Guide:
Merchant payment solutions
Boost merchant businesses with a scalable, feature-rich and cost-effective payment platform. An omni-channel solution that facilitates a smooth digital payment experience for merchants, supporting a variety of payment options.
Author: Alena Tomchuk
Last updated March 19
Contents
Introduction
Merchant payment solution is a comprehensive software platform designed to enable banks and Fintechs to deliver a range of financial services and products for the management and operation of merchants across diverse sizes and categories. The software ensures a swift transition to digital payments and a seamless digital experience for merchants and their customers. These cover credit and debit card processing, point-of-sale (POS) systems, electronic payment processing, mobile wallet solutions, etc. Merchants can broaden their horizons beyond traditional cash transactions by using merchant services. Embracing the convenience and security of electronic payments allows them to attract more customers and increase their revenue streams.
According to Verified Market Research, the Payment Processing Solutions Market size reached USD 52.371 Billion in 2023, and it is anticipated to surge to USD 92.778 Billion by 2030. This represents a growth rate of 10% during the forecast period from 2024 to 2030. Employing the right payment solution empowers businesses to enhance operational efficiency, elevate customer satisfaction, and foster revenue growth.
We will discuss different types, trends, advantages and factors to consider when choosing a merchant payment solution and provide tips and insights to help banks and fintechs make informed decisions.
Types of merchant payment solutions
Merchant payment solutions and services are continually adapting to meet the growing demands of merchants and the changing dynamics of their business operations. Here are some of the services typically encompassed in a merchant payment solutions offering:
Credit and debit card processing
Merchant services rely on the fundamental aspect of credit and debit card processing. This enables businesses to receive payments through credit and debit cards, whether customers are physically present at a retail store or making online purchases. Through credit and debit card processing, customers can easily pay for products and services, facilitating business growth by expanding the customer base and boosting sales.
Payment gateways
A payment gateway is a platform that enables customers to input payment details online, such as credit and debit card numbers. This information is then directed to the merchant's payment processor. In face-to-face transactions, the process occurs through point-of-sale terminals and card readers. Utilizing a payment gateway provides a secure method for businesses to accept online payments. Typically, merchant payment solutions providers offer integrated payment gateways directly on a merchant’s website or e-commerce store.
Point of sale (POS) systems
Point of Sale (POS) systems are utilized by retailers, restaurants, and various businesses, featuring both hardware and software to facilitate in-person transactions. These systems encompass cash registers, card readers, barcode scanners, and tools for managing inventory.
Mobile payment solutions
Tailored for businesses needing payment processing on the move, mobile payment solutions are crafted to enable transactions using mobile devices like smartphones or tablets. Particularly beneficial for businesses engaged in trade shows, events, or field operations, these solutions offer flexibility and convenience in accepting payments.
Invoice and billing solutions
Tailored for businesses seeking efficient management of invoicing and billing procedures, invoice and billing solutions are designed to facilitate the creation and sending of invoices, the organization of customer payment records, and the tracking of cash flow.
Online payment processing
Online payment processing involves the acceptance of various electronic payments, encompassing credit and debit card transactions, online payments, mobile payments, and platforms supporting mobile wallets. This solution facilitates businesses in swiftly, securely, and efficiently processing payments, eliminating the necessity for physical cash or checks.
Loyalty and rewards programs
Customer engagement, retention, and lifetime value (LTV) are enhanced by merchants through loyalty programs, sales, and seasonal promotions. Implementing and executing these initiatives on the payments side of a business can be complex. Fortunately, numerous merchant service providers are simplifying the process by actively facilitating and supporting these types of programs and promotions.
Trends in merchant payment solutions
The landscape of merchant payment solutions is ever-changing, driven by emerging technologies and ongoing improvements. The key trends in merchant payment solutions are:
Increasing adoption of mobile payment solutions
A notable trend in merchant payment solutions is the growing adoption of mobile payment options. With smartphones being widely used, customers increasingly opt for the convenience of mobile payments for swift transactions.
Examples of such solutions include Apple Pay, Google Pay, and Samsung Pay, enabling customers to make payments directly from their smartphones, eliminating the need for cash or physical credit cards.
Merchants embracing mobile payment solutions can anticipate heightened customer satisfaction and increased sales, given the quick and easy payment experience for customers.
The rise of blockchain-based payment solutions
Another compelling trend in merchant payment software solutions is the rise of blockchain-based payment systems. Blockchain technology has the potential to transform the payment industry by offering a secure and transparent platform for transactions.
An example is BitPay, a blockchain-based cryptocurrency wallet solution allowing merchants to accept payments in cryptocurrencies like Bitcoin. This solution provides merchants with enhanced security, as transactions are recorded on a decentralized ledger resistant to hacking and fraud.
