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The Green Sheet Online Edition

September 12, 2016 • Issue 16:09:01

Street SmartsSM

To own or not to own the POS system sales process

By John Tucker
1st Capital Loans LLC

This past June, we lost futurist Alvin Toffler, who spent decades of his 87 years on earth discussing how technological innovation, development and advancement would shape our lives in important ways. Toffler said, "Technology is that great growling engine of change." I agree. Technology is changing our daily lives, as well as changing what happens at the POS.

This is why I want to continue the discussion of rebranding the merchant level salesperson (MLS) by delving further into how an MLSs can rebrand as technology sales professionals, or more specifically, leading in as experts in advanced POS technology.

Today, two main options for managing POS transactions are available to merchants in the retail, service, restaurant and hospitality industries: it's either an electronic cash register (ECR) or a feature-rich POS system. I recently polled the GS Online's MLS Forum for input on this discussion and in this article I will share more of their commentary.

Most relationships are partnerships

As an MLS, you are partnered with a registered ISO/merchant services provider to resell bankcard processing solutions to merchant prospects. Many MLSs who have rebranded to lead in with POS systems are partnered with various POS manufacturers and companies to resell specific POS systems. Some arrangements have MLSs controlling the entire sales cycle (which affords them more commission and control of the processing relationship). Other arrangements have the MLS acting as referral partners only; they just refer merchants to the POS manufacturer to complete the sales cycle in exchange for an upfront referral fee.

Some advocate owning the process

Some veterans of our industry believe MLSs should try to own as much of the POS system sales cycle as possible, to eliminate potential future disputes over revenues, residuals and client ownership. MLS Forum member Steve Norell provided lengthy commentary.

"This may sound tainted, but I'm fed up with most of the landscape as it pertains to POS," he wrote. "So here is my spin, either buy a POS software and make sure that only you can do the processing, or buy a POS reseller and make sure that they only process all merchants with you. You have to put some skin in the game so that you call the shots and not have to put up with the crap dished out by any of these POS system companies."

"If you are doing the processing for a merchant on a POS and the reseller of the POS wants the processing, then guess what? They are going to get it (the processing) and do you know why? Because Mercury (Vantiv), will do the integration for free and will meet or beat any price even if it's a penny over cost. If we all want to compete with these guys, then we as a group need to create our own integration that competes with companies such as Mercury, Datacap and others, to level the playing field. We are all going about this the wrong way, and the current method is a zero sum game."

CCGUY matched Steve Norell's sentiment. "I would agree with Steve that you have to own the POS system processes from A to Z: that is, become a POS reseller or buy one," CCGUY posted. "Control it all from soup to nuts. The POS dealers are in love with the processing money and all the money they are making by having merchants pay for software and PCI updates. Own it from A to Z, and you have 'Stickiness.'"

Some favor the traditional route

MLS Forum member DatacapSys (who represents Datacap Systems Inc., which is a major POS technology company) took exception to the comments from Steve Norell and CCGUY.

"Steve, why do you see Datacap as an enemy to the MLS community?" atacapSys wrote. "There are a lot of ISOs making a lot of money from Datacap integrated payments products. We do not get paid for any after-market support and 90 percent plus of the calls we take are not specifically due to our products.

"We have rental deals with a significant number of acquirers where they rent the product at wholesale prices, but must deliver the product through an authorized reseller. This is not to protect the reseller, but to protect Datacap. But by renting at the wholesale price, we provide the room necessary to markup that rental price to the merchant so that you can pay that difference to the reseller and protect your margins.

"We believe that ISOs and resellers have to play nicely in the sandbox in order for the integrated payments paradigm to pay dividends to all the parties. In our 32 years of selling integrated payments, we have found that the most successful programs were wrapped around cooperative programs where each party stayed in its own lane, took payment for the value they provided and let the other party make their money for the value-added services they provide.

"But you are right in that Datacap could make a lot of money if we took five cents on every transaction processed through our products, at least for a short while. The problem is that we'd then be in our partner's revenue stream and nobody would want to deal with us long term. Most of the folks that go down our path don't grasp either the complexities or costs of delivering a reliable, low support, productionized product.

"So we keep innovating, but it is challenging and quite expensive. Though as we think about that journey, names like ICVerify, Atomic, Rich Solutions, PCCharge, TPI, Smoky Mountain, etc., come to mind, which were all good competitors, but they are all gone. This gives us some confidence that we have built a sustainable business model."

The decision is up to you

So some vets believe that you should try to own as much of the POS system-related sales process (including the technology and supporting aspects) as possible. Others are more supportive of the traditional system of partnering with companies on a value-added basis, to allow them to be more hands-on with the service in particular, as it's seen as their specialty area.

There are advantages and disadvantages to both alternatives. More ownership usually means more risks, responsibilities and nuisances that must be managed. On the bright side, more ownership usually means more control, stability and higher revenues. Less ownership usually means lower revenues, lower levels of control and potentially lower stability. But you don't take on as many risks, responsibilities and headaches of the process.

So who is right and who is wrong? It's up to you to decide as you rebrand as technology sales professionals focused on selling advanced POS technology. Stay tuned for more discussion end of article

John Tucker is Managing Member of 1st Capital Loans LLC, as well as an M.B.A. graduate and holder of three bachelor's degrees in accounting, business management and journalism. Tucker also has over nine years of professional experience in commercial finance and business development. You can contact him by email at tucker@1stcapitalloans.com or by telephone at 586-480-2140.

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