Editor’s note: What trends lie ahead for the payments industry in 2017? We’ve invited Kieran Hines of Ovum to highlight some important ideas for the coming year. Are you ready for retailers’ needs to shape your payment services practice? See what our guest blogger has to say.

As we closed 2016, it became very clear that 2017 will be another year of major change in the retail payments industry. One trend that will be particularly key will be the growing importance of merchants – and retailers in particular – in setting the innovation agenda for acquirers, payment gateways and other PSPs.

The rapid growth of digital commerce, and the convergence of the physical and digital channels among more traditional retail, will see the influence of merchants grow when it comes to the direction of innovation in payment services. There are three important factors behind this trend.

Firstly, the business of managing payments has become a top priority for merchants of all sizes and types. An Ovum survey of 450 merchants conducted in the third quarter of 2015 found that 74% of all retailers and B2C service businesses have a clearly defined strategy in relation to payments. At the same time, 78% of merchants are investing in new payment technologies, because they believe they will help them drive incremental sales.

In essence, where once payment acceptance was largely an operational necessity, it has now become a critical enabler of business growth.

Online and mobile commerce are key drivers of activity here, particularly in enabling any merchant with an online presence and the right PSP (and logistics) partners to successfully reach customers across international borders. Indeed, the attraction of enabling cross-border ecommerce has catalyzed developments in the online payment gateway market and wider acquiring ecosystem. In turn, this potential has seen cross-border digital commerce grow rapidly as a share of the total market. While estimates vary, Ovum believes that cross-border ecommerce by value has grown to reach around 20% of global ecommerce, and will continue to grow in the coming years.

The biggest changes though, are yet to come.

In the same way that the current wave of online payment services have focused on simplicity and speed of use for customers, merchants too are investing heavily in their own future service delivery. Relatively standalone channel offerings are becoming better integrated, even in mid-sized merchants, and the most sophisticated players are moving towards entirely re-imagined omnichannel digital-led customer journeys. Rather than focusing on marketing to drive sales conversions alone, developing deeper relationships through personalized services and – crucially – encouraging repeat business through the quality of the transaction experience will be key.

The expectations for payment service providers will be to support these experiences by being invisible to the customer as far as possible, while providing flexibility, high security, rapid settlement and added-value services. For PSPs, this will require continued investment and innovation to deliver. As payments become a less visible part of the transaction process, they will also shift the needle for how the industry develops and delivers services.

We have seen the first wave of consumer-led payment innovation, driven by convenience and new digital channels; the next one will be driven by merchants.