Incorporating biometric authentication into payment solutions
The integration of biometric authentication, encompassing facial recognition and fingerprint scanning, is a growing trend in the realm of merchant payment solutions. Leveraging biometric authentication allows merchants to offer customers a more secure and convenient payment experience.
For instance, facial recognition can be employed by merchants to swiftly and securely verify customer identities, expediting transactions. This technology is advancing the simplicity and security of digital payments.
Surge in contactless payments
In the current landscape, contactless payments are gaining widespread popularity among both merchants and customers. This method allows customers to make payments effortlessly by holding their smartphone or debit card near a contactless payment terminal.
Offering convenience and speed, contactless payments minimize the risk of fraud and enhance the overall customer experience. For merchants, embracing contactless payments provides a straightforward means to boost sales and elevate customer satisfaction.
QR code payments
QR codes are changing the way people pay for things. They provide many benefits. One is safety because they don’t need any contact for payment and reduce theft chances. QR code payments are easy, too, needing only a smartphone to scan the code. It gets rid of the extra step of carrying cash or cards, which helps make buying things easier. Plus, QR codes can hold lots of data, so they keep good records of each transaction, making it easier to track spending and manage money.
Common Issues
Despite making the digital transition, many small and medium businesses (SMEs) struggle when dealing with core payment issues. True, payment processing can be complicated. However, it is an important part of a customer’s user experience (UX) and merchant’s relations with buyers and vendors. Let’s look at the main merchant payment processing pain points.
Time-consuming merchant onboarding
In today's landscape, processors demand more extensive supporting documentation during the application process to verify the legitimacy of businesses and mitigate fraud risks. Before commencing the merchant onboarding process, businesses should ensure they have all necessary documents and materials prepared. Proactively gathering these materials can accelerate the process and reduce potential delays in what can often be a time-consuming procedure. Typically, the list of essential documents and materials for submission includes business registration documents, tax identification numbers, ownership details, financial statements, bank account information, business licenses and permits, online presence information, and payment processing history, among others.
Solution: Automated merchant onboarding
Automated merchant onboarding offers increased efficiency and reduced manual intervention compared to traditional methods. Here's how it works:
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Digital application: Businesses complete simplified digital forms with smart fields and prefilled information to speed up data entry.
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Electronic document submission: Businesses upload necessary documents securely online, eliminating physical handling and speeding up verification.
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Instant identity and risk assessment: Advanced algorithms quickly perform identity verification, risk assessments, and compliance checks.
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Easy integration: Prebuilt integration options for popular platforms and APIs facilitate seamless connection with payment systems.
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Automated ongoing compliance: Systems monitor businesses for continuous compliance with regulations like KYC and AML, reducing manual efforts.
Automated merchant onboarding streamlines the process, offering benefits such as faster onboarding, improved accuracy, enhanced security and compliance, cost savings, scalability, customization options, and real-time tracking. This results in a more efficient and user-friendly experience for businesses, payment service providers, and payment gateways, ultimately improving customer payment experiences and increasing compliance while enabling businesses to scale effectively.
Disconnected systems
Merchants often have various channels for collecting payments from customers, such as through an accounting team managing open invoices and recurring bills, counter sales at physical locations, and online purchases on a website. Typically, each channel operates on different software applications (e.g., accounting systems, and websites), leading to inefficiencies and errors when processing credit cards in one system and manually entering payment data into others.
Solution: Integrations
A payment solution should enable a seamless integration of payment processing into merchants existing business applications. By consolidating payment processing into a unified banking platform that integrates with existing systems, merchants can streamline operations, reduce manual errors, and enhance efficiency. This integrated approach ensures a cohesive payment experience for both merchants and customers, ultimately driving business growth and success.
Security and compliance
Security has emerged as the primary challenge in payment processing. Merchants face the task of safeguarding extensive amounts of sensitive financial and personal customer data from breaches. However, ensuring robust security is intricate, especially with the proliferation of regulations such as PCI DSS.
All merchants processing credit card data must adhere to the regulations set by the PCI Security Standards Council, which assesses various aspects of credit card information security, including data collection and storage practices. Achieving and maintaining PCI compliance can pose challenges for merchants, particularly concerning the IT infrastructure needed to securely store payment data under PCI standards.
Solution: PCI DSS-compliant solutions
Transitioning from locally stored credit card data can substantially decrease the IT resources required for data security and PCI compliance. Instead, businesses can leverage tokenization technology, storing only tokenized payment records in their database while securely storing actual credit card data in the cloud. It's essential to ensure that merchant payment solutions are compliant with PCI DSS standards.