Why It’s Time To Rewire Payments Or Fail

Imagine a race of fast cars, speeding along some race track at, say, 1,000 mph. Now, imagine having to change a tire on one of those cars. Sorry — there are no pit stops! Changing that tire happens during the race, as no car wants to give up any edge to its competitors, as doing so would certainly result in losing that race.

Guess what? As exaggerated as that example is, it’s a decent description of the challenges involved in what Daniela Mielke, CEO at RS2, called the “rewiring” of the merchant ecosystem when it comes to payments. In a new PYMNTS interview with Karen Webster, Mielke set the foundation for why to accomplish that task — one that can lead to better customer experiences, merchant efficiency and, ultimately, more revenue, especially as those merchants expand globally into new markets.

Payments used to be so easy and — let’s be honest — boring, at least compared to other forms of economic and commerce activity. Those days are long gone, though, as PYMNTS readers likely know well.

However, this exciting era of payments has created its own challenges, which are part of the reason such payments rewiring is needed, according to Mielke. “Over the last 20 years, we’ve seen so much innovation in payments,” she said. Those changes have largely been adopted in what she called a “step-by-step” or “layered” process by merchants, with platforms and technologies often being meshed together, creating what can sometime seem like Frankenstein creations — at least, from the merchant’s perspective.

That means more complications for merchants in providing the best payment experiences to customers who, thanks to the rise of eCommerce and other digital services, expect “truly seamless experiences,” Mielke said. “That’s still a huge challenge for merchants.”

The current era of payments is also defined by what she called “fragmentation” when it comes to payment services and platforms (largely the result of the process described above). That introduces other complexities and costly inefficiencies for merchants when accepting payments from customers.

“Rewiring,” Mielke told Webster, “is about reducing the fragmentation, and reducing the number of integrations and partners, to create holistic solutions.”

Indeed, is that not one of the ideals of digital technology when it comes to payments and commerce — that is, to make things simpler, but also bring more depth to the situation? In this case, that means not only laying the payments groundwork to enable larger, more encompassing customer experiences (one of the other big races going on around the world as more players build bigger ecosystems), but adding as many payment options as possible to meet consumer demand. Not only that, but the proliferation of ways to pay — for instance, via rewards and loyalty points, a vital part of pretty much any growing digital ecosystem — also requires that holistic view Mielke talked about with PYMNTS.

One of the main eventual goals? “You don’t have all these different platforms,” nor does one have to deal with all kinds of suppliers and integrations. That doesn’t mean, though, that all that payments rewiring comes in one shot — or that it’s even all about the technology.

“In payments, nothing happens at once,” she said. “What is needed is a different framework. Think of payments as a simple transaction between payer and payee. If you use that simple framework, you can start putting all the different payment types on the same platform.” Sure, start with debit and credit card acceptance, Mielke added, but “layer in different payment types, and make the transition to a new and holistic framework much easier.”

That said, she continued, “no one is going to rewire the entire payments system, but having a simple platform allows merchants to access all these other forms [of payment on] one platform. That’s a good starting point.”

It seems obvious that any merchant would want the best, most lucrative and most encompassing payment technology and services around — that’s the theory, at least. When it comes to daily business reality, though, Mielke told Webster that it’s common for a merchant to realize the need for this sort of payments “rewiring” when a company is looking to expand into new countries and markets — a move that tends to require the addition of new payment methods and, of course, adherence to foreign regulations.

The spread of better, easier-to-use and integrated APIs is also helping with new payment initiatives, as are innovative forces, such as PSD2, and the increasing demand from consumers for quicker, more seamless and varied payment options and experiences. So is, perhaps, the emerging realization among merchants that their main job is not payments.

“It’s not their business,” Mielke said. “They should not have payment experts and payment teams. Some of the best payment experts in the business work for merchants now, and that really shouldn’t be the case.”

Progress always brings a heavy price, and that’s the case with payments right now. Merchants must get it right, and the margin for error and failure is often narrow.