History of payments (2/5) | The past (part 2)
"In this second blog of the series “History of Payments”, we are here looking at the years 2000’s onwards. If you haven’t read the first one yet – can catch up here."
Isn’t progress amazing, in the 1980’s card payments were taken using a cumbersome manual card processing machine, today we make payment at the touch of a ring, what will the future give us?
"Traditional non-cash payment systems can execute payments over physical distance, allow businesses and consumers to avoid some of the costs and risks of using cash, and are run by generally trusted and closely regulated intermediaries"
Congressional Research Service
2000’s: Here come eCommerce
As the internet became mainstream during the first decade of the new millennium, internet-based businesses demanded a new kind of payment terminal, a virtual one compatible with the needs of online, or eCommerce. Online payment gateways enabled connectivity between eCommerce Web sites, off-line POS software, and payments processors.
The 2000s also saw value-added resellers (VARs) encroaching on established ISOs with integrated or semi-integrated electronic POS systems that provided small to mid-market merchants with integration of payments processing with other POS functions, such as inventory management.
Gateway vendors realized there was an opportunity to bypass ISOs and offer merchant accounts themselves, often utilizing simplified, or even less expensive, fee structures. Because they were accepting greater risks, some began developing analytics capabilities to better manage fraud. These analytics promoted the utilization of data management and analysis to create new marketing related services and new features such as optimizing the shopper experience.
2010’s: All about mobile – the software era
Recognizing the growing threat of new competitors, processors and larger ISOs began buying up gateway vendors to blunt that threat and offer new software-based services providing greater value to merchants and consumers.
As mobile phone and tablet use has proliferated, we have entered a new era of multi-channel commerce that can blend the physical, mobile, and internet-based shopping environments.
The future of payments will depend on cloud-based business models. Apps will function as digital front ends that are accessible from consumer mobile and internet devices, as well as in-store POS solutions.
Independent software vendors (ISVs) are targeting industry segments with highly specific solutions, and further extending abilities to gather data useful for marketing and enhancing the consumer experience. These ISV’s are offering affordable ePOS and digital storefront systems that can easily be connected to additional services via back-end API’s. They have also exploited a more effective customer acquisition channel that bypasses the traditional ISO ‘feet on the street’ model.
Again, acquirers are responding to new competitive threats by acquiring some of the most promising integrated payment providers so they can refresh and extend their portfolios of merchant payment services. In order to succeed and thrive, they need to build on these capabilities to create more business-critical merchant solutions that will create greater merchant ‘stickiness’.
To be continued…. Stay tuned for the next blog on this series where we explore the “Present of Payments”.