PC POS: Changing Your Merchant Service Provider

The lack of transparency in the Retail Point of Sale (POS) industry for the small to mid-sized business retailer is extremely frustrating … not only for the small business CEO, but also for the multiple industry business players that need be synchronized in order for everything to work as advertised. Whether you are a small retail business evaluating POS solutions, or your profession requires you to sell in this marketplace, this murky infrastructure is surely causing you pain.

The Industry Players

NCR created the POS industry way back in 1884 (yes, 1884) with the introduction of the mechanical cash register. It was a much simpler time back then that allowed the merchant to deal with a single vendor for all their POS needs.  Now, there are several business sectors involved in the POS industry.  The software developer that developed and updates the POS software application, the Value Add Reseller (VAR) that sells, installs and supports the software & hardware, and the Merchant Service Provider.

POS software developers naturally partner with VARs (formerly and often still called Cash Register Dealers) giving them the ability to distribute their applications nationwide, but the merchant service provider has always been the outsider in this necessary alliance of POS business sectors.  Just like the spouse or significant other that is brought to the company XMAS party, the merchant service provider walking in the door of a retailer knows very little about the current POS relationships but by asking the right questions can add significant value to the equation that benefits everyone.

The Interchangeable Piece of the Puzzle

Merchants often times bring their own merchant service provider (MSP) to the party, but more commonly MSP sales personnel enter the POS equation while making sales calls on retail merchants.  After a rate review they can normally show significant savings on credit card processing fees, so at face value it looks like a good deal for all.  But if a rate review is the extent of the evaluation to-date it is a disservice to all parties to consummate a deal without further research.

The Merchant Services industry was created around the credit card terminal back in the early 1980s … the CC terminal was game-changing technology back in the day, but has seen its market share continually eroded by the increased capabilities and flexibility of today’s computers and mobile devices equipped with POS software.  Unfortunately many in the industry rode this credit card terminal cash cow for too long and ignored the PC POS industry that started emerging back in the mid 1990s.

So, you need to evaluate whether this money saving opportunity (switching MSPs) may cause you future frustration and business disruption.  It shouldn’t if you are working with a quality merchant service provider that has an infrastructure built to educate their personnel and support the POS merchant.

The Need to Know

OK, back to the party where this seemingly savvy sales professional is promising you significant savings … what else should you tell him to see if it is worth moving on to the dance floor?  If he is not asking you for the following information then you should proceed with concern:

POS Software Name and Version? – Knowing the POS application helps start off the compatibility investigation, and the POS version number determines PCI compliance giving the merchant service provider “piece of mind” that you have implemented industry mandated credit card security updates.

Who is your VAR? – Basically, who do you call for support and updates?  In most cases it is who you originally purchased the POS system from, and normally they need to be involved in the process of making the processor change.  These VARS want to be compensated for their time and normally your new merchant service partner is agreeable to cover “reasonable” fees associated with effecting the change.

The Transparency Dilemma

Business works because people make money.  So just because your POS system is compatible (BTW, in most cases it will be) according to your new friend from the merchant services industry, you could run into a business relationship roadblock.

Probably unbeknownst to you, your current merchant service provider that your VAR highly recommended when you inked the deal with him a year or two ago is paying your VAR basis points on every credit card transaction you run.  Not necessarily a bad thing if your merchant service partner is treating you as a valued client and educating you on other business building solutions that naturally evolve from the merchant services industry.

But, if it does make sense to make a change, a POS savvy merchant service company can turn things in to a “win-win” for all parties with the exception of your unresponsive merchant services company that has been regularly raising your rates.  You will probably get a call from them trying to save your account by offering to match your new rate quote, but pardon me, “consider what it took to get them to help you out.”  Consider the value that this new merchant service provider brought to your business and give them the deal assuming they give you the assurance of a smooth transition.  BTW, changing processors in a POS environment is not “rocket science” and good merchant services provider should have POS trained customer support staff dedicated to this process.

Hopefully this post has served its purpose of giving you a little better understanding of the POS ecosystem. Just to provide full disclosure, I have worked on both sides of the Point of Sale industry, starting out in the mid-90s with a couple of POS payment software developers, and I am currently employed by a merchant service provider that I believe is succeeding in being an eco-friendly payments processor in the small to mid-sized POS merchant community.  Feel free to ping me if I can provide some clarity to your POS payment questions.