Without question, payments processing is consuming POS. And without hesitation, there are serious downsides in choosing a POS that only offers one payments processing option.
But, when done responsibly, there are great upsides in sourcing your POS and payments processing from the same provider. For evidence of that look at Lightspeed, a POS company that offers open processing options but recently launched their own payments “service”. While merchants don’t have to choose Lightspeed Payments, 40% of all new customers are. This blows away analyst expectations which prognosticated payments attach rates of 16%.
Now we very much doubt merchants understand the positive implications of choosing both POS and payments from the same provider, but let’s pretend they’re rational actors for a minute. In this case, here’s why merchants should consider choosing payments processing from their POS provider.
But only if that POS provider offers more than one payments option, mind you; if they only offer one processing option we’d run away quickly…
Data Insights
You wouldn’t know it, but there’s a lot of valuable data merchants can be collecting from their payment processors. POS systems, for the most part, dump the payments data. This is a dumb move, but the card networks (via PCI) have convinced them it’s a good idea. As a quick rundown, payments data:
- Tells you where your customers are coming from (i.e. Zip codes of residence)
- Tells you where else your customers are spending their money
- Tells you how much money your customers are spending at competitors
- Can be appended to customer contact information for marketing
All of this information can be turned into useful marketing software for merchants. But payments processors aren’t known for investing in innovation by any stretch of the imagination (it’s one of our major concerns for any piece of software owned by payments companies, by the way). That’s why many of them have partnered with Womply for some of these value adds.
Upserve has taken the value one step further, conjoining POS data with payments processing data. Taken together, Upserve can pinpoint menu items that are repeat favorites and those that are struggling. Yes, POS systems have reports (which no one looks at) which can tell you high and low sellers, but it doesn’t have this level of intelligence.
You couldn’t get these insights unless you paired POS and payments from the same provider. (Note: not all processors have made this data available. You would need to investigate the processor before believing this to be true).
Access to Capital
Merchants need loans; not all of them grow gangbusters with cashflow as generous as payments processing. Ironically as payments processing grew more popular, many of the processors realized they could extend loans to merchants and recoup the principal and interest out of the merchant’s settlement volume, lowering the risk of payback.
But Square took it one step further. In serving as the POS, Square was able to see the entire financial picture of the business (merchants still have 25% of their transactions come via cash or check tender types). Square applied some actuarial data science and voila, more loan volume with lower default rates.
An entity that is both the POS and processor can also find other, useful ways to extend capital.
The POS has access to employee workforce data through its clock ins. If employees need loans to cover their expenses, the POS company can determine when the employee will next work a shift and cash-advance the employee the funds. A payments balance sheet makes this more accessible since POS companies have conventionally been quite poor.
One Throat to Choke/Support
The world is unbundling, despite what POS players with walled gardens want you to believe. That is, consumers have a burgeoning number of choices in their lives and aren’t limited to half-baked solutions if they don’t want them. Merchants should, too.
In the case of payments, which is at the bottom of anyone’s list of value propositions, it’s better to have a provider responsive to your calls. And since most payments processors will simply blame your POS for their problems, it’s hard to do that when they’re also your POS provider.
When a party is both your POS and payments provider, issues should be solved more expeditiously. Instead of chasing down two parties, you now have one that can’t point the finger at anyone else. The hope would be that the payments provider inherited the support culture of the POS provider and not the other way around, of course.
Tighter Integrations
Lastly a provider of both POS and payments should be able to develop payments solutions that actually work.
- First Data has EMV that works with Clover
- Upserve has EMV that works with Upserve POS
- Toast has EMV that works with its POS
- Shift4 has SkyTab that works with its POS assets
- Global has a number of EMV solutions for its POS companies as well
Compare this to POS companies like NCR which can’t get Connected Payments to work regardless of when the liability shift happened.
When you own the POS, you have root access to the code and can, in theory, build much more integrated payments solutions. Not that payments solutions are all that complicated to build (and have often taken the path of least resistance despite the negative consequences for their customers) but still, it’s a theoretical positive for bundling the two from the same provider.
There are probably some other values we haven’t thought of as well, but this is a good list to start with. Of course, be incredibly mindful of POS companies that only offer one payments processing option; that can be a recipe for disaster.
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