We all thought (or at least hoped) that 2022 would be a very different kind of year, but we’re leaping from one crisis to the next with no relief in sight. Some are going as far as calling it “the year of catastrophe.” Others think that’s an overreaction, particularly in payments.
In a conversation with PYMNTS Karen Webster, Payroc CEO Jim Oberman said “I’ve been labeling it the year of increased uncertainty,” and there’s no shortage of it, with the June CPI coming in at 9.1%, the biggest interest rate hike nearly 30 years, and consumers cutting back.
Despite this, Oberman said the payments ecosystem is thriving — “cautiously thriving” to be precise — with the double dynamics of higher prices driving up revenues and more card purchasing driving up transaction volumes.
“Ultimately, business health is driven first by revenue and then margins,” he said, “so the current environment is actually not hurting payments overall. But I will cautiously say ‘yet’ because I think business failures, in our mind, in everybody’s mind, just have to increase, which is going to have a recessionary effect overall.”
That’s two uses of “cautiously,” so it’s not that Oberman doesn’t see the storm clouds but that there are too many unknowns yet to unfold. We’re not technically in a recession. Yet.
Additionally, the payments ecosystem itself is arguably more solid than it’s ever been, which shores up the flagging confidence of consumers and small businesses when they need it most.
“What’s dramatic about that is you have a system that’s now global and it’s reliable,” he said. “The card brands have put power and flexibility in the hands of consumer and buyer, and power in the hands of financial institutions who want to extend credit to the buyer or want to allow that buyer to access their funds [more easily] to pay for something.”
See also: Demand for Embedded Payments Ignites Fierce Competition Among POS Providers
Going Global, Paying Local
Inflation is on a global scale, but people are still shopping in all markets, making cross-border expansion a viable strategy to access new revenues when one’s home market is sagging.
With the U.S. dollar and the Euro at parity for the first time in 20 years, it’s a sign of both the challenges facing business and of the opportunity someone always finds in distressing times.
Oberman said “When travel opens up it will incent the whole world to travel. But moreover, I think it’s going to bring more to the reality of localization in accepting payments. I think payment processors that have the ability to do cross-border or go into the locale and operate are going to have a unique advantage” in optimizing their cost structure.
Whether or not foreign markets are on the table, the rising force of embedded payments is another way he sees companies capturing more sales, even during a downturn.
He said “the consumer and the business are going to be looking for flexible ways to pay, at the counter, in the aisle. You go in an Apple Store you’re paying in the aisle. Restaurants, you pay at the table. A business that has multiple ways to say to their customer: ‘you can buy from me and I’m going to make it really easy,’ is the way payments companies can use technology.”
Not a fan of applying the term “omnichannel” to new digital journeys that may start on a smartphone in a car and be completed curbside or on the front porch, it’s the Uberization of payments — making them invisible to the consumer — that also helps at times like this.
“It’s having the freedom to be able to not pay for something, but purchase something,” he said. “How can the payments industry make that experience even better with technology? There’s this new phenomenon … called tap on glass or tap on phone. Apple’s all in. Those on Android are all in. It’ll be interesting to see how that technology unfolds and what markets it serves well.”
See also: 44% of Consumers Say They Would Switch Merchants Over Card Surcharges
Let Free Markets Be Free
Another front in the imperfect storm of 2022 is consumer reaction to practices like credit card surcharges. PYMNTS research finds that nearly 60% of consumers will walk away from a transaction with a surcharge tacked on. Oberman is sanguine on this issue.
He said, “a lot of payments companies … are offering surcharge because merchant businesses are asking for it. Those of us that are in payments, we’re going to be neutral. If somebody wants dynamic currency conversion, auto updater … if they say that’s important, we’re going to build it and we’re going to sell it. We’ve got to give credit to the free market system.”
Calling the surcharge dustup “just one of the attributes in determining [the] decision about buying or paying for something,” he used a pancake analogy to make his point.
“I love pancakes, and I can go to the breakfast place three blocks away that’s closer, more convenient, or I can go a mile away and they’re a lot better pancakes,” he said. “I walk into the place a mile away where I like the better pancakes and they just surcharged my bill. Am I going to run from there because of that surcharge? Probably not.”
From pancakes to pan-global payments, his position is to take a deep breath and look at things on a longer timeline — what he called a “four-decade perspective” — and let free market forces decide whether surcharging fits in or gets phased out.
With possible recession bearing down, surcharging is just one aspect of how new capabilities can help merchants stay profitable without alienating consumers in so doing. An eCommerce merchant can “toggle” features to lower declines or increase fraud detection, for example.
“What the payment company’s got to do is build their technology so they can be agnostic and let the free market go,” he said, “let it rain and be prepared to do what the merchant’s asking, what the consumer’s asking, and what issuers and card brands are asking.”
Meanwhile, at least for the payments sector, he sees strong year-over-year growth and strong organic growth, “especially for those payment companies that are diversified, they don’t have any one concentration of risk.”
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