Payments Is One Hell of A Drug


Imagine this scenario:

You’re a POS reseller. Your best trick is funneling merchants to your favorite payments partner where you receive a big kickback. Once you lock the merchant into the payments contract you sit back and receive ongoing payments for, well, doing nothing.

Sounds great, right?

Well all of sudden your POS provider changes ownership. The POS company gets purchased by a payments organization and the POS will now only support payments from the parent payments entity.

All your residuals (and carefree days) are over unless you’re willing to put in work… but you signed up for the payments residual specifically so you wouldn’t have to work. Now your portfolio is worth pennies on the dollar.

Sound familiar?

This, ladies and gentlemen, are symptoms of addiction.

Don’t believe us? Here’s a list of the behavioral symptoms of addiction:

  • Missing work/school
  • Work/school problems
  • Missing important engagements
  • Isolating/secretive about activities
  • Disrupted sleep patterns
  • Legal problems
  • Relationship/marital problems
  • Financial problems (e.g. always needing money)
  • Conversations dominated by using or drug/alcohol related topics

Now let’s see how the relevant symptoms of addiction are manifested in payments.

  • Missing work/school: dealers don’t properly service the merchant because they’re making so much money on payments. Dealers are missing the work they should be doing because payments processing softly whispers, “Don’t do work… Just use me… I’ll make all your troubles disappear…”
  • Work/school problems: just look at the massive work problem created when the POS provider was purchased. Because the dealer didn’t bother to stay involved in the merchant account, they’ve just lost years, and perhaps decades, of opportunity by ignoring their customers’ real needs
  • Missing important engagements: can you name a dealer who shows up to help their merchant improve? Or do they only show up when it’s time to renew the processing contract? You know the 95% that fall into this category…
  • Isolating/secretive about activities: dealers (and payments companies) don’t want you to know what payments should cost so they obfuscate the hell out of the payments statements. Random, arbitrary fees in your monthly statement? Par for the course
  • Disrupted sleep patterns: there have been many sleepless nights in M&A as everyone dreams of selling more and more payments
  • Legal problems: locked into a 4-year payments contract and getting abused? Better take it to court if you want out
  • Relationship/marital problems: good luck finding a merchant that doesn’t think there’s a problem with your average dealer
  • Conversations dominated by using or drug/alcohol related topics: payments quickly becomes the focus of any and every conversation. “Oh you’re shopping for a POS? How cute… But what about PAYMENTS?!”

When payments is earning more revenue per account than the POS – or any other merchant service for that matter – to believe anything else is prioritized is to believe the tail wags the dog. Ain’t gonna happen.

But POS dealers and payments agents are simply following in the footsteps of the payment processors. The large merchant acquirers will do anything to keep their payments businesses and can’t be bothered to think about a future that looks any different – even if it’s inevitable. First Data made a great strategic move in acquiring Clover, then gave up because they didn’t have the DNA to see it through.

The acquirers are just as addicted to payments.

Let us be the intervention you need.

If you don’t want to be in this position you need to start learning how to build other, defensible revenue streams. We’ve talked about some options in an earlier article, and there are many more bolt-ons that can be made available if your POS offering has an open and free API. But it’s critical that you, as the trusted advisor and VALUE ADDED RESELLER truly understand a merchant’s problems before you offer a solution. Demonstrate your value by not only recommending potential fixes but providing services on top of it.

We’re going to make this very clear.

Businesses that are getting funding in Silicon Valley are not getting into services. It’s not scalable enough for the West Coast investors to make a return. They are instead very focused on repeatable software models.

But if we only followed what Silicon Valley dictated nothing would get done. That groupthink doesn’t understand what happens in the real world, what happens in the flyover states they choose to ignore. Brick and mortar is middle America. It takes grit and perseverance. There are no ping pong tables or kegs in the office if you’re losing $1M a month. That’s make believe.

There is a huge opportunity for someone to capitalize on the services merchants haven’t been getting. Think about the transformational change for the entire industry if all of a sudden the channel started keeping merchants in business longer and proved it. When word got out the smarter merchants would say, “Yea I can buy this POS online but I need a local expert to help me get the most out of my business. Joe increased his revenue 5% by working with his local expert.”

We’re optimistically rooting for 95% of dealers to go under so business experts in the channel can step in and deliver actual value to merchants.

Someone needs to break the cycle of addiction. Who’s ready?