Our work in... Merchant Services

We’ve done a lot of work across the merchant services landscape over the last 7 years. Whether working with incumbents or challengers, targeting SMB or enterprise, direct or via market partnerships and ISVs — we’ve helped several businesses to understand the needs of their merchants and to evolve their products and services accordingly. We’ve spoken to >50 enterprise clients and >500 SMB clients about their shifting needs and priorities and gained a fairly sophisticated understanding of market shifts.

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What we’ve seen

The market has changed since we started working within it. Emerging from an era defined by cost leadership strategies and pan-regional consolidation, enabled by lots of Private Equity money — the ‘softer topics’ of merchant experience, brand and go-to-market were often overlooked in favour of M&A and cost optimisation. We quite often found ourselves howling to the moon on such topics in early days.

This has changed now, with a range of new challenges and pressures emerging for the merchant services landscape:

New entrants have gained a lot of traction, with innovative new products and services that put the convenience of merchants first raising the bar for incumbents — whether that’s online (Stripe, Shopify being the obvious ones), or POS (Adyen proving to be a worthy and rapid growth competitor)
The breadth of SME services surrounding merchant services has also seen significant change, with a rush of SME banking, accounting and lending services proliferating that place a similar emphasis on digital service and experience — helped in the UK by competitive remediation (BCR). This has led to an unbundling of SME services, which have placed new pressures on interoperability, whilst driving up business expectations of what “good service” looks like. Merchant services is one of 6 major financial services in the life of a small business.
The technology world is also very different than it was in the PE-era, as devices become more capable and OEMs get in on the action. softPOS has been talked about as an innovation of interest for some years, but as Apple takes its first steps into opening up its NFC ecosystem, the spectrum of device options has widened. Whether a fully “smart” POS that leverages app ecosystems, or the need for no POS device (just using a mobile) become viable alternatives to the incumbent POS manufacturers. This fundamentally shifts the strategic challenge for incumbents — from a pure distribution game to a product-fit game.
As larger enterprises have continued to accelerate cloud adoption, the buying centre for enterprise merchant services has shifted from being a finance-initiated purchase to, in some-cases, a technology-first decision. This has driven up the need for compelling developer experiences, as sophisticated buyers expect sandboxes, easy boarding a range of other services to make managing their merchants easier.
The verticalisation of software continues at pace, partly driven by venture capital. This has created a much greater need for integration. PaymentSense (and now Dojo) are the original and great example of sewing up a vertical through the sheer breadth of integrations on offer in pubs and restaurants. Now there are many more verticals that are simply inaccessible without appropriate ISV integrations — healthcare, vets, dentists, education, hospitality being the obvious examples.
In the UK, it is now impossible to create market growth without nailing the switching proposition. The new to card opportunity is spent. Only 20% of eligible merchants were switching in 2018, now it’s more like 40%, depending on whose numbers you believe. Removing switching barriers is now a strategic priority, so things like ISV integrations, switching incentives and dedicated switching support are key to keeping market addressability wide. The alternative is that the market goes to war over the shrinking share of eligible switchers with simple integration needs (newsagents, dry cleaners, barbers etc).
Similarly in the ecommerce arena, short of a blip where ecomm leaders overestimated how ‘normal’ the ‘new normal’ was post covid — ecommerce markets have continued their growth. The lines between offline and online continue to blur, especially as digital wallets increase their share of total transactions. Truly “omnichannel” payments and inventory management is still a relatively rare, despite of lots of talk about it.
Retention drivers have changed. Whereas before, headline rates and reliability were the biggest acquisition and retention drivers for merchants, now customer experience is a close competitor. Clunky experiences, a lack of responsiveness, poorly coordinated handoffs within organisational silos, and even poor merchant portal experiences are common bugbears — even if there is a prevailing apathy amongst service providers on the value of these things.

All in all, there has never been a greater need to organise around the needs of merchants. If incumbents don’t, challengers will.

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What we’ve done

We’ve completed over 35 project lifecycles in merchant services. Below is a quick breakdown of the key projects we’ve driven:

Mapping the end to end merchant experience to identify 150+ service initiatives to improve merchant experience and operational efficiency for a top 3 uk merchant service provider
Rebranding a UK SMB direct business, encompassing >2,000 brand touchpoints, >5 digital products, 10 systems, and hundreds of merchant-facing colleagues
Devising the brand identity, proposition, digital product strategy and product roadmap of a new bank-owned merchant services brand in the UK
Designing and building 4 merchant portals across 3 providers, based on quantitative analysis of inbound contact centre data and qualitative understanding of merchant needs
Devising the brand identity, proposition and sales messaging for a new bank-owned merchant services brand in Germany
Designing the digital experience and business processes to enable self-boarding across Europe for a big pan-regional incumbent
Creating a new product hierarchy and launch strategy for a new product launches with a Series-D backed category leader, including 2 global product launches
Creating an enterprise messaging strategy and creating a new suite of sales collateral for a leading global merchant services provider
Designing and developing a developer portal for enterprise clients
Creating a UK launch strategy for an US-based payment provider
Commercial due diligence for a verticalised software product business assessing opportunities to widen payments revenue by becoming a payment facilitator
Understanding the opportunity to creating a client management platform for ISVs
Proposition design and sales collateral for a solution for payment facilitators, ISVs and marketplaces
Creating a micro-fronted architecture to enable multi-tenant deployments of boarding and merchant portal capability
Designing a vertically integrated payment acceptance platform for the events and hospitality industry

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The questions we can help to answer

Proposition

Is your proposition compelling to your target merchants? Are you able to deliver a competitive advantage?

Product Marketing

Do your merchant-facing or internally-facing channels deliver the right messages and impressions?

Product / Merchant Experience

Does your product estate deliver the functionality that merchants/colleagues need to be happy/efficient? (e.g. Boarding, Portal, Support Portal, Appstores / Marketplaces)

Voice of the Merchant

Do you have a reliable and serviceable understanding of what merchants expect? Do you have a programme to reliably cultivate and action merchant sentiment?

Product/Programme Audit

Are your current initiatives, partnerships and/or programmes delivering the desired value? How might they improve? (E.g. Portal / Boarding implementation programmes, public web refreshes)

Growth Strategy

What growth opportunities exist within the wider merchant services market? (e.g. ISV integration, switcher propositions, agent selling)

Threat Scanning

What market or competitive forces might undermine the current strategy of record and merchant book? (e.g. Stripe / Shopify > POS, SoftPOS)

Product Strategy

How would your product need to flex / evolve to meet these identified opportunities? (e.g. ISV integrations, B2B marketplace)

Acquisition Strategy / Sales Model

What new routes to market might you consider taking to better access identified growth areas? (e.g. Partner selling, Embedded Bank Servicing)

Actionable Vision / “NorthStar”

Where can the business go? What might this evolution need to look like? What would need to be true for it to be successful?

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