As concerns about a potential recession mount, payment companies are trying to provide as many merchant services as possible through a single gateway, in an effort to ease some of the burden that comes with managing economic challenges.
"We're trying to create freedom of choice, modularity and flexibility," said Kate Hampton, senior vice president of product for NMI, which acquired Agreement Express' payment products for an undisclosed amount near the end of 2022.
NMI plans to combine Agreement Express' technology with earlier partnerships and acquisitions to support a range of services from merchant sign-up to payment support for the independent software vendors, fintechs and payment facilitators that use NMI.
The payment company is making its move as businesses express concern about future economic stress, sparking a rush among payment firms to add technology while making it simpler to use. One of the last major economic upheavals — the abrupt lockdown at the start of the COVID-19 pandemic — forced many merchants to quickly put new technology in place to change to a digital or hybrid model. The next jolt to the economy may prompt a similar need to adapt, and vendors like NMI want to make that process as streamlined as possible.
At NMI, Agreement Express will add onboarding, underwriting and risk monitoring. That includes anti-money-laundering compliance, fraud screening, customizable risk scoring, automated data collection and other compliance.
By adding these services, merchants or NMI's payment company partners can combine risk management tasks with other underwriting tools with less effort, reducing the need for merchants to turn to other providers to manage their payments.
"Before, these partners could throw more bodies at it and get to support faster merchant underwriting," Hampton said. "That is not acceptable today."
NMI also partnered with Kount late last year to use artificial intelligence to improve fraud protection for e-commerce, mobile payments and other card-not-present transactions. In August, NMI and IRIS CRM, a firm NMI acquired last January, introduced a merchant management platform that allows NMI's partners to onboard merchants without leaving NMI's customer relationship management system.
An earlier acquisition of
In the year ahead, NMI plans to tie these products together more closely to create a single source for a larger variety of payments and services that NMI's network offers to merchants.
"It's about creating more value per merchant for our partners, to monetize payments in a smart manner and with less effort," Hampton said.
Small-business owners are already expressing anxiety about the economy.
Sixty-seven percent of small-to-medium sized business owners and executives believe a recession is likely in 2023, according to new research released on Tuesday by Provident Bank, which is based in Iselin, New Jersey. The research, which surveyed 1,000 U.S. small businesses, found inflation (16%), supply-chain issues (13%), rising wages (12%), trouble attracting and retaining talent (11%) and continued fallout from the pandemic (9%) would challenge economic performance in the coming year. The businesses also said inflation (57%), climate change (37%) and crime (28%) were the top issues facing Congress in the coming year.
There's a heightened sense of awareness of working capital requirements for businesses in the current environment, according to Brian Rafanello, senior vice president and head of treasury management for Provident Bank, adding those concerns connect to improving payment processing and treasury management. As such, the bank is focusing on products that automate daily deposits and collections, for the bank's small business clients and the firms that the clients engage with, such as suppliers.
"We're seeing more of our clients looking to improve operational efficiency," Rafanello said. "A lot of the work that's being done is to expedite payables, and migrate suppliers from paper."
The threat for the payment companies is merchants that are downsizing will look to cut providers for payment services.
Other payment companies have upgraded point-of-sale technology and links between payment acceptance and other merchant services.
"Firms like Stripe, Square and Adyen are making an easy experience for merchant onboarding an expectation now," Hampton said.
For merchant services providers and other payments firms to attract and retain clients as a potential economic downturn looms, they need to be able to offer a variety of services to meet merchants' needs, have the ability to quickly roll out new features, and have a plan for how to discount their services if the situation calls for it, said Daniel Keyes, a senior analyst at Javelin Strategy & Research.
"Offering a number of services ranging from payments acceptance to lending to shipping fulfillment makes a provider more appealing," Keyes said, adding this has become a fairly common practice.
Where providers can stand out is their ability to quickly build and roll out new services as they're needed, something some did better than others during the early days of the pandemic, Keyes said.
"Quickly meeting merchants' needs can help with retention and acquisition, as can offering temporary discounts and promotions in the event of economic issues, since that can build loyalty and attract merchants looking to lower costs," Keyes said.
