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Insights and Expertise
ChapterTitle
StreetSmarts SM

Are you selling products or processing?

By Allen Kopelman The payments industry is changing rapidly; companies
Nationwide Payment Systems Inc. that do not have technology will not be around in five
years. ISOs need to move fast and build or acquire soft-
he payments industry is at a crossroads. On one ware companies. Partnering is not enough and not a good
side, ISOs are developing their own gateways, strategy. What's to prevent a third-party partner from sell-
software and POS systems. On the other side, ing down the road and seeing the new owners switch the
T formerly "processor agnostic" third-party pro- merchant accounts and monetize the payment revenue?
viders are stealing accounts from merchant acquirers and
making payment processing a mandatory part of their Remember when Lightspeed switched their (our) mer-
products and services. chants to Stripe? Merchants wanting to keep their current
processor had to pay $400 or 50 basis points, whichever
Protect your residuals was greater. It didn't make financial sense for merchants
to stay with us, so they left, and there was nothing we
Want to guess what we'd tell a third-party service pro- could do about it.
vider that promises never to touch our accounts? Some
of it is not printable. Can you blame us for being jaded, Protect your business
after seeing the same movie repeatedly? Agnostic systems
have hurt our agents, stolen our residuals, and hog-tied Terminals are still around, but hardware sales in general
our merchants into long-term contracts with no price pro- are going away. Toast, original equipment manufacturers
tection, as they can raise prices whenever they want. (OEMs), and other companies offer hardware-as-a-service
(HaaS) and software-as-a-service (SaaS). This approach
People who have only been in the business for a few years enables merchants to continuously refresh their technol-
may not be aware that the days of selling agnostic soft- ogy without fear of obsolescence. It shifts the focus from
ware are fading. News flash: merchant level salespeople simple mechanisms to solving problems and helping mer-
(MLSs) need to work with ISOs that fully own their tech- chants run a business.
nology stacks. While you may make less money upfront
and on residuals, you'll protect your long-term residual At a time when any company can sell software to your
income. These ISOs provide a safe harbor for selling with- customers online, it's time to figure out what you're going
out the threat of lost accounts and stolen residuals. to sell and how you're going to sell it and build your busi-
ness around a few products. Do you think Toast, Square
Protect your valuations or Stripe users care what rate they're paying? They're buy-
ing a product.
In the current environment, having a portfolio of coun-
tertop terminal merchants is worth less than having a Product or processing?
portfolio of merchants using non-agnostic software or
POS systems. MLSs need to protect their valuations by In my recent presentation at the Southeast Acquirers As-
working with companies that offer a full suite of in-house sociation, I asked people if Toast sells processing and
solutions. almost everyone in my session raised their hands. Toast
does not sell processing. They sell Toast with very high
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