Digitising payments for the cash-dominant micro, small and medium-sized merchant industry is a $19-trillion global opportunity.

Traditionally, merchants relied on physical cash to get paid and other manual processes to manage their businesses. Now, several digital solutions provided by fintech startups are available to help such businesses operate and grow.

A merchant is an individual or a small-scale business involved in the provision of goods or services to customers within, and sometimes, outside a particular country.

Merchant services providers primarily enable their clients to receive money from customers via several payment instruments—such as credit cards, mobile money, POS, bank transfers, etc.—usually from anywhere in the world.

Providers play the role of intermediary between a business wanting to receive funds and the customer looking to purchase goods or services. They typically require merchants to have accounts, either directly or through a referral partner, such as banks.

Beyond facilitating payments, however, merchant service providers offer other add-on services to businesses. These include solutions to track payments, manage inventory, understand business data, collect outstanding invoices, among others.

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Making merchant services a success

The promise of digital merchant payments is clear. However, how to succeed as a provider in the space isn’t.

Ifeoluwa ‘IO’ Orioke, Chief Commercial Officer at Flutterwave, advises that business-as-usual approaches that neglect the needs of merchants are likely to fail.

“As a payment technology company, you stand in the gap between merchants and their customers,” Orioke told TechCabal. “Making merchant payment a success starts with fully identifying your clients and understanding their needs.”

Providers also have to ensure that in addition to processing payments, they offer everything a merchant needs, available on a single platform.

“As a merchant, I shouldn’t have to use different vendors or platforms to receive money and pay third-party suppliers for instance. These services should be available through one dashboard,” he said.

Typically, SME-focused payment startups could offer digital toolkits that can help grow businesses, such as a website, inventory management dashboard, and other solutions.

An API (Application Programming Interface) is used to integrate two applications to communicate with each other in order to provide a seamless digital experience for users, and it plays an important role in merchant services.

In this context, a payment API provided by a fintech startup is used to integrate its solution within another existing application or website—usually an online store. This integration is carried out by software developers and allows merchants to accept payment from customers online via several electronic channels.

An overall rule regarding payment APIs is that developers should pay attention to their flexibility. In addition, Ifeoluwa says merchant services providers should make their APIs user-friendly and easy for developers. “It’s important to simplify the user journey from a customer perspective.”

How to assess merchant services providers

As a merchant, one of the key things to look out for when considering provider options, according to Ifeoluwa, is the security of payments made using the platform.

Industry compliance standards to look out for include the Payment Application Data Security Standard (PA-DSS) and the Payment Card Industry (PCI-DSS). Both refer to requirements set for companies to protect credit card information and to secure payment portals.

Equally important is that a merchant services provider offers more than just payment processing.

“Again, having multiple vendors doing different things isn’t cost-effective because I’d have to pay one developer to do several integrations,” Ifeoluwa explained. “It’s better to have one that gives me a robust solution with multiple features.”

Merchants also have to look out for fees. “Whether it’s you paying the charges or your customers, do a comparison of providers in the space to make sure you’re getting a competitive rate,” he said.

The payment API must be easy to integrate, typically within three to four working days, according to Ifeoluwa. In addition, the provider’s platform has to be responsive on different types of devices such as Android or iOS, laptop or mobile, etc., while transactions should be seamless and effective. “The provider has to commit to at least 98% uptime.”

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Michael Ajifowoke West Africa Reporter, TechCabal

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