have been operating for many years and often focus on a particular channel – either online payments for e-commerce sites or physical payments for brick-and-mortar stores. Due to their age, most acquirers’ reliance on legacy technology and lack of omnichannel presence hinders their ability to react to market trends and the demands of the merchants themselves.
AaaS tackles this problem by taking a different approach, one which leverages modern technology to provide more value and reposition the acquirer’s relationship with their merchants. Long-seen as a relationship purely based on commodity, acquirers taking an AaaS approach have the chance to become a valued payments partner instead.
Underpinned by flexible technology and real-time transaction data, AaaS can go beyond single-channel card payments to easily cater for new payment methods, support dynamic transaction routing, build customer insights and offer comprehensive risk management capabilities. This allows merchants to gain greater visibility and control of their costs – allowing them to deliver an optimised customer experience and ultimately grow their business.
PE: Are you able to tell us more about how Acquiring-as-a-Service has evolved in recent times for the payment industry?
AR: Acquiring hasn’t changed as quickly as the wider fintech industry has. Acquirers still rely on legacy technology that is predominantly cards orientated.
Because of the lack of innovation in the space, acquirers have been forced to compete largely on price, resulting in a highly commoditised market. This has led to a ‘race to the bottom’. Now acquirers are looking at how they can step out of this race and showcase how acquiring can be a strategic advantage for merchants.
This is where AaaS comes in. By allowing acquirers to plug’n’play from a range of new services, they can evolve to meet the fast-changing demands of merchants and their customers.
Today, payments are more than just cards – and the role of acquiring should be much more than just taking payments. Acquirers need to understand what consumers want so they can better support merchants with delivering loyalty and conversion-boosting customer experiences. This can include the ability to support different payment types, but it’s also about ensuring that things like fraud screening doesn’t introduce friction into the payments process.
In the past, acquirers have been held back by legacy systems – the technology simply hasn’t been there to deliver this type of modular, data-driven, real-time offering. However, fintechs operating on new tech stacks are now able to fulfil the promise of AaaS. This technology has allowed for the role of acquirers to evolve from simple payment acceptance to enablers of merchant success.
PE: How important is data in enabling Acquiring-as-a-Service?
AR: Access to data is hugely important and one of the main differentiators between traditional acquirers and those offering AaaS. Acquiring has often been seen as a ‘black box’ with merchants unable to tap into the transaction data to analyse payments performance. This makes it very difficult to understand how transactions are routed, how customer payment trends are changing, why some payments are authorised and others aren’t, and the cost and risk implications of these evolving issues.
AaaS breaks down the black box of acquiring. Today, acquirers are able to provide merchants with transparency and control around how their payments are handled so that they can make better decisions and take back more control over the payment options they offer, how transactions are routed, their cost structures and much more.
By coupling real-time insights with a more flexible range of capabilities, AaaS can enable merchants to capitalise on the value of data and help grow their businesses. For instance, intelligence drawn from payments data can give merchants greater visibility of customer behaviour across all channels. With a data-driven approach, acquirers can provide services to merchants that meet the specific – and rapidly changing – needs of end users in multiple markets with different rules and regulations.
This is an approach that isn’t possible with a traditional approach to acquiring.
PE: What are some of the benefits from the perspective of a merchant to Acquiring-as-a-Service?
AR: A huge benefit of AaaS for merchants is that it enables them to make changes quickly to meet the demands of their customers. Before, acquirers were shackled by legacy systems making it difficult for them to react to the needs of merchants, their end-users and wider market trends. AaaS utilises newer, more agile technology which gives acquirers the ability to shape and deliver new services quickly, and in turn allows merchants to do the same.
Cost control and strong conversion rates are key for any merchant. An AaaS approach can support dynamic routing to merchants which enables them to automatically route payments to ensure cost and authorisation rates are optimised. This means merchants can take better control of their transaction fees and acceptance rates – and flex their approach when things change.
Again, with data-driven insights, merchants can gain a better understanding of their fraud exposure and adapt to counter any emerging threats. This can help reduce fraud and losses, but merchants and acquirers can also ensure that risk management is more closely aligned to their risk appetite.
Lastly, consumers’ preferred payment methods and journeys are changing fast. Acquirers need to support merchants as they seek to cater for these new trends and in-demand services. The technology that underpins AaaS offers the chance to quickly adapt and tailor the customer experience by adding new payment methods, channels and functionality, without significant investment or disruption.
PE: Can you tell us more about how Tribe has embraced Acquiring-as-a-Service?
AR: We firmly believe that AaaS is the future of acquiring and we’re working with several acquirers to help them take that step and set themselves apart from the competition with valuable service differentiation. Our tech stack makes it possible for traditional and newer acquirers to offer AaaS, to deliver a step-change in their service offering. Tribe’s core platform, ISAAC, allows acquirers to provide integrated payments services across all channels and a variety of payment methods, from point of sale, to ecommerce, mcommerce, MOTO, instant payments, FX wallets, crypto, account-to-account payments, peer-to-peer payments, bulk transactions, SEPA payments and recurring subscriptions.
We’re committed to helping acquirers with better access to data and enhanced visibility and control. This enables them to empower merchants to easily customise their payments programmes, monitor and respond to fraud in real-time, take control of their costs, create tailored authentication journeys, and much more.
PE: Lastly, what are some of your predictions for the future of Acquiring-as-a-Service?
- The pressures of cost won’t go away. In a post pandemic world of thinning margins, merchants are looking for ways to cut down costs more than ever before. With AaaS, merchants can gain access to capabilities such as dynamic transaction routing to minimise and simplify transaction fees. They can also gain better insight into fraud data, along with the tools to more effectively manage risk, which is vital for both cost control and brand reputation.
- Acquiring-as-a-Service will power ‘omnipayments’. Merchants come in all forms, shapes and sizes – from sole traders, to large retail chains, pure ecommerce businesses, unmanned kiosks to pop-up shops. Consumers increasingly shop across multiple channels and they’re adopting new payment methods at pace. To meet these changing demands and remain relevant, acquirer mindsets must move beyond traditional card transactions and payment journeys. AaaS will allow them to support a far more diverse range of payment methods and journeys, across different merchant types and channels.
- Acquiring-as-a-Service will enable acquirers to thrive. AaaS gives acquirers the opportunity to get ahead of the market, enabling them to offer tailored services and ensure a consistent digital-first offering across different customer points. AaaS switches the acquirer’s relationship with a merchant from being simply just another supplier – and even cost centre – to becoming a valued partner.