KBW Talks Payment Facilitators: A New Mobile Payments Opportunity?

March 4, 2019         By: Steven Anderson

We’ve seen a lot of new and exciting developments on the mobile payments front. Paying for things before you leave your car, using your smartphone as a way to try on clothes and buy them from the same interface with augmented reality…the list goes on. A new potential field has emerged, though, as indicated by a report sent our way from Keefe, Bruyette and Woods (KBW), who recently discussed the notion of the payment facilitator (PF) and their impact on the mobile payments field.

First, KBW offered background on just what a PF is and what it does. There are currently 188 such firms out there, the report noted, and that compares extremely favorably to the thousands of independent software vendors (ISVs) out there. ISVs have proven to be a “solid tailwind” for merchant acquiring operations, but merchant acquirers may have a serious concern as more ISVs turn into PF operations instead. Some major names already account themselves as PF firms, including PayPal and Square.

That there are 188 such firms around shows this is a trend still in the early days, but KBW figures that PF operations could benefit around half of the 22,000 operations out there that specialize in software as a service (SaaS) operations for business-to-business markets.

There are real opportunities for PF firms to make headway in the market—just look at PayPal’s success over the last few years—yet there are risks as well, as PayPal has also demonstrated. Fraud, chargebacks, and the intense need for the best in data security at all times are just some of the hazards a PF can face.

We can see from the overall landscape there’s a lot of value in being a PF, but getting into the market may prove a bigger challenge than a lot of firms expect. With 188 firms already in play, we may not have a whole lot of room left before mergers, acquisitions, and outright closures start taking effect and setting the bar for market access too high without some kind of really innovative idea.

Still, for ISVs looking to branch out, becoming a PF could be just the ticket. We’ve seen enough value in the mobile payments sector to make it worth considering, that much is clear.