Value-Added Services Hold Key To The MSP Future

What do the biggest, most successful merchant service providers (MSPs) concur is the key to their collective future? PYMNTS got that answer, among others, in our just-published The Key To Optimizing Merchant Services Report, done in collaboration with technology firm Endava.

The answer to that cliff-hanger opener, incidentally, is value-added services (VAS) — the growing assortment of benefits that MSPs provide to their merchant clients. As for the sentiments of the largest players, PYMNTS found that nearly 97 percent of MSPs processing $1 billion or more annually consider VAS “very” or “extremely” important to their future business.

The current list of VAS includes mass-appeal functions like supporting digital wallets, and the PYMNTS research sheds light on what comes next. The majority of MSPs surveyed by PYMNTS are focusing on four key areas for future VAS enhancement: alternative payments, communication management, customer relationship management (CRM) integration and data analytics.

To deliver new services, some larger operators (more than 50 percent) have ambitious plans to build VAS platforms, while many mid-market and smaller MSPs (around 72 percent) say they’ll look to partnerships. Either way, the trend is gaining momentum fast. The average VAS offerings from MSPs now number around seven; that’s set to increase to 10 within 24 months.

Where and how will these new merchant services add value?

The Big Four

Alternative payments tops the list of most valued value-add, with 44 percent of MSPs planning to add alternative processing, joining the 57 percent that do already. This reflects a belief among MSPs that forms of app-based payment will become a de facto industry standard.

Sharing the limelight with alt-pay methods is data analytics. Over 41 percent of MSPs will add analytics to their VAS bundle. This is largely because merchants understand the value of their transactional data, but often lack the in-house expertise to visualize and put data to work.

In line with the desire to do more with data is CRM integration, another top area of keen interest among merchants and their MSP partners. More than one in five MSPs intends to add CRM integration to their VAS in the immediate future. Communications management completes the top four, with its advanced notifications keenly sought by MSPs and merchants.

Upgrade to Upsell

Whether individual MSPs build their own VAS expansions or partner with third parties, and almost regardless of size, virtually all MSPs are looking at upgrades to core systems as the only way to deliver this much more robust set of value-added services. Nearly 45 percent of MSPs surveyed by PYMNTS are currently in the process of upgrading core systems, with almost 32 percent planning to begin upgrades by mid 2020, and some 22 percent not yet sure on timing.

Like most things in the payments industry, VAS is undergoing changes that render old definitions obsolete. The survey reveals powerful market forces at work that spell changes to the traditional business of merchant service providers. It begins with the expansion of four critical service areas will decide a merchant’s ability to compete in a new payments landscape.