Back then they didn’t want me, now I’m hot they all up on me
Or so go the lyrics by Mike Jones’ 2009 hit “Back Then”. I’ve inserted the video below so you can marvel at such visionary poetry from today’s generation.
As colorful as it may be, it properly encapsulates the thoughts folks at Harbortouch have no doubt had swimming in their heads the past few years. While point of sale and payments confluence seems a natural strategy today, it wasn’t always so apparent. There was one company that withstood the criticism and attacks to make the industry what it is, and that story deserves to be revisited.
In 2003, Harbortouch started with a free credit card terminal, borrowing inspiration from the cell phone market (if you recall, many telco carriers were willing to underwrite the cost of your cell phone in exchange for subscribing to their service). Says Brendan Lauber, CTO of Harbortouch, “There were probably some smaller operators out there who were flirting with the idea of a free terminal, but nobody was doing a free terminal at scale. Nobody implemented a nationwide sales program to move free terminals. Frankly there were a lot of upset legacy players who were getting fat on $59, $69 per month terminal leases and thought we were crazy.”
After the success of the terminal program Harbortouch expanded its efforts with electronic cash registers in 2009. Harbortouch struck a deal with Casio to tether the register with their processing services. This program started to prove it was viable to pair processing with more than just the conventional processing hardware. Which got Brendan and his team thinking about the next phase: could they do it with point of sale (POS)?
“It took some serious time to crack the POS nut,” Brendan admits. “We had to figure out where we could get reliable hardware. So there were many years of international travel, working with partners in Asia-Pacific to figure it out.” Even then, Brendan and Jared Isaacman, Harbortouch’s CEO, seriously questioned the economic viability of their model. “We knew we wanted to own the POS hardware and software, but we were sweating the economics. Would merchants pay for what we offered, and would we actually be able to make money on it?”
Eventually the investment paid off. Hardware prices dropped low enough and the sales teams realized – using data, of course – that the merchants signing up for their POS offering were more stable businesses than those which accepted the electronic cash register or free terminal. “It was a huge sigh of relief to have some numbers in 2011 and see that the years of effort weren’t for nothing,” explains Brendan.
But Harbortouch wasn’t out of the weeds yet.
Harbortouch had mostly been a second offering for its partners. “Our channel partners would lead with their existing POS solution because it was a $25,000 upfront payment. Our system was so cheap, relatively speaking, that it was hard to get our partners to pay much attention to it. I mean we moved units, but it was nothing like we originally wanted,” admits Brendan. “But we were still differentiated by truly bundling our POS and payments together. Other POS providers had integrations to a handful of processors with the requisite kick backs, but we were the first to have this highly structured program that would make it easier for channel partners.”
And over time this started paying off. “Once we crossed 2010 the market started believing in the ‘as-a-service model’. Cloud POS companies came in with consumer-grade tablets and wouldn’t even offer upfront pricing. The market was awash in marketing dollars from venture capitalists and that had a profound effect on changing the way merchants thought about pricing.”
As the market started changing its pricing model, Harbortouch’s bundled payments and POS started moving to the front of the channel partner lineup. “There was this nice confluence of events where the legacy POS providers were still charging large amounts upfront but the resellers were hearing about monthly payment options from their customers. We did well to stay in the game long enough to see the market swing our way,” Brendan posits.
Harbortouch still isn’t done pushing the status quo. They’re aggressively investing in new software features to make their POS more relevant to salons and larger restaurants, and are committed to improving their hardware, even as many of the cloud entrants defer to tablets. “We’ve always had a problem with consumer-grade hardware,” Brendan says. “You can probably get away with an Android tablet at a low-touch retail outlet, but especially for restaurants you want something purpose-built.” Brendan also mentions the advantage of using their own hardware for networking, so you can have reliable support features like heartbeat and not have to worry about “hacking into the backend for port access,” which some cloud POS companies found themselves doing the past few years.
All along the way the industry hated on Harbortouch. They hated that there was someone disrupting their revenue stream, even if it might be better for the customer. And now that the market is finally catching up to what Harbortouch saw long ago, the haters are all quietly copying the moves Harbortouch made.
At a time like this, scorching irony, not convincing argument, is needed.