Intuitive Payment Gateways in Emerging Markets

[Guest Post by Arthur Jones]

While protectionist rhetoric and a call for reducing free trade worldwide have been on the rise in certain countries, global trade continues to push beyond borders. Now more than ever, emerging markets are beginning to take center stage as leaders in eCommerce and trade at large.

Emerging markets are home to 85% of the world’s population, with 90% of people under 30 residing in countries that are transitioning from agriculture and resource-based economies to service and investment-heavy markets ripe with burgeoning middle classes ready to spend.

Yet, how will this emergent middle class pay for goods and services? In many countries around the world, cash is still king. However, with keen government support, innovative technology, and widespread adoption of smart mobile devices driven by the IoT (internet of things,) cashless economies are set to usher in new consumer frenzies in Southeast Asia, South America, and Africa.

From digital payment gateways to mobile wallets, let’s take a look at how the emerging markets are setting up shop online.

Cash-Centric to Cash-Free

According to a report from PWC, the payment processing sector is primed for a shake-up. In their 2017 report, Emerging Markets: Driving The Payments Transformation, the global finance and consulting firm found that: ““The payments business, traditionally dominated by banks, is witnessing increasing competition from new entrants, most of which are non-bank players. These include retailers, telecommunication providers, technology companies, startups and others players that specialize in niche value-added services in the payments processing chain.”

PWC’s Global FinTech Survey from 2016 breaks down merchant and consumer tech adoption. In many cash-heavy economies, typically affluent urban areas in emerging markets have long been bastions of electronic POS and ATM use. This has been the case within cities in Brazil, China, Mexico, Nigeria, and South Africa. Meanwhile, mobile wallets and mobile POS use have been seeing steady growth in urban India, China, and Brazil. Interestingly enough, the emergent mobile commerce (mCommerce) sector is seeing rapid adoption in key African markets, specifically Kenya, South Africa, and Nigeria, where telecommunications and smartphone capabilities among middle-class consumers are reaching parity with more established economies.

India: A Cashless Case Study

In terms of cashless emerging economies, India is seen by many as a litmus test for how policy can dictate the terms of progress. In December 2016, Forbes contributor, Wade Shepard, wrote on a cashless future for the world’s largest cash-centric economy.

India is the midst of a massive demonetization scheme led by Prime Minister Narendra Modi along with several high-ranking government officials. In essence, the strategy set by the prime minister was to nullify all 500 and 1,000 rupee banknotes and to replace them more secure 500 and 2,000 notes. This policy came as a shock to much of the country since it was announced in a surprise television announcement on Nov. 8th, 2016.

For context, Forbes reports that hard cash accounted for up to 95% of all transactions in India, with 90% of vendors lacking card readers or any means to accept electronic payments. 85% of workers were still being paid in cash prior to Modi’s demonetization. In fact, Forbes also found that even Uber in India accepted cash in order to acclimate to the local consumer culture, a first for the global ride-sharing company.

Modi prides himself as a staunch enemy of corruption, and Shepard asserts that the demonetization scheme was rushed into implementation to catch the black market off-guard. However, the planned 50-day transition is estimated to take months as the government “catches up” to replace the nullified bank notes with secure replacements, effectively forcing the majority of India’s consumers and entrepreneurs to adopt cashless alternative payment methods. And although the goal of the campaign was to initially combat corruption, much of Modi’s recent rhetoric seems centered on transitioning India to a cashless economy.

Whether India at large is ready to accept these changes or not seems to be irrelevant as the government intentionally lags in replacing obsolete banknotes. According to HSBC’s Indian affiliate, new bank accounts are being opened at an astonishing rate, and even traditional market vendors from launders to vegetable sellers have begun setting up mobile POS at their stands.

