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July 23, 2007 • Issue 07:07:02

A pandemic is sweeping POS terminals: Are you ready?

By Biff Matthews
CardWare International

The boxy, gray (or black) POS terminal will soon be the newest member of the technology has-beens club. Who now remembers using the once-ubiquitous old-fashioned cash registers with metal keys and ringing bells? Face it: The POS terminal is headed for the same fate.

Even sixth generation terminals can't meet all of the needs of today's merchants, much less tomorrow's. Increasingly, retailers require fully integrated, end-to-end retail solutions.

It is estimated that 95% of merchants have at least one terminal, and half of those have upgraded in the last two years or so. Merchant level salespeople (MLSs) who weren't in on that action aren't likely to gain a foothold, even with the lure of free terminals.

I am amazed at the number and variety of terminal manufacturers entering the U.S. market with low price points. They are coming in on the downside of a technology Bell curve with a steepening slope as payment processing functions migrate to a virtual environment. And that trend is unstoppable. Virtual terminals are widely accepted because they are online and eliminate certain issues with integration and Payment Card Industry Data Security Standard compliance. Virtual terminals also offer better and broader opportunities than proprietary software loaded onto an appliance.

Virtual terminals are easier for merchant employees to understand and use. And they are easier for MLSs to sell vis-ˆ-vis PC applications, because the quirks of PCs inevitably present issues. Virtual terminals are pleasantly cut-and-dry by comparison and are almost free of time-wasting nuisances.

Cooperation flowering for survival

Recently, VeriFone and Microsoft Corp. teamed to provide a fully integrated, end-to-end solution that incorporates credit card processing, accounting and ordering.

VeriFone brings the sophisticated credit card application; Microsoft contributes accounting and sales orders. Surely this will hasten the death spiral of VeriFone's own gray box. But one suspects the company fully appreciates that and has no problem with it.

The end result for MLSs is that the days of lucrative equipment placement and upgrades are nearing an end. We have encountered a technology "tipping point."

As a result, tomorrow's MLSs will need to develop new skill sets or partner with individuals or companies that can provide needed expertise.

MLSs will also have to show greater patience because the time from sale to implementation will be longer. They will need greater capital, too, because getting paid will take longer.

And there's more. MLSs will have to do more and better listening, learn to delve deeper, and understand the merchant's needs more fully. In addition, MLSs will have to have a greater understanding of business, in general, and the technology of accounting, specifically.

Effective partnering, which leverages the contacts (as well as the knowledge) of others, will be essential.

There will also be heightened specialization, with delineation by business type. MLSs will be specialists in grocery, hardware or automotive parts retailing, for example, because the respective business needs of those merchants will be that different.

Perhaps most notably, MLSs will have to have a long view of this business, with an eye toward sustainable residuals.

Foes emerging from the woodwork

The few opportunities that ever existed for big bucks will be tomorrow's eight-track tape player. And all of this will occur in an environment of competition, but not the type to which we're accustomed.

This competition will come not only from peers who step up and acquire in-depth knowledge, but also from software integrators, value-added resellers, hardware suppliers and accounting firms.

All of them will vie for business that was formerly the exclusive purview of today's MLSs.

The challenge is that salespeople for many integration companies and accounting firms already understand the longer sales cycle. They also have the capital to manage it.

It's inevitable that some MLSs will invest time, money and training to acquire new skills. Others will understand they can't be all things to everyone and will partner with firms that have complementary skills.

I predict that more than half of today's MLS population will exit the industry, moving on to different quick-dollar opportunities.

This will happen sooner if knowledge becomes codified, and state and federal regulators impose certifications, licensing, or both, as is the case with real estate agents. The old-standby terminal has been the industry's foundation. It was built on the migration from paper to electronics, with low price as the (recent) sweetener. It was custom-made for quick-hit equipment placement and good residuals based on the relationships created.

But the demise of the old-style gray box and the end of conventional MLS methods are imminent. The Bell curve describing the product's life cycle has effectively run its course.

In the recent past, a company could influence the curve with a significant new product or service. But, as technology evolved from one generation to the next, demands increased.

With price points converging, the purveyors of traditional POS equipment and virtual terminals have made the choice between them obvious for merchants. The future of those who service this industry is equally clear. end of article

Biff Matthews is President of Thirteen Inc., the parent company of CardWare International, based in Heath, Ohio. He is one of 12 founding members of the Electronic Transactions Association, serving on its board, advisory board and committees. Call him at 740-522-2150 or e-mail him at biff@13-inc.com.

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

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