Changing Landscape of Merchant Services

Retail Merchants are one of the critical customer segments for banks and financial institutions. From traditional corporate banking engagement with the bank, they expect to be enabled with multiple payment acceptance capabilities. Today’s merchants have banking relationships with multiple banks as they accept offline payment through multiple banking/ acquiring engagements, requiring the merchant to access & track their banking transactions and end-customer payments through multiple systems across different banks.

Banks and PSPs who act as merchant acquirers have been using legacy systems/processes for merchant onboarding and providing various merchant services. The traditional model of on-boarding a merchant/corporate takes several weeks and involves offline KYC management and physical verification before they become eligible to avail banking/merchant services.

Additionally, the merchants also have a large ecosystem of suppliers, partners, OEMs, with whom they need to ensure timely payment of the invoices and are able to track & control their cash-flows & profitability. These retail merchants would also require other banking services including loans, bill payment and fund transfer facilities as a corporate customer of the bank.

Merchants and banks have been facing stiff competition from their peers on account of rapid digitization and the way they are expected to service their customers. While merchants are expected to offer multiple and flexible payment methods to their customers, merchants demand a unified view and a single window system from the banks for all their banking services, including payments.

Across geographies, the retail sector is still largely dominated by neighborhood traditional retail stores, which represent dependability and trust. Today, a majority of the customer segment is smartphone enabled and opt for secure and flexible digital payment facilities over making a physical cash payment due to the recent shift to digital banking, lured by added benefits like cashback, rewards for using these payments methods. Customers now have open access to a diverse range of brands, competitive prices and access to customer reviews. This requires traditional retail merchants to leverage digital technologies to better engage with existing customers, expand their base, reduce operating costs and increase profitability.

A majority of retail merchant business has redefined the payment experience with supporting multifarious payment strategies making it fast and more convenient for their customers. The recent COVID pandemic has further impacted the retail market landscape by shifting the customer focus towards e-commerce stores which leads the traditional retail (brick-and-mortar) stores to move into online space i.e., electronic storefront to host website and advertise their products/goods for their customers.

All the above market requirements put the onus on the merchant acquiring entity (banks/ financial institution/ PSP) to consolidate all their banking services and also offer various value-added services for the merchants/corporates through a unified app/portal.

Globally, large banks are innovating in multiple ways to address the increased needs of their merchant/corporate customers. Some of the key focus areas that are being addressed through a unified app/system to acquire, manage and grow merchant portfolios are listed below:

Self On-boarding

Provisioning web-portal or mobile app to the merchants to on board themselves and their merchant services (supporting both physical retail store as well as e-commerce) with managing multiple hierarchies and on-boarding of multiple outlets.

Online KYC Verification Workflow

Supporting standard API interfaces for integrating with e-KYC systems; Government repository and Centralized Databases to perform online KYC verification process. Merchants would have the flexibility to upload the KYC documents and perform digital verification online allowing instant on-boarding.

Unified Dashboard

Empowering merchants with a unified dashboard providing insights of the daily payment collected by the merchant and summarizing the transaction details with an overview of payment transactions collected through multiple payment methods.

Unified Settlement view

Merchants can have a unified and transparent view of all settlements including charges paid to the bank/ acquiring institution.

Merchant E-Storefront to sell goods online

A flexible-storefront facility enabling traditional retail merchants to host their products/goods in the webstore. Store front can also offer merchant-specific settings, product inventory, discounts and promotional offers.

Invoice Presentment

Enabling merchants to create online invoices for their corporate customers and facilitate Request to Pay through SMS/ email links or QR Codes.

Corporate Bill Payment

Enabling utility and other bill payments to be made to various service providers and supporting multiple payment types including standing instructions/ recurring payments, provision to make payment through NEFT/RTGS, Credit Cards, UPI, Net Banking.

Merchant Transaction Banking

The web-portal/ mobile app offering transaction banking facility to help the merchant/ corporates manage their day-to-day banking activities including account enrolment; linking & managing of accounts with virtual accounts; enabling Payment On Behalf Of (POBO) facility to make merchant payments and Collection On Behalf Of (COBO) facility for receiving payment from their suppliers/vendors/partners/OEMs; payment transaction tracking; option to request overdraft.

Unified Merchant and Transaction Banking services

The ever-changing landscape in financial services has forced banks/financial institutions to look at how they service their Corporate/ Merchant customers. The demarcation between Merchant and Corporate/Transaction Banking services have been fast diminishing and Banks have been innovating and will continue to innovate to acquire, retain and grow their business to meet customer changing expectations.