A Digital, Cash-Free Future

With forward-looking policy makers along with an innovative generation of digitally-adept millennials, emerging markets will only adopt cash-free payment methods at a faster rate as the digital pandora’s box stays firmly open. While the transition will by no means be effortless or uneventful, this massive paradigm shift will dictate how the next generation of non-Western economies lead the way for a bright future in global trade and commerce.

Author Bio: Arthur Jones is a freelance fintech consultant. With an MBA and years of experience at the IMF, Arthur enjoys utilizing his expertise to help new entrepreneurs acclimate to new global payment gateways market research, consumer insights, and the latest trends in eCommerce.

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How To Choose Your Merchant Services Provider

Below is an infographic provided by Leappayments.com -- they contacted me a long, long time ago about featuring this on my blog and it managed to get lost in my inbox for quite a while. Every now and again, I would pull it up and look at it and think to myself that, yes, it was a nice infographic.

And since it features information that, for the most part, I have already written about in various posts, I thought this might act as a handy reminder. So, here it is, compliments of Leap Payments, with whom I have no working relationship, and therefore cannot vouch for the company beyond this excellent presentation.

I will caution only one thing with regard to the infographic. It suggests that you pay attention to online reviews, which you should -- but it does not go into detail about how a very small number of rather loud or disgruntled merchants might give very bad reviews of a company that are because of situations where the merchant was at fault. I've read enough such reviews to be able to recognize them, but most merchants and potential agents probably have not. Trusting bad reviews or outstanding reviews blindly is not a good thing -- always look for reviews that give a balanced view of the experience, back up the conclusion with good examples and otherwise tell something more about the company. Neither a few bad reviews nor a few good ones are likely to tell an accurate picture of a company. Additionally, negative reviews (especially on Rip Off Report) are much more common than positive reviews overall, because people having a good experience are less likely to feel the need to write a review in the first place. After all, why would anyone go out of their way to say, "Company X is doing exactly what they are paid to do," which is essentially what every good review would be saying. It's a service, people! Expect it to work properly and be a good value for the money!

Affordable Tablet POS Systems That Support Open Checks and Tips from Groovv and ShopKeep POS

Android and iOS based POS Systems perfect for small and mid-size restaurants, coffee shops, bars or any business that accepts tips or open tabs.

Most mobile credit card processing solutions are not able to handle tips or open checks (tabs) at all, acting strictly as the equivalent of a counter-top terminal for swiping or key-entering a single transaction. This works well enough for most people, who rarely will need modifiers of any sort. However, business owners wishing to move away from or avoid altogether the high-priced POS systems now are seeing viable options appear in the affordable tablet-based solutions entering the market.

While affordable solutions such as Harbortouch have begun presenting themselves in the market for full POS systems required for high-inventory merchants who need extensive employee tracking and reporting for the accountant, the mobile marketplace has seen an explosion recently with excellent retail solutions like

Time Again for Increases in Interchange Costs

April Interchange Increases

It happens at least twice each year: the credit card processing companies all send out notices regarding unavoidable pricing increases for their merchants. Like clockwork, April brings the news, usually overlooked by merchants who are used to glancing past the fine print on their monthly statements (if they read them at all). In case you missed it, here is a brief rundown of some current increases in interchange cost associated with the major credit card brands.

Not surprisingly, processing companies use this excuse to cry poor, and in addition to merely passing the additional costs on to merchants, they will mostly tack on across the board increases to compensate for the new expenses while also generating more income.

New PayAnywhere (Free) Tablet Storefront Solution Is Here

First the good news: North American Bancard (NAB) has a new PayAnywhere branded mobile tablet-based processing program which offers the placement of a free counter-top system and some great new options built around a 10 inch Android tablet (plus an additional mobile card reader for phones or tablets). It is one of the most affordable processing solutions on the market that takes advantage of mobile solutions at highly competitive rates with a future-ready, upgradable combination of hardware and software. It will become EMV compliant and is consistently being updated on the software side to take advantage of the latest technology while offering more enhancements to merchants. The program is very similar to the previous Phone Swipe Tablet Program which NAB been providing, but without the high volume requirements.

