By Jeffrey Green (@epaymentsguy)
It’s tough these days for independent sales organizations (ISOs). In their heyday, their job was simple enough: sell payment terminals to merchants so they can accept debit and credit cards. Many ISOs made millions doing just that, as the market early on in the 1980s was wide open, with merchants hungry for a faster, more efficient means to accept payment.
Today, technology quickly is changing the sales scenario, and it’s creating difficulty for many ISOs, who must come up with business plans that deliver ongoing revenue. In 2014, ISOs will continue on their mission to adapt.
As part of our latest 12 Days of Christmas Series, PYMNTS.com is providing you with five important ongoing issues ISOs will face next year that will affect their decision-making:
1. Tablet-based point-of-sale (POS) systems – With more merchants replacing traditional standalone terminals, electronic cash registers and personal-computer-based systems with tablets containing POS software that supports functionality beyond what many small and mid-size merchants traditionally could afford, ISOs are finding revenue they may have earned from hardware sales and leasing arrangements more difficult to secure. Moreover, cloud-based processing is doing away with the need to house expensive servers, while consumer familiarity with tablets is making clerk POS software training relatively simplistic, if not automatic.
2. Specialization – Traditional hardware sales will not go away altogether, however, and ISOs may even see some resale opportunity from the various proprietary tablets available, though not all vendors will use ISOs as distributors. As such, many ISOs will look to other means to make a buck.
Some will look to specialize in specific product areas, such as merchant cash advances, gift cards, mobile wallets (such as Isis) or rewards/loyalty programs. They then can use their acquired expertise in that area, and their ability to talk the talk, as a competitive selling point and market differentiator.
3. Industry clean-up − As noted earlier, the integration of electronic card readers spawned a new industry that got many rich, but it also helped create some bad apples. It appears some more work to clean up the industry may be necessary, and expect those efforts to have an impact in 2014.
Bob Carr, CEO of Heartland Payment Systems and one of the industry veterans who helped form the Electronic Transactions Association, wrote in an open letter to the industry in October that there are “criminal practices currently taking place in our industry that are duplicitous and designed to prey upon merchant customers, and which I feel must change.” Among Carr’s allegations include tactics used by some ISOs and others in the acquiring industry to deliberately falsify interchange, misrepresent merchant category codes, and use extortion and intimidation to enhance merchant retention. Carr called for collaboration with the Federal Trade Commission to “stop these criminal practices.”
4. EMV – Despite the impact tablets will have on sales of traditional payment terminals, the impending October 2015 liability-shift mandate imposed by the major card brands related to EMV card acceptance will create continued churn in the market. And while growing tablet use is one result of that churn, not everyone will turn to the computer technology when they look to become EMV compliant. As such, millions of merchants, many in certain market niches, will be looking to EMV-compliant terminals that could generate sizable sales for those ISOs able to meet the demand appropriately.
5. PCI compliance – Compliance with the Payment Card Industry data security standards is not a new topic, but it is an ongoing one, and one that many merchants continue to ignore. As such, ISOs will play an ever-increasing role in trying to educate merchants on the benefits of complying, chief of which is reducing the scope of their exposure to liability should their systems become breached.
For more insights and information from PYMNTS Contributor Jeff Green, click here.
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