It should be no secret that payments is encroaching on POS’s territory. From white labeling and reselling POS solutions, to buying POS companies outright, banks and their acquiring channels view POS as a tourniquet for their payment churn woes. By that we mean that payments processing is a massively commoditized game of price matching: everyone runs around offering the same solution and he with the lowest rate wins the deal. As such churn is very high and a POS is much harder to replace when it’s bundled with payments (as the POS has operational implications when it’s yanked out).
Yet the cultures of the two organizations are drastically different and it becomes apparent when looking at two qualities.
First is product. All processing is virtually the same. No matter the type or size of merchant, the offering is very similar. Sure there are different card types and risks, but generally that has a lot of carry over to any merchant you can conceive. So the payments service you’d sell to a mall kiosk operator is the same you’d sell to a $500M retail chain. POS, on the other hand, couldn’t be more different. Feature complexity is tied directly to operations and businesses operate differently. That’s partially why there are so many POS companies out there – multiple niches and segments are hard for even well-funded incumbents to serve adequately. Because there’s such a large product difference, processors have immense difficulty appropriately and ethically selling POS.
Second is support. Many would argue that support in payments is merely lip service – that payments is as close to set-it-and-forget-it as one will get and thusly payments companies don’t emphasize their support operations. POS is a much more critical tool for business success, is more complex, and has traditionally come with 24/7 support models, including on-site expertise should a business be willing to pay. Payments companies are not set up this way. In fact we’ve noted on multiple occasions that POS companies too often receive the first support call as the merchant has learned their payments provider defines “support” much differently than they do. So somewhat related to product differences, payments companies are not built for the level of support needed to successfully manage POS (though there are tools helping them get there).
To heap even more skepticism on the notion that payments companies will successfully sell and support POS in the near term we turn to some anecdotes from the field. Our sources requested that they remain anonymous as they are often installation and support service providers for processor-bundled POS systems. More specifically, they accept installation work from a national network of POS and general retail technology installation dispatchers. A lot of their work comes from Toast, who is so concentrated on sales that they can’t keep up with their installation backlog, and Upserve, who has no field installers at all.
When a job is advertised for either Toast or Upserve, we take it. We do so because we have a really good feel for how that install is going to go; that’s because these POS companies require site surveys ahead of time. For instance, Toast does their own site surveys and provides us with the details, and Upserve will dispatch us to do a site survey before committing to anything greater. In this way we understand all of the X factors we’ll encounter before we get too far down the road.
This is a stark contrast from the work they get from banks and processors.
When we receive an advertisement (it’s an alert that a job is available, similar to how Uber and Lyft drivers receive requests) and the customer is Elavon, many of us think twice. If it’s Elavon, it’s likely going to be an NCR Silver job or one from Talech. In the case of either POS we’ve literally never seen a site survey done. Talech site surveys are nearly always ‘done’ by the bank rep. Bank reps don’t understand very much about networking, routers, cabling, or wifi. They get it wrong every time.
We have some inklings for why this occurs, but let’s turn to some specific anecdotes from one of our sources.
I know of about a dozen bank POS installs that have been done in my area. All of them have gone poorly with the exception of a handful that only had one or two terminals. On the last Talech installation, the bank rep had sold the merchant two Cradlepoint MBR routers which could only be located near the customer’s Comcast gateway. The site didn’t have strong enough wireless signal to reach the service area. The bank rep also sold the merchant kitchen printers and cash drawers they simply didn’t need. On top of all of that, the merchant was sold iPad Pro’s without the proper stands and all of the iPads shipped with Verizon 4G/LTE service. This is totally unnecessary if the merchant got a 4G/LTE modem to serve as the failover.
These experienced field technicians also find the same problem with processor support that merchants find. “When something goes wrong we reach out to the bank to figure what hardware has been installed, why it’s been installed, and then perform a gap-analysis to see what’s missing. When we’ve dialed the Clover support line, as an example, we get a prompt for a merchant ID. We pump this in and then the phone rolls over to some ISO rep’s cellphone, which is invariably on a golf course. It never fails.”
If this reads as a joke it shouldn’t: these are merchants whose livelihoods are on the line, and payments processors are not handling them properly. Why does this happen?
Payments culture.
Payments reps are given quotas. They’re not incentivized to successfully sell or support a POS, only to hit their payments numbers. So is it surprising that the rep will do anything to sell the system and attach their processing, even if there’s no fit? This of course creates a cascade of downstream problems.
- The processor is on the hook to deliver a POS that might not even physically work in-store. There’s a juggling act of hardware and installation services that follow, increasing the processor’s costs
- The customer acquisition cost (CAC) skyrockets as resources are levied to appease the merchant – all in an effort to keep the payments business, mind you, not because it’s the right thing to do
- Merchants learn to hate POS because they’ve had a terrible first experience, and this makes sales cycles shittier for everyone across the industry
Payments companies would make more money if they were more transparent. If street reps had visibility into POS sale and support costs, they might not put their employer on the hook all the time. If quotas were were tied to the length of time merchants kept their POS systems, we’d probably see some drastic changes in culture too.
Alas, transparency and payments are two words that hardly ever go together. When viewed in the context of the undeniable future of software and data, payments is still the tail wagging the dog.