Processing of Visa, MasterCard, Discover, American Express and the new PayPal card are all available with Next Day Funding and a lower swiped rate than Square or any "Pay As You Go" style programs, and still without additional transaction fees.

Having stated the good news, you might expect that there is bad news to counter it. But there isn't, at least not in the sense of anything new about the processing industry. Instead, there is the caveat that merchants still must deal with the same basic pricing and service of typical merchant accounts, including the PCI responsibilities and standard fees. Moreover, however, this program is not a "one size fits all" solution. If merchants are not processing over $5,000 in monthly charges, there is a good chance this program is not for them. On the other hand, it could save the right merchants a lot of money, offer a forward-thinking alternative to standard terminals and increase both productivity and profits. All will be revealed after the jump...

New Phone Swipe Promo, What It Really Means

North American Bancard just released a new promotional push for its Phone Swipe product, touting it as a new, first of its kind deal for 2014. The text of the promo reads:    

"This January, be the first in the industry to offer Visa, MasterCard, Discover and even AMEX at 2.69% with next day funding to all pay-as-you-go customers! It's just another reason why Phone Swipe is the mobile payments solution that sells itself!"  

Since the next day funding option has been standard for new accounts since mid-2013, and since American Express cards have been processing on Pay-As-You-Go accounts at the same qualified rate as Visa, MasterCard and Discover for the same period, I wanted to find out which part of this was supposed to be new for the new year. Well, it turns out that it isn't new and nothing has actually changed in the program. The spin is simply the suggestion that agents should take time now - in January - to point out that Phone Swipe is the first processor to offer qualified charges for the main card carriers at this rate. Agents and merchants should still be aware that the same mid/non-qualified downgrade of 80 basis points continues to apply to all accounts on the Pay-As-You-Go plan, along with the $0.19 transaction fee for business signature cards and even rewards cards.

Does this make the Phone Swipe program a bad deal?

If you have read this blog before, you know that I have endorsed Phone Swipe for a long time. I even

Recommended Solutions

One Size Does Not Fit All

One of the most important things for merchants to remember is that what works best for one business may not be a good fit for another. This applies in almost every area of business, and the processing set up for a business is no different. Except in one way: every merchant wants the cheapest solution that will serve their needs.

The problem is, what saves one merchant money may not save another merchant who does business very differently. Having the lowest transaction fees is terrific until it means that all transactions are going to have to be stored for later because a merchant is trying to save on mobile processing fees, only to discover that more charges are downgraded and other charges are simply not approved... In fact, there are dozens of considerations to be made before ensuring that the merchant has the best program set up.

Some generalizations remain true

It is always in the best interest of a merchant to save money. The rates and fees set by Visa, MasterCard, Discover, American Express, et al,  are varied by card type and transaction type, and even have built in adjustments by industry. There are ways in which the processing companies have worked to save merchants on some types of charges while profiting off other types of charges. This was the birth of "Tiered" pricing.

A good "Tiered" deal may actually save a merchant money over an Interchange-based plan. This may be the case when the Mid- and Non-Qualified markups are not excessively high and the Qualified rate itself is low, because many cards may be processed at very little profit or even at a loss for the processing company, versus the consistent markup on every charge as processed via an Interchange-plus agreement. These kinds of "Tiered" plans are pretty rare, however, and many merchants find that their "Tiered" rates are raised periodically to compensate for the increase in Interchange costs for a few card types every six months or so. This is also assuming that the Interchange-plus plan is based on the typical "book rates" from most processors (likely 50 basis points over cost).

I generally believe that Interchange-based plans are the most fair-minded and often the most cost-effective. There is no undue rounding up on rates, no downgrading. And there is usually no additional transaction fee to go along with the downgrades, either. A merchant pays the cost of processing with a nominal surcharge on the total and a reasonable fee per transaction. This "cuts the fat" and makes the costs much more equitable most of the time. Still, this sort of plan sometimes looks complicated and does not work best for every merchant, so the pros and cons must be examined.

