Historically, the retail point of sale has been made up of a cash register, terminal, and printer.

But, as the cost of PCs decline and their processing power increases, a new trend has emerged: Windows-based-PC-based, POS software. We hear a lot about POS software but, if you're like many ISOs, you're thinking, "Why should I offer software? If I'm happy with terminal solutions, and my merchants are happy, why should I rock the boat?"

The reason is because your prospects want it. Merchants are driving change in the marketplace; they want payments integrated with, and to reside on, their primary data processing system. If your merchants haven't asked for a software solution yet, chances are they're going to ask you for it very soon, or they are already talking to someone else about it right now. According to Joe Gage, President and CEO of Go Software, merchants are approaching software vendors and saying, "This is how we will do business." Give us a solution or we will find someone else.

If you're skeptical, just take a stroll into any large, national retailer, such as JCPenney's or Wal-Mart. As is the case with many industries, change happens at the top of the market and you will not find a traditional terminal solution at the large national chains. There may be a device to capture the PIN number or swipe information, but there won't be a terminal dialing out. Integrating payments offers a large financial benefit and the large retailers are taking advantage of it.

Just what are the financial benefits?

Data entry, as we all know, costs time and money, and it leads to mistakes that cost even more time and money. Integrating the payment function eliminates redundant data entry into the primary data processing system. Additionally, the merchant is able to provide the customer a single receipt that contains the entire transaction (including the payment) and the merchant can track payments faster than with a hardware solution. These abilities can lead to better customer service and increased sales.

There is also the issue of reconciling. Merchants spend time at the end of each day reconciling their credit card terminal to the cash register; that's why the auto close/auto open came into existence. Merchants either don't want to or don't have the time to reconcile their payments. Using software can eliminate the reconciling, saving the merchant money, time, and employee hours.

Finally, a software solution requires just one phone line, and it does not have to be a dedicated phone line. And, there are the physical concerns: software does not require separate hardware, ribbons, cartridges, cable, or counter space.

That's great but...

You're probably thinking, "Yes, but they do need a PC and how am I going to justify that expense to my merchant?" Well, many merchants today already have a PC but, if they do not, that does not always mean they have to purchase one. They need only a piece of data processing equipment, such as a cash register, for the software to run on. If they do have a PC, one is enough. Much of the newer IBM and NCR equipment, such as the NCR 2127, are built on the PC/ Windows environment and the register can then "talk" to the PC located at some other area of the store.

OK, so it saves money, what else?

ISOs may have a hard time explaining the value of a software solution to merchants. Selling software does require some sales expertise because it has a higher functionality and it requires a sales professional who can demonstrate that functionality to the merchant. ISOs need to communicate to merchants that in addition to software saving the company money, it can also generate valuable data for merchants. Comprehensive reports are generated, and merchants can use the data from those reports to track payment patterns and demographics for target marketing, inventory control, or accounting purposes. POS software can also decrease fraud. Since the amount of the purchase is automatically authorized, the opportunity for an employee to enter an incorrect figure is diminished.

Another great thing about the PC/software based systems is the memory archive and retrieval capabilities. Transactions can be stored for 7 years, or more. The storage capabilities are only limited by the size of the merchant's hard drive. But, if a merchant decides to archive their data every year or two, they can save that data to disk and never run out of archive space!

Another example of the value of software applies to merchants who have both an Internet presence and a traditional storefront. Go Software, for example, requires just one license and the merchant can use that one license on one computer for both their brick and mortar store front as well as their Web store.

But, what may motivate you to sell software more than the financial and practical benefits, is the fact that if you don't, you will be left out in the cold! Other channels are taking the business: software providers already have a significant market share, cash register vendors are integrating software already, and companies are even leasing software, which is attractive to merchants and ISOs.

Perceived Barriers

There is a common misconception that if a merchant has difficulty using the software, he or she will have to call some sort of technical help line, and will be left in a labyrinth of customer service voice mail without ever getting the help needed. But, most software companies have excellent, fully staffed merchant help desks to avoid such debacles.

Another common objection to software is that it is too expensive. What ISOs need to keep in mind is that each year the cost of software stays relatively the same, while the power and functionality increases dramatically. It's very similar to the world of PCs where last year $1,000 bought a lot less power and memory than $1,000 this year.

Another barrier that may be keeping ISOs away from software is the perception that there is a lack of name recognition and they will have to educate the merchants on who the software company is. The truth is that while we all know about Hypercom, VeriFone, Lipman, Dassault, etc., many merchants do not. So, whether you go into a store offering ICVerify or Go Software or VeriFone, it's all the same to them.

What about upgrades, you ask? This is one of the best parts. The software industry has mimicked the terminal market. As Joe Gage, President and CEO of Go Software says, "Don't change the world unnecessarily." Many of the software companies provide terminal management software service. And the ISO doesn't have to do anything! The vendor handles the downloading direct to the merchant terminal, or the ISO can handle it if he or she wishes.

If you're still not sure if you should start offering software, ask yourself how much it costs to acquire a merchant and how long that merchant stays on your system. If your attrition rate is high, software could solve your problems. The perception among merchants is that it is harder to switch when you have software. In reality, it is not but this perception means that attrition rates are lower for software than hardware. Also, the password protection utilized in software solutions makes it virtually impossible for your merchant to switch without your knowledge.

OK. You've convinced me. Who should I sell to?

Well, according to Joe Gage, the direct marketing merchants are the easiest to sell because typically their transactions are not real-time. MO/TO and catalog merchants also offer a huge revenue opportunity. And don't forget the home-based business market of anywhere from 2 to 18 million merchants (depending on who you talk to). These companies already have a PC and database system, and selling them is a slam-dunk. And, of course, the up-and-running Internet merchant is ideal.

Now what?

You need to find a vendor!

ISOs should look for a company that can meet the needs of a variety of business types.

As GS readers know, in retail alone there are about 20 vertical markets including hard goods, soft goods, books, bottled goods, apparel, etc. And, each market has its own "system". For example, color, class, style, and size classify apparel. Therefore, processing software needs to be optimized for each different vendor. You may be thinking, "Great, now I have to learn 15 different software products so I can find the one that fits my prospect." Not true. All ISOs need to do is align themselves with a software vendor that serves all those markets. That way, the ISO only needs to know one company and that software provider does the work of finding the correct solution quickly, easily, and reliably.

ISOs must also look for POS software products that integrate credit, debit, check guarantee, and verification that are faster and offer more functionality than their hardware predecessors. They must also be easy to use and integrate, easy to upgrade, and offer cross-platform support.

When shopping around for a software vendor ISOs should also consider its compliance maintenance. They should look at the support with downloads, maintenance, etc., in the same way they do with hardware. The key is to find a company that does not reinvent the way the ISO functions in the financial service world, but complements the way you work today. The bottom line is that merchants want software and you can provide it without changing the way you work, so go give them what they want!

For more information about selling software, contact a software provider. The following article provides more information on the specific vendors.