Back when the POS was all about cash, checks, and credit, who really cared about payment processing platforms? Today's bevy of payment options has changed everything.
When's the last time one of your salesclerks asked a customer if they'd be paying with cash or credit? It's probably been a few years. If it's been that long since you analyzed your payment processing platform, perhaps you should rearrange your priorities. The payment processing space has changed at pace with the payment options now available to consumers, and as your customers' choices continue to evolve, so will your payment processing needs.
Payment Processing Systems Are Ripe For Upgrade
Johann Dreyer, CEO of Mosaic Software (Deerfield Beach, FL), says retailers' network infrastructures have paved the way for adoption of modern payment processing platforms. "We have seen that a number of retailers grew very quickly over the last five years in the United States. Not too long before that, retailers did not have store networks to connect them to the home office. The infrastructure was not there. In most cases, communication was limited to a dial-up at the end of the day," he explains. Because of this, Dreyer says retailers typically went to an ISO (independent sales organization), acquired terminals for their stores, and dialed the processor directly from the store. "With no corporate network, that was all they knew to do," he says. Over the course of the last five years though, networks like frame relays and DSLs (digital subscriber lines) have been installed, changing retail's entire approach to internal and third party communication. "But the stand-alone, dial-up approach to payment processing remains," says Dreyer. "We have the opportunity to find those retailers, eliminate their stand-alone machines, and get their payment processing systems set up on the corporate network."
Mark Johnson, VP of retail solutions sales at ACI Worldwide (Omaha, NE), says the popularity of many different forms of stored value cards has driven change in the retailer's perception of outsourced payment processing. "Stored value cards have been an active area for three to five years, and their widespread acceptance has changed the payment processing landscape," he says. Retailers that don't have them yet want them, and smart cards, already popular in Europe, are getting in position to have the same impact in the United States that stored value cards did. "Look for a solution that handles the full suite of payment options," says Johnson. "People tend to deal with the problem staring them in the face instead of looking beyond that to what they want to do a year or two years from now."
Driving Down The Cost Of Payment Processing
As payment acceptance options grow, so do the number of players in the space looking for a piece of the action. When they first began to appear, many retailers jumped right to a third party provider to implement them quickly. Now they're counting the costs and realizing they can do it less expensively in-house. While bringing stored value program management in-house requires a large up-front investment, most retailers do it in order to drive long-term payment processing costs down.
Retailers can also cut out middlemen to reduce costs. "If you're a growing enterprise, you can drive cost out of the situation by looking at your payments and analyzing where your heaviest transaction loads are going," says Johnson. "For instance, if you have a large chunk of payments going to Visa, you can cut the gateway processor out of the equation and go straight to Visa, eliminating payment of a middleman for handling the transaction," he says. Lately, American Express and Discover have been more willing to work directly with certain retailers, and Visa and MasterCard have adjusted their rates to allow the same.
Paul Garcia, CEO of Global Payments (Atlanta), gives retailers a sobering reminder of just how much sales revenue is being filtered through outsourced hands. "Nationally, 30% of retail transactions are cash, meaning 70% are some other form [debit, credit, check, stored value, etc.]. That percentage is flowing through the retailer's payment processing configuration," says Garcia. "This gives the payment processor plenty of opportunity to do a very good job or a very bad job. It's like picking a surgeon - you should do your due diligence."
Choose Your Partners Wisely
A few years ago, retailers didn't have much choice in payment processing platforms. They often simply went along with whatever company partnered with their POS software vendor. Now, thanks to open systems and an increase in types of payment, retailers have plenty of choice. But, what should they be looking for? "How quickly your provider gives you access to your money, what kind of reporting they can offer, and what kind of job they do protecting you from charge backs are three important areas to consider," says Garcia. Indeed, reporting features can unlock a wealth of transaction data, such as charge backs and returns per store. This kind of data can support LP (loss prevention) initiatives by helping to uncover fraud and reveal customer service issues.
Gone are the days of entrusting your POS software provider or integrator to the design of your payment processing platform. As creative non-cash payment methods continue to surface, the payment processing industry will become even bigger, giving you more options and control of your hard-earned sales revenue.