Recommended Solutions

I like to put my merchant clients into a narrow range of solutions whenever possible. For some, they have an existing POS system that needs to be reprogrammed and it is as simple as discovering what processing company will interface best with the POS system and then setting an account up with the proper parameters and lowest available cost. I'll use the First Data network for most POS systems, because I can provide that through a third party at much less than First Data usually charges merchants who have accounts directly set up through their processing wing. Plus, I'll do it with no long-term contracts and without cancellation fees. I can also process over the Global Payments network, or through a gateway like Authorize.net. For most high volume businesses, this sort of solution is perfect for them. They have the hardware already, I'll simply provide them with better numbers. I'm not precisely in the POS business, but I have the ability to set up several types of systems and can provide a limited range of them as well.

Next Day Funding: What It Means and When It's Necessary (Or Not)

Every now and again I discuss "next day funding" with a merchant in the course of a consultation. It's something I generally don't offer and few merchants ever mention, but once in a rare while it is a sticking point that the merchant holds as an important aspect of the service.

Case in point, I was chatting with a merchant this morning who must pre-order and pre-pay for product that she sells a "parties" set up in people's homes as sales events. Because she does not keep much inventory on hand until she has an idea about how much she is likely to sell, she is often out of pocket when she begins a sales event and needs to immediately recoup her expenses in order to pay her bills before it becomes an additional expense that cuts into her profits. Because of this, she is essentially attempting to pay her balance before it becomes due, to presumably somewhat mixed results.

Cash Advances for Merchants

"Merchant Services" are generally understood to center around the processing of payment data from bank cards or gift cards and the like. There is another aspect to these services, however, that some businesses benefit from in ways that can quickly help them expand, cover shortfalls or otherwise access needed resources without having to go through a lengthy process or get tied into bank loans or mortgages.

By getting a cash advance from their processing company, merchants are able to put funds directly into their bank account and have the balance automatically paid off over a short period of time simply by automatically deducting a percentage of the credit card sales made by the merchant's customers (or, to look at it another way, to pay a higher percentage on sales to cover the repayment of the advance).

An advance program can be used to purchase additional inventory, do necessary repairs or upgrades, or simply pay some bills. Funds can be delivered usually within 5-10 business days. Sometimes even in as little as 72 hours.

This is good for merchants who need the money quickly, those with little collateral or if they have limited access to other areas to get the funds. 

In order to get access to this type of funding, a merchant will generally have to work with a sales agent from the processing company they use. These cash advance programs are great for sales agents, because they generally will share in the profits made on interest, get a nice upfront bonus from the processing company, or both.

Agents Beware: What to look for when approaching new merchants

As a general rule, I am more inclined to warn merchants away from unscrupulous agents or sales representatives. There are some instances, however, where an honest sales rep might want to pause before pursuing a relationship with a merchant. This posting is for the sales representative who needs to be wary before setting up an account he or she might regret.

When should a sales agent avoid a merchant?

It seems almost counter-intuitive to suggest that sometimes a sales rep might be better off not making a sale. And certainly this post will be somewhat different in perspective than my previous exploration for merchants on whether a sales rep should be trusted. But as with most relationships, business or otherwise, this is a two-way street. Coming into a business cold, an agent will want to look for signs that the merchant is going to be worth pursuing and not end up wasting time and resources that could be better spent elsewhere.

After all, sales reps do not want to risk being involved in legal action or be subjected to threats or libelous statements. No agent wishes to end up out of pocket at the end of a deal or go through a process that can only end in damaging the agent's relationship with his or her own processing company or service provider.

What Should Make A Merchant Want To Change Processing Companies?

