By Dee Karawadra
Editor's Note: In this column, we're looking back to when POS systems were new on the payments scene with an excerpt adapted from Impact PaySystem President and CEO Dee Karawadra's Street SmartsSM column published May 14, 2007, in issue 07:05:01. To read the full article, visit www.greensheet.com/emagazine.php?issue_number=070501&story_id=83.
Something has been generating buzz in the payments industry. Many people who are talking haven't seen it; few have demoed it. Some believe it is an elixir that will replenish the income that equipment leases used to generate; others think it is beyond the pale for merchant level salespeople (MLSs).
So, what is the buzz about? The POS system.
POS systems have been around for a while. But now more solutions are available for small to midsize merchants. Big names such as First Data Corp., HP and Microsoft Corp. are teaming up to put together their version of a POS system that will be distributed through First Data channels. Prominent ISOs like United Bank Card Inc. and Orion Payment Systems are also on the bandwagon.
One reason the POS system's time appears to have come is that Microsoft is in the game. Most people with computers use Microsoft's Excel, Word and Outlook applications routinely. Thus, Microsoft's Retail Management System software will be instantly familiar to them.
Also, MLSs hope selling and leasing POS systems will reinvigorate revenue streams on equipment, which have been running dry due to the over-saturation of free terminal programs. ISOs have been looking into alternative revenue generators for MLSs. To survive the "freebies," we ISOs and MLSs have to find niches. POS systems open the door to one such niche.
POS systems accommodate more than just payment processing ‒ for a price comparable to what a wireless terminal used to cost. This has created an opportunity for MLSs to provide an integrated solution for small to midsize merchants. What used to be cost prohibitive to them is now becoming very affordable.
Merchants spend from a few hundred dollars to a couple thousand dollars for a cash register system. A credit card terminal will run them another few hundred dollars; a back-office computer may cost $1,000; and accounting software will add another $300.
Before realizing it, merchants can easily spend over $5,000 on equipment. So why wouldn't they be interested in an integrated solution that takes care of the payment processing, accounting, inventory, back-office operations, sales tracking, customer management and much more – for less money?
Merchants get a one-stop shop for all their POS and back-office needs. This creates value. And offering a product that merchants value promotes loyalty. In addition, the POS system has not saturated the small to midsize merchant market.
From free equipment to zero transaction and statement fees, margins are shrinking. This has created a price war to the bottom. POS systems can bring back the hope of gaining margins by selling packaged value instead of price. With the POS system, MLSs are essentially saving the merchant time and money by providing a packaged solution.
Offering POS systems also gives new MLSs an opportunity to earn a living while building a residual base. MLSs will also have better leasing options than those traditionally offered. Now MLSs will be able to offer financing through companies such as General Electric Capital Corp.
I speak to agents daily who express frustrations with "free" equipment and cut-rate pricing on processing. This type of competition forces MLSs to focus on lowering merchant attrition. The POS system brings merit to the sales process. No longer will MLSs sell the same widgets competitors are giving away. Instead, they will be able to bring true value to merchants, providing a product that is unique and not easily replaced.
The temptation to switch processors to save a few pennies, once so easily done, will now come with repercussions, making a change in processors more thorny than rosy. Merchants will think twice before deciding a new offer is worth the trouble. A transition could damage a merchant's entire business system.
The POS system opportunity will have to overcome many hurdles before MLSs embrace it. The most important factors will be support, leasing options and a credible retail solution.
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