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THE MICRO MERCHANT REVOLUTION Western States Acquirers

THE MICRO MERCHANT REVOLUTION Western States Acquirers. September 27, 2012. Internet & Mobile Have Ignited Innovation. Rapid increase in super smart phone (easy UI+computer+wireless). The card “form factor” will naturally move to the phone. Mobile devices are ubiquitous.

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THE MICRO MERCHANT REVOLUTION Western States Acquirers

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  1. THE MICRO MERCHANT REVOLUTION Western States Acquirers September 27, 2012

  2. Internet & Mobile Have Ignited Innovation Rapid increase in super smart phone (easy UI+computer+wireless). The card “form factor” will naturally move to the phone. Mobile devices are ubiquitous All Devices become connected to internet so “off-line” disappears. Adding new payment types is as easy as a download. Online is everywhere Software applications move from local devices to cloud. POS, mobile and eCommerce look the same. Acceptance of all payment types becomes critical. Software moves to cloud Payments bundled with transaction-related services Technologies make product/service bundles cheaper & better. Packages are simple when bundled on-line. Premium value for payments data (analytics / advertising). Target marketing becomes simple for those that have the information. The info is valuable. Payment data more valuable for behavioral targeting Free applications for iPhones, Droid Markets, etc. Consumers have many choices and a low cost of entry. App Stores for Payments 2

  3. THE MICRO MERCHANT BATTLES • Launched in April of 2010 • Intuit services over 350,000 merchants in the US • Dramatic growth in last year • 0 to 250,000 merchants 5 years • 250,000 to 350,000 merchants last15 months • Intend to expand model to International markets • Launched in January of 2010 • Easily the fastest growing merchant processor in terms of new merchant relationships in the world • Claim to be adding over 50,000 new accounts per month • Claim to have shipped over 2,000,000 readers • Channel Strategy • Direct to Merchant – Online Advertising, Trade Fairs, Social Media • $3 Billion valuation and blue chip investors • Visa, Chase, Kleiner Perkins ($100 million investment) • Board – includes Larry Summers (former US Secretary of the Treasury and Chief Economic Advisor to President Obama) • International Expansion Plans Launched in June 2011 in Sweden Have announced intention to expand to other countries in Europe Supports EMV with signature (no pin) No data yet on progress 3

  4. IT ISN’T just a few 4

  5. Emergence of a new merchant segment Smart Phones have opened up payment processing to the masses. 1.4 million with >100 employees Home Services: locksmiths, fitness, dog walkers/trainers, horse trainers, mobile notary and business services, party planners, house cleaners, etc. Home Repair & Installation:  home theaters, fence installers, electricians, etc. Arts/Crafters: either providing goods direct to homes or at craft fairs/trade shows; t-shirts, pottery, a few "direct marketing" individuals that sell personal items/vitamins, etc. IT Services: computer services offered onsite to small businesses and individuals. Studios & Photographers: provide onsite photography in homes, weddings, corporate events, etc. Donations: onsite donations for various political organizations and charities. Event Related Business:  trade show and event companies that want to offer payments at their events or provide onsite staffing and want to accept payments. Other Services: legal and accounting type services, limo services, motivational speakers, golf courses Tier 1 Tier 2 6.9 million with 26 - 99 employees Tier 3 1.7 million with 5 - 25 employees Tier 4 16 million with 1 - 4 employees or “micro merchants” (85 million worldwide) Tier 5

  6. THE MARKETERS OPPORTUNITY TRADITIONAL CHANNELS INEFFECTIVE BELOW TIER 4 Tier 1 Direct Tier 2 Traditional Playing Field Bank, Processors, ISO & POS ISVs Tier 3 Tier 4 Tier 5 Channel Becomes Ineffective $2B+/yr in transaction volume… and rising fast

  7. Recipe for their success • Simple, Cost Effective, No Obligation • New approach to Merchant Acquisition • Fill out a form and you are active in 10 minutes • Most people qualify – innocent until proven guilty • Pay a single flat % fee per transaction • No monthly fees, no contract, no minimums, no hidden fees • Free application download • Free card reader device • Free support • No rental or lease of payment device • Works with you smart phone or tablet computer 7

  8. Their GOAL: OWN THE STACK • Aggressively Grab the Merchant • Force their preferred products & services • Offers • Coupons • Rewards • Analytics • The tablet/phone is the only POI • “Real merchants” will directly connect to their solutions 8

  9. MANY WILL DIE TRYING ACTIVE ACCOUNTS TO BREAKEVEN SCALE, LOW CPA & DISTRIBUTION ARE EVERYTHING 9

  10. FOR THOSE THAT SURVIVE HURDLES FOR UBIQUITOUS ACCEPTANCE • Evolving Payments & Multi Channel makes single hardware solution acceptance challenging • Ubiquity of acceptance of all tenders (wallet/tender agnostic) • Flexibility of marketing service providers is important • Integration into business processes is critical RETAIL IS HARD … JUST ASK PAYPAL 10

  11. A FUNDAMENTAL CHANGE • SUCCESSFUL OR NOT, THESE NEW PLAYERS HAVE BEEN THE CATALYST TO A FUNDAMENTAL CHANGE IN MERCHANT PROCESSING: • SMB BOARDING EXPERIENCE CHANGED FOREVER • USER EXPERIENCE/INTERFACE IS PARAMOUNT 11

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