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Table of Contents

Lead Story

All aboard the processing train

News

Industry Update

Credit card spending increases

Reading the tea leaves on Apple and NFC

Weighing in on alternative payments

Trade Association News

Features

GS Advisory Board:
Game changers for 2011 - Part 2

ISOMetrics:
Salaries in the payments industry

A checklist for advertising effectiveness

Selling Prepaid

Prepaid in brief

Rewards expand with BillShrink

The value of stored-value for ISOs and merchants

Views

Bold steps needed on fraud front

Patti Murphy
The Takoma Group

Retaining merchants during a portfolio acquisition

Daniel Federgreen
Analyst

Education

Street SmartsSM:
POS systems, yea or nay?

Ken Musante
Eureka Payments LLC

Selling in the digital age

Dale S. Laszig
Castles Technology Co. Ltd.

The decreasing primacy of price

Theodore Svoronos
Merchant University

Referrals: Do you play the numbers game?

Bill Pirtle
MPCT Publishing Co.

Marketing basics

Nicholas Cucci
Network Merchants Inc.

Company Profile

VeriCheck Inc.

New Products

Upward mobility, no strings attached

Pay Anywhere
North American Bancard

An app to cinch the deal

POS Portal Mobile App
POS Portal Inc.

Inspiration

The fine art - and science - of selling

Departments

10 Years ago in
The Green Sheet

Forum

Resource Guide

Datebook

Miscellaneous

2011 Calendar of events

Skyscraper Ad

The Green Sheet Online Edition

February 28, 2011  •  Issue 11:02:02

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Street SmartsSM

POS systems, yea or nay?

By Ken Musante

To get the merchant level salesperson (MLS) perspective on selling and supporting POS systems, I posted the following on GS Online's MLS Forum: "What do you all think about the virtual cash registers and software that turn your PC into a card-present processing solution?

"I know there are Payment Card Industry (PCI) Data Security Standard (DSS) issues that must be dealt with, but assuming the solution is PCI DSS compliant, what do you think?

"Many lower-cost solutions are available, not just for restaurants but also for retail merchants, that may be sold with or without the hardware. Many of these are encroaching on Micros, Aloha and Squirrel. Separately, some gateways have offered a card-present solution for years, but the functionality did not outweigh the monthly cost. Now with the ease of connecting and the enhanced functionality, many of these solutions deserve a second look. What's your experience? As always, feel free to expand the topic."

Compatibility issues

CCGUY started us out: "We have looked at software - POS solutions," he wrote. "The big gap is hardware. Where does the merchant get it from? And who deals with the hardware issues?

"I talked to a few companies, and they said ... '[Y]ou can get hardware anywhere ...' I do not want to deal with that. And then you have to explain to the merchant now that you use your PC for POS, you can not surf Google or do your email."

CCGUY described the obstacles MLSs must overcome before selling POS systems. With a terminal, the hardware and software are compatible. With a POS system, not only must you ensure the PC has up-to-date virus software, but you must also ensure the software does not conflict with the processing capabilities.

I received a related post, from someone who wished to remain anonymous, pointing out that diverse hardware and software are sold by dealers with little or no real knowledge or experience and "no reference to customer support or service."

A viable option

BER posted that MLS Forum members "have been talking, mumbling, and chatting about POS on the MLS level for a while now. With [an ISO] announcing their free POS program, I figure this may be a good time to discuss MLS involvement in POS.

"MerchantNation and I were talking about POSs. I mentioned a thought I had of a lower-priced, all-in-one POS with embedded software, not PC-based, that would cost less than half of a traditional system and lock merchants in.

"We talked possible solutions, service levels and service requirements. ... I've talked to POS guys on and off ... and it just seemed too involved a business for me to get into at this point [considering] support and logistics ... but I put it on my 'follow-up' list for later.

"My market is primed for another POS player; other than the guys for Micros and Pinnacle, there is just one company ... cleaning house with cash registers and POS. Just about every restaurant and bar in town has these guys for POS and Heartland or Mercury for processing when they open.

"The Harbortouch POS program, free or otherwise, seems like a good setup. Seems like something a lone-wolf, single MLS can sell and manage. Adding the free part, leads, upfronts to pay ETF, subagents and referrals, and an application so you can demo on your iPad ... seems like a homerun.

"I also think that having this offering will help legitimize an MLS with prospects, possible referral partners and current clients."

The question is will the POS system increase sales or allow you to close larger merchants that you cannot otherwise close, or will it lead to excessive service issues. BER feels "there is no way to deny the market potential for lower-cost POS that can be remotely supported with integrated payments. ... I think it's funny how some of you guys are selling on not doing POS ... I do see all the obstacles you guys mention ... but those are all barriers to entry. Fewer people in the game means a better piece of the pie for me."

