Randy Guard, chief marketing officer and product officer at Spreedly, told PYMNTS that merchant aggregators are confronted with a host of challenges when helping their merchant customers.
“These platforms, basically, offer software and services for thousands of merchant customers,” he said. “They are very good at what they offer but they are not fraud protection providers, they’re not payments providers, they’re not PCI scope experts. They want to abstract all of that — and offload it too.”
In describing the types of merchant aggregators, he noted that some aggregators or platforms (the terms might be used interchangeably), are focused on certain verticals (food delivery or ticketing and travel for example) or may extend horizontally to offer a specific service to merchants across any number of sectors (eCommerce, for example).
A few overarching themes govern aggregators no matter their focus, he told PYMNTS.
“Aggregators create a platform and an environment for businesses — whether they are restaurants, sell digital goods or offer association-based tools — so that they can add value or help extend the reach of their customers through a centralized solution,” he said. They typically operate by onboarding merchants (sometimes called sub-merchants) onto their platforms.
In some cases the platform will be the merchant of record; in that event the platform will take “ownership” of fund flows, of payouts. In other cases, there may be a hybrid model in place, where a provider such as Spreedly manages the payments orchestration needs of the platform, which needs enablement and connectivity. In breaking down those needs, he said, “enablement” boils down to being provided a universal vault, where Spreedly, in Guard’s words, “takes away PCI scope so that regulatory and compliance are not part of your job serving, for example, thousands of restaurants.”
And, he continued, “we’ll also provide the connectivity into hundreds of payment service providers, whether those are PSPs and gateways, or loyalty programs, or fraud providers … in short, all of those different connections in the network.” That level of connectivity, he said, means platforms don’t have to build or maintain that functionality themselves.
“All of this means that we’re decreasing the cost of ownership and cost of maintenance, and it dramatically increases the speed that they can bring on new merchant customers onto their platform,” Guard said.
These platforms, said Guard, in addition to orchestration, want payments optimization. The aggregators need to make sure that all of the payment methods — Google Pay, Apple Pay, digital wallets — on offer are up to date, and that transactions can be rerouted and retried as appropriate. They also need robust fraud protections brought on board, said Guard. By offloading these integrations to Spreedly, he said, the aggregators can in turn offer these same services to their own merchants — in ways that have positive ripple effects. Offering those services “not only increases the revenue of the platform itself, but it increases the comfort and the security of the merchant down the line,” said Guard.
“Some of these sub-merchants could be, I would say, local restaurants, for example. They’re not going to have a big IT shop where they want to go out and do cybersecurity and fraud management. So they love it when the platform can offer a valuable service like that to them.”
Offering a range of value-added services, he said, boosts merchant acquisition and retention rates for the aggregators through a good client experience. Scaling also becomes easier for the aggregator, he said, as merchants seek to embrace new geographies and local payment preferences.
The merchants, he said, “want to spend their development energy and their business energy on differentiation in their markets and the growth that they want. Therefore, they’re not going out to hire payments engineers or payments product managers to define and build and then maintain the payment stack,” he said. “They’re outsourcing that to us.”