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Education

Against this backdrop, payment technology providers
can start building a case to charge for technology rather
than the payment service. The opposite case can also be
made: if payments are free, why should merchants pay for
Legal ease: technology? The reality is that most payments technology
providers are not Silicon Valley unicorns that can run at a
loss for years and years.
Monetization of data

Payments providers have been hanging out at the POS for
decades focusing on cards, chargebacks and cardholder
Payment technology data. Meanwhile, they have not known what was in
the basket and countless other data breadcrumbs that
consumers leave at the POS. First technology providers
licensing – Part 2: and now merchants themselves know, beyond any doubt,
that one of the key assets of any business is the data set the
What should and business creates.
Setting aside public policy and legal issues associated
shouldn't be free? with privacy, monetization of merchant data is core to
many payment technology platforms. Indeed, payment
technology platforms are lacking if they do not take into
By Adam Atlas account the value of data for the merchant, the platform or
Attorney at Law the consumer. Depending on the scenario, the data may be
of greater value than the underlying payment transaction
and may open the door to creative pricing approaches.
nce upon a time, everything had a price. Then,
everything was free. Now everything has a
monthly subscription fee. As a payments tech- To be clear, to monetize data, a payment processor does
O nology developer, how does the arc from fees not need to access any more data than they are already
to freemium to death-by-subscriptions inform commercial accessing for their core service. For example, the processor
for an online merchant can create analytics pertaining
and legal planning?
to transaction size, time of day, issuing bank and other
The goal of this second article in a series on payment core payments data points that would add value to
technology licensing is to consider the legal and business the merchant. Where the merchant is willing to share
a bit more data, the product becomes that much more
considerations for various pricing models. New revenue
models are invented every day, so the ideas discussed valuable. In short, no pricing analysis is complete without
monetizing the underlying data.
here are by no means exhaustive. I hope they will jog
your imagination so you can develop your own winning Proof of work
formula.
This term is drawn from the world of cryptocurrencies in
Payments gone free which miners of cryptocurrency are entitled to a new unit
Increasingly, card processing fees are being shifted to of currency when they prove to the network that they have
consumers through programs such as cash discounting done a certain amount of work.
and surcharging. In the cash discount model, consumers
pay a posted price for goods or services and are entitled There is a lesson here for payments technology providers.
If the technology creates an efficiency of some kind, the
to a discount if they pay by cash. (The legalities of cash
discount are best saved for another article). licensor should attempt to quantify that efficiency and
consider weaving that proof of work into pricing. As a
merchant, it’s appealing to buy something that proves its
What is important for payment providers to consider is value—or that earns its value on the basis of verifiable
that merchants are being sold on the notion that payment
processing can be free—through cash discount and other data.
creative approaches. White label versus branded
Even where payment processing is not free to the Payments technology may benefit merchants, consumers
merchant, with some exceptions that are discussed in this or both. Licensors of such technology should reflect
article, there is a continuing compression of ISO margins, on whether they will reside behind the merchant—on a
meaning that money to be made for the simple act of white-label basis without any consumer-facing terms—or
acquiring a credit card payment is decreasing. as part of a direct relationship with the consumer.

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