Taking the $100 billion opportunity before it’s too late

In their 2021 Global Payments Report, McKinsey and Company identify[1] an $100 billion opportunity to provide small and medium enterprises (SMEs) with new payments services. By offering value-added services to SMEs, rather than outdated and low-function static payment terminals, merchant service providers (MSPs) have the opportunity to deepen and strengthen their relationships with SMEs.

McKinsey quantify this opportunity as a shift from owning 5-7% of a merchant’s software spend to owning as much as 40% of that spend.

In our new white paper, we argue that providing next-generation, flexible and smart mobile point of sale (POS) devices is more than just a revenue opportunity: providing such devices will also help MSPs solve the long-standing problem of customer churn.

Up to 25% of merchants switch their acquiring relationship from one year to the next in pursuit of lower costs, viewing acquiring as a commodity service. This can have a dramatic, cyclical effect on MSP revenues, making it hard for MSPs to plan for growth as revenues and profits become unpredictable.

This situation is now getting worse as MSPs lose merchants not just to lower fees, but to richer, more capable product offerings.

The best MSPs will stop this “race to the bottom” by aiming to win a higher share of merchant software spend. This means delivering value-added solutions that enhance merchant loyalty to and reliance on their MSP and create more stable revenues and profits.

In From hardware to software: how smart POS devices are reinventing payments, we explain why the best way to deliver value for merchants from day one is to integrate a novel, secure technology stack that allows merchants to add and delete payments services quickly and safely.

At Handpoint, we have created an international platform with a novel architecture not available anywhere else. This fully-flexible, capable platform includes PAX smart POS terminals with payments, tokenization and API-enabled apps that run directly on-terminal or in the cloud.

Our proprietary APIs, developed in-house, fully secure all transactions with point-to-point encryption, enabling MSPs to bring services to market rapidly and securely.

Carpe Diem for MSPs

With proprietary research from PCM estimating[2] that the merchant services market will grow by 30% through 2026, there is a huge opportunity for MSPs to transform their businesses through the provision of next-generation, flexible and secure terminal architectures.

However, McKinsey estimate that MSPs have a window of just 1-2 years to renew their offerings or be left behind. As they state in the 2021 Global Payments Report, “With disruptive players already investing heavily in this arena, failure to move fast could come at a high cost in lost growth.”

Make sure your business doesn’t get left behind: download our white paper to find out more about how to transform your merchant offering.

[1] See The Global Payments Report 2021, McKinsey & Co.: https://www.mckinsey.com/industries/financial-services/our-insights/the-2021-mckinsey-global-payments-report

[2] See The Digital and Card Payments Yearbooks 2022 at www.paymentyearbooks.com