By Tim McWeeney
ExaDigm Inc.
When parents enroll their children in Little League baseball, they don't go to the sporting goods store and buy hockey sticks and ice skates. This is analogous to the merchant level salesperson's (MLS's) job in the payments industry: Merchants in different vertical markets require distinct equipment and services to prosper and increase revenue.
Consider this scenario: A furniture retailer in an MLS's portfolio has six delivery drivers. Each needs to collect a percentage of the bill at the time of delivery. The average transaction is $800, and the drivers average 10 deliveries apiece per day. That's $48,000 a day for the merchant. Payments are collected in one of three ways:
Few customers in this example pay for furniture with cash. And the merchant dislikes getting bounced checks and stop payment orders. That leaves plastic. But the method the delivery drivers use to accept credit and debit cards is expensive, risky and becoming increasingly unacceptable to customers.
Drivers take customers' cards, phone the central office and relay card account numbers, expiration dates, card verification values, customer addresses, purchase amounts and so forth to order takers who key the information into desktop computers. Is this a practice that consumers find tolerable in this day and age?
Customers cannot be certain that drivers are not calling fraudsters to disclose their highly sensitive and personal account information. And even if drivers are honest, who knows if the order takers on the other end of the line are keying in the information correctly.
What if a $500 order is accidentally entered as $5,000? Most customers would notice such a discrepancy within days and likely think the merchant had ripped them off.
To alleviate such problems, MLSs should offer handheld, wireless terminal solutions to merchants who employ fleets. The drivers should be carrying portable terminals in order to swipe cards in the customers' presence and issue customers correct receipts at the POS. And it is easier for drivers to void transactions on the spot rather than issue refunds several days later.
Furthermore, wireless terminals that accept PIN debit will save merchants money. PIN debit transactions are guaranteed, nonrefundable, noncancellable and inexpensive. On typical PIN debit transactions of $1,000 or more, merchants are assessed the qualified swipe interchange rates, not the outrageously high rates for key-entered transactions.
Merchants are often unaware that cardholder limits on PIN debit purchases are quite a bit higher than cardholders' daily cash extraction limits. It is not uncommon to have several thousand dollars available to cardholders for PIN debit. That alone is reason enough for merchants to switch to wireless terminals.
ISOs want their merchant customer to be as low-risk as possible. Furniture retailers are typically considered high-risk primarily because of the future delivery aspect of the business.
But if MLSs can convince furniture merchants to go the wireless terminal route, transactions will likely be 95 percent swiped credit or PIN debit, which elevates the number of qualified transactions and reduces the incidence of chargebacks.
With a more secure and stable revenue stream, the risk model for merchants changes dramatically - from high to medium or even low. When processing is safe and reliable, far less chance exists of merchant accounts being saddled with reserves or deposits.
The ongoing recession will require MLSs to think more incisively and creatively about what products and services merchants really need. In the case of furniture retailers, it is up to MLSs to convince merchants it is wise to switch to wireless terminals. Wireless is as appropriate for furniture retailers as gloves and cleats are for Little Leaguers.
Tim McWeeney is Vice President, North American Sales for ExaDigm Inc., a leading provider of wireless, wired and modular POS terminal solutions. He is also a member of The Green Sheet advisory board. He can be reached at tim@exadigm.com.
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