One of BER's key comments was that the system can be supported remotely. POS systems that charge a monthly fee will succeed over others that do not, because the home office of the POS provider gets paid for solving user issues.

Sticking points

To give the other side equal time, I'm including MAKETELINC's perspective. "[H]ow much did you get per hour for your studying, setting up and supporting [a POS system]? How much did you get per hour for night time [not to mention nightmare] work? How many nights' sleep did you lose, and how much other business did you lose, because you were busy with this? How many agents dumped the equipment outside your office and canceled their bank accounts? How many want to sue you for lost business, and how many $300 claw-backs came your way?

"[No merchant] complained that you priced them lower than what they were paying, but when they add up the charges less the [monthly support fee of] $59.00 ... their effective rate is 50 to 60 basis points higher, or for that matter, even [100] basis points higher. [Before doing POS systems] you only took an hour on average per merchant, and your residuals were as good as they are elsewhere [different ISOs] on the same type of account, and none of the above stories happened to you - then bingo!

"If the above stories happened, and you are in denial suffering from Stockholm syndrome, then I will feel bad for you, but I think ... I have warned you of the possibilities, so after all, it may be your own doing. ... For those of you who feel [placing POS systems] is a lifetime opportunity to get rich quick, I say it is a free country; go for it, but as wise men would always advise, never lay all your eggs in one basket."

A pro's perspective

I reached out to Jared Isaacman, Chief Executive Officer of United Bank Card Inc. because UBC recently included a POS system that MLSs could provide to merchants at no cost. I told him I would appreciate his perspective on POS systems and asked, "Why you are now putting a major investment behind Harbortouch?"

"Well, to be honest, we have been putting a lot of money in Harbortouch since we founded the division back in 2007," he replied. "There is no question the future is in POS systems. You can see that trend in all forms of technology.

"People want more features in one device. Integration makes our lives easier. In our present world we carry a cell phone that does email, takes pictures and plays music and video. The alternative would be lots of separate devices.

"We no longer use fax machines as much because email accomplishes so much more, and it's integrated into our computer. The same applies with POS systems. A credit card machine just runs credit cards.

"A POS system runs the entire business - from order entry, inventory, employee operations, marketing, credit card processing, cash management, reservations, etc.

"The list of features is overwhelming, but the point is businesses are more efficient when using a POS system. That is clearly why so many of the largest national chains, in both retail and hospitality, use POS systems. As costs come down, it will be only natural for all businesses to take advantage of this technology.

"That is why we started our free POS initiative. We brought those costs down by becoming a software development and an actual hardware manufacturing company. Once we were able to achieve the price point we wanted, it was only natural to include it in our already successful free equipment program."

I mentioned to Isaacman my belief that so long as there is a monthly service fee, systems like Harbortouch will work because you have a vested interest in maintaining them.

He replied, "Well, there is no question that you have to have some form of a service or maintenance agreement. The systems are more powerful and feature rich than a regular-old credit card terminal, so with that come more support obligations. The support we provide at Harbortouch includes on-site installation, training, repair, replacement, remote data backups, remote management, priority swaps of defective equipment, wiring, etc.

"We are completely turnkey. This level of service is essential, and we are not new at it. We have been doing it this way since we first got involved with POS systems several years ago. Also, considering we are placing the system at the merchant's location for no charge, we have a very vested interest in assuring its proper function.

"If the POS system stops working, we are then unable to receive credit card transactions that are core to our return on investment. Basically, when a merchant receives our free POS system they are getting a lifetime warranty with it. As long as the merchant is processing with UBC and under our service agreement, the system will always be well-maintained."

I then asked Isaacman, "The solution also attracts a larger more sophisticated merchant, correct?"

"There is no question that higher volume and better quality merchants utilize a POS system," he said. "These are merchants that do enough business to recognize all of the efficiency gains that come with POS systems. Over the years, we have noticed substantially higher processing volumes and much lower attrition with merchants utilizing our Harbortouch product."

Inevitable alternative

We should all learn about POS systems. They are coming and are right for many merchants and business types. By understanding when to provide a POS system and how to offer it such that you are able to connect the merchant and the POS system installer directly, you can be ahead of your competition.

Get to know the variety of solutions available. Get to know POS dealers in your area, and understand if they are referral sources or competition.

Thank you to BER and MAKETELINC for letting me use their posts for this article, and to Jared for his comments. In closing, when in doubt, sell something.

Ken Musante is President of Eureka Payments LLC. Contact him by phone at 707-476-0573 or by email at kenm@eurekapayments.com. For more information, visit www.eurekapayments.com.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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