Merchants must ask themselves why they would consider changing their processor. Perhaps even before the next sales representative walks through their door, seeking their business, it would be a good plan to have the answer in place

Nobody likes wasting their time

As an agent in the field, I can assure any merchant out there that nobody in a sales position enjoys wasting their time. If a sales rep is going to put in the effort to sign a merchant, he or she is going to appreciate knowing the merchant's actual wants and needs. And the merchant will save both time and money by being aware of his or her own expectations. In actuality, if the agent is honest and the merchant is above board, both are on the same side. Many merchants feel adversarial toward sales reps of any stripe, often with good reason. Being on the same page, however, is a win for both the merchant and the rep. The rep may not see the huge profit or windfall initially hoped for, but the relationship should be much more solid and the retention of the client much more likely.

Top Reasons To Consider Switching Credit Card Processors

Consider this check list as a starter only. Every merchant will have different issues that they want to consider and different values attached to each. What ranks as most important to one merchant (i.e., cost savings or next day funding) may be of little importance to another. And it may be that if a merchant has ten things on the list, one or two of them might be flexible options if the other 8 or 9 are going to be handled well.

Should Sales Reps Be Trusted? Four Ways To Spot A Lie.

Just for the record, most of the time it is probably not in a merchant's best interest to automatically trust a merchant services sales rep. I'm throwing it out there based on my personal experience interacting with both people within the processing companies and the merchants I've met through daily interaction. This isn't to say that sales reps are mostly untrustworthy, but they should earn a merchant's trust and in this industry that is not always easy.

How to spot a lie from a merchant services agent

To be fair, I honestly believe that many sales reps in the merchant services industry are simply ignorant with regard to what they are selling. I've been on that end of a claim, though not for long. In fact, the first "Team Leader" that I worked with used to tell me that I was too smart to be a salesman because I kept talking business owners out of the deal. My question to him was always the same, "aren't we here to save the merchant money?" And Team Leader's answer was always this: "what's important is that the merchant believes he is saving money. We want happy merchants."

Maybe it's just me, but I am happiest when I know I've been treated with honesty and integrity. I am mighty unhappy when I have the sudden realization of having been "sold a bill of goods." And I never wanted any of the merchants I worked with to feel that way, either. Besides, I wanted to provide services to businesses that I actually patronized, that thrived in my own neighborhood. If I set these places up with bad service agreements it would be plenty difficult to show my face out on the street.

Lie #1: I can't quote you a rate

Whenever a sales rep is in a business establishment, he will be quite anxious to find out the current rates that a business is being assessed. This is the crux of the business pitch. A big gasp will generally ensue upon examining a statement, perhaps even some eye rolling or head slapping. It's simply amazing how high those rates are! But what rate am I offering? Oh, I can't tell you that without examining your processing statements first.

Really?

When Does It Make Sense To Switch Credit Card Processors?

As a field sales rep in the credit card processing industry, it is important to understand when it is really in a merchant's best interest to switch processing companies. It is even more important for the merchant to be aware of when it is the proper choice. Let's be honest, a sales rep wants the merchant's business. The merchant should simply want what is best for his or her bottom line.

Fear of Change

Most merchants suffer from the same basic phobia with regard to anything involving their banking situation. "If it ain't broke, don't fix it" seems to sum up the excuse for retaining the status quo. To a certain extent, this is reasonable thinking. Functioning processing that gets funds deposited where they are supposed to be is the primary concern of many merchants. A processor that has done this for some time is a known commodity and therefore is also in the merchant's comfort zone. This does not  necessarily mean it is the correct option for the merchant.

When deciding whether to make a change away from a company that has been successfully processing on behalf of a merchant, there are always a few considerations:

• Contractual obligations or cancellation fees
• Ease of transition
• Guarantee of rates and fees
• Terminal purchase, lease or rental
• Reprogramming time requirements
• Customer loyalty or working relationships
• Fair treatment
• Company perception
• Trust

And the list really can keep growing quite easily.