Merchant aggregators, or enterprises that funnel and process multiple merchant transactions through a single account, have gained increasing attention in recent years. Payment’s Journal reported that as merchants deploy mobile-card acceptance, it’s important that these firms can process millions of transactions by linking them to a single account.
And with the rise in mobile payments, this capability may be crucial for a competitive edge. The news source explained that traditional merchant service providers are now looking at the aggregator model more than ever before. Not only do these services minimise operational burdens, but they also offer potential cost savings on processing transactions and account maintenance.
Still, Payments Journal asserted that acquirers need to consider certain factors and take a highly strategic approach when incorporating a merchant aggregator model.
According to The Green Sheet, there’s a reason that payment aggregators are becoming popular: promises of tapping into new markets and acquiring customers at a low cost. While many merchants may have begun utilising this model originally for mobile acceptance, the source explained that many have actively transitioned to tablets and fixed POS systems across a range of devices.
The Green Sheet noted that this new market, which is rapidly maturing, is colliding with traditional merchant acquiring. Aggregators have become immensely attractive, particularly for start-ups and small merchants, as accounts can be quickly and easily set up.
Further, The Green Sheet pointed out that these services offer free hardware and software that includes a fully functional POS platform. Pricing for this model is affordable, predictable and easy to understand. This enables any merchant to better plan and maximise the budget.
Still, there are drawbacks to aggregation that can be limiting. The Green Sheet explained that rates and transaction fees can be higher for merchants than the prices charged for most merchant accounts. Thus, acquirers often steer growing merchants in the direction of more traditional solutions.
The news source was adamant that merchant retention demands a migration path that allows the business to build stronger, more loyal relationships, and in this regard, aggregation can offer a distinct opportunity.
By enabling merchants to quickly attain and begin servicing new customers, while still giving the processor ample time to monitor transactions and risks without forcing the business to wait. Therefore, a migration path is critical for supporting customer acquisition in growing businesses.
Mobile Payments Today reported that as the aggregator model has continued to gain not only acceptance but rapid interest in the acquiring space, Visa launched an expanded framework to consolidate the role of payment service providers (PSPs). As this model enables PSPs to enrol and manage merchants, as well as present transactions as a single entity, the acquirer is no longer required to do so directly.
But before moving to this model, the news source explained that acquiring organisations need to consider certain technologies and processes.
Switching to this new model demands a shift in risk assessments, The aggregator is now liable for the risk profiles of all of its merchants and additionally, acquirers need to evaluate the aggregator and its business for risks. The model thus requires that acquirers evaluate the risk of an aggregator in more detail than just the individual merchant.
Particularly since the aggregator model tends to target smaller merchants that may have higher risk profiles. It therefore becomes more important to the acquirer to have a mechanism to understand that risk profile based not only on the payment mechanisms and technologies at play but also on the acceptance environment within which the merchant is operating.
The transition to the aggregator model also necessitates new business intelligence and reporting capabilities. Mobile Payments Today revealed that merchants have accounts through acquirer-created portals for a variety of reports. Thus, a payments gateway will need to provide the same level of data accessibility to its merchants in the aggregation group.
Aggregation is not the right model for every merchant and acquirer, but it can certainly offer distinct benefits as business demands and customer expectations evolve.
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