Payments That Go Beyond Payments

“Payments-as-a-Service.” It’s a term that many in the industry have started to use, but no one has quite nailed down a clear definition of it.

Henry Helgeson, Co-Founder and CEO of Cayan, believes that to do so, a company has to look at payments more abstractly — and less myopically — than others.

While the process of payments has traditionally been viewed as being limited to what takes place within the “box on the countertop” at a merchant, Helgeson explains that Payments-as-a-Service goes well past that.

“It really has to tie into a much bigger back end system,” he says, “and it’s not a world where you can just send a transaction directly to a credit card processor and call it a day. This is a world where you really need a sophisticated system — part of which is a payment gateway — to handle all these new tender types.”

In a recent discussion with MPD CEO Karen Webster, Helgeson explained that his company defines Payments-as-a-Service as “any different payment types that can be used in retail with any form factor.”

Meaning that it’s not just about Visa or MasterCard-branded NFC transactions or credit and debit transactions, but “everything from the new wallet providers,” says Helgeson (such as Apple Pay, Android Pay, Chase Pay, LevelUp, PayPal, and so forth), to coupons and offers and loyalty, all of which — although they’re not traditionally thought of as payment methods — consumers do use when making purchases.

That makes payments more complicated for merchants. Omnichannel — which Helgeson calls  “the most overused and least understood term in the industry right now” — is a key contributor to that confusion – something that, in concept, all merchants want to be able to do, but for which there’s no real clear definition or roadmap.

“Omnichannel is about being able to enable and accommodate all types of payments – including loyalty and coupons – across all channels. That means that you can’t be in the Payments-as-a-Service game without being able to serve all of the merchants’ needs, both card-present and card-not-present, which, frankly needs to be recast as consumer-present and consumer-not-present,” he tells Webster. “All of those are now in scope for any provider who wants to be in this space and serve merchants.”

And Helgeson says that means being able to help merchants address the “waves” of change that are hitting them, waves that Helgeson says will materially change their business – and are no longer “optional.”

“First there’s security, then there’s EMV,” Helgeson says. “Then, there’s NFC, and Version 2 of NFC, which is going to include new payment methods or tender types like offers, coupons, discounts and loyalty — which we’re starting to see with some implementations of Apple Pay.” All things that Helgeson says require merchants to “retool” their systems.

“It’s very difficult to make this stuff work,” he asserts.

Making it work, from Cayan’s perspective, is what gets Helgeson and his team out of bed every morning – helping merchants future proof their business at the same time they help them manage all of the legacy systems and applications that run the back end of their businesses today. From a practical and technical perspective, it starts with what Helgeson describes as a creating “very abstract” API for POS developers to use.

“It’s very simple for the POS developers to implement and very powerful,” he tells Webster, and it provides the ability “to make changes to it and bring new payment types and tender types to the merchant’s countertop without breaking their POS infrastructure.”

That issue, attests Helgeson, is really where the biggest challenge is in mobile payments.

“We can do payments very well as an industry,” he says, “but as soon as you add a coupon or an offer or a discount to that NFC transaction or POR transaction, you have to do surgery on the entire POS infrastructure.”

That distinction speaks to what Helgeson views as misconception about Payments-as-a-Service: That it’s only about payments.

“Payments already works today,” he remarks. “You don’t have to change payments or change the form factor to really add value. There’s room for improvement, but there aren’t leaps and bounds we can take in making payments better.”

What is broken, according to Helgeson, is gifts, and loyalty, and offers, and coupons.

Consumers “don’t carry paper,” he continues, nor do they “want to have 15 different applications in their phone.” And merchants, meanwhile, “don’t want to only be able to use one platform versus another.”

What the industry needs with regards to Payments-as-a-Service — and what Cayan is working toward, notes Helgeson, is “a seamless commerce experience” where those needs on both the consumer and merchant ends can be solved in order to drive consumer behavior.

“If you can do one-to-one marketing between a merchant’s physical location or eCommerce website and a device in a consumer’s hand,” he tells Webster, “that has huge amounts of potential to disrupt retail and put those merchants out in front.”

In contrast to a lot of developer platforms that are popping up in the space (Webster cites Visa and MasterCard’s platforms as a couple of recent examples), Helgeson describes Cayan’s role as more of an “enabler,” one that is working to connect to all the different systems “so the POS developer doesn’t have to.”

That task, for POS developers, is particularly more difficult in physical retail than it is in eCommerce.

Continues Helgeson: “To get these things to work requires a tremendous amount of development — and it’s not something that point of sale developers can take on, beyond one or two systems. It’s our belief that merchants aren’t going to want to propagate offers through one or two systems or one or two publishers; they’re going to want to get as many offers in front of as many eyeballs as possible — and that means utilizing multiple platforms.”

If any particular type of merchant understands the enormous potential of Payments-as-a-Service better than others, Helgeson believes that it is tier one retailers. In Cayan’s perspective, industry acceptance of the concept will “come from the top down into the SMBs.”

Where the company expects it will take off, says Helgeson, is in the “SMB-plus world” — i.e., among slightly larger-scale merchants that are small enough to be nimble but big enough that they possess the necessary infrastructure, back end and staff to manage the various platforms.

Among critical success factors for merchants that are looking to take the Payments-as-a-Service concept to market, Helgeson advises that they “[look] at companies that intend bring more than one offers platform.”

There are some companies that are trying to handle the offers and loyalty platforms themselves in addition to the acquirer doing so, explains Helgeson, “and that’s an entirely different business model.”

Cayan, as an acquirer itself, Helgeson tells Webster, has “never had to be in the position where we’re in front of the consumer. We’ve never been an offers publisher; we’ve never been a consumer app company. We’ve really been focused more on the merchant side of things.”

That puts Cayan in the position, he attests, to connect merchants into companies that do “play well” in the consumer-facing arena.

“It’s more about the vision and how companies are approaching this,” concludes Helgeson. “The ones that we think are going to win — and I think the merchants would probably agree — are those that are willing to work with many different companies.”

Henry Helgeson is one of the panelists at Innovation Project 2016, being held March 16-17, 2016, at Harvard University. He will share more insights on how modern technology enables payments innovation at the event.