Although retail is the first vertical many VARs and MSPs look to for payment processing opportunities, there are lucrative possibilities in other verticals, too.
In last month’s issue of Business Solutions magazine, we posed the question, “Will 2014 be the year for mass mobile payments adoption?” and looked at the massive growth in smartphone usage along with analysts’ predictions about mobile payment transactions growing exponentially over the next couple of years. This month, we’re once again looking at trends in payment processing, but this time asking: “What kinds of payment processing opportunities exist for VARs/ MSPs selling to nonretail vertical markets?”
An example of a nonretail vertical is the professional services industry, which according to Commerce.gov comprises about 760,000 firms, makes up $1.3 trillion in revenue, and employs 7.8 million Americans. Some examples of subsectors of this vertical include accounting, architectural services, dental practices, engineering services, healthcare practices, legal services, and management consulting. What many of these businesses share is that they conduct business with multiple clients each day, and they generate lots of payment transactions. “Professional service providers are seeking ways to cut time and errors out of payment processing with payment solutions that integrate with accounting and ERP solutions,” says Brett Narlinger, senior VP of sales, Mercury Payment Systems. “VARs and MSPs have the opportunity to generate significant residual cash flow by offering seamless transaction processing services to their clients. Smart business owners realize that offering their clients a broader range of payment methods — including mobile payment, online billing, and traditional card payment — gives them a significant competitive advantage.”
Who’s The Decision Maker For Payment Processing Services?
Part of selling any new solution entails getting in front of the right decision maker. “The typical payment processing decision maker in a nonretail environment is the business owner,” says Bill Lodes, director of developer partnerships at TSYS. “For example, a veterinary software provider engages with the veterinarian who owns the practice. During this discussion, the VAR/MSP could inquire about the payment modules that complete the veterinary software provider’s offering.”
In larger nonretail environments, the CFO and CTO are two additional decision makers you need to engage, according to Todd Fuller, executive VP of business development at JetPay. “On the financial side, the CFO is the best target, and this person will be more interested in strategies that increase revenues or decrease expenses. The CTO is also a great target and will be most interested in how the technology features and benefits can help the organization.” Fuller advises VARs/MSPs to try to have both individuals on a call or in a meeting when possible because ultimately both decision makers will have to agree upon the proposed solution. “Approaching the sale through the IT side first will allow you to identify needs you can fill for the customer and will give you an understanding of the dynamics before involving the CFO,” adds Fuller. “Also, keep in mind that when meeting with C-level executives, they will expect you to get to the point quickly with solutions that directly address their business problems.”
Understand (And Outsmart) Your Payment Processing Competition
Although nonretail markets may be an overlooked opportunity for some VARs and MSPs, it doesn’t mean that you won’t run up against competition. “The biggest competitors VARs will run up against — besides other VAR competitors — are payment processing companies and banks, which typically offer nonintegrated solutions,” says Lodes. It’s important to recognize that VARs/ MSPs selling solutions already have an advantage. The key is for the VAR/MSP to remember its distinguishing advantage, which is providing a total solution.
“It is generally believed that traditional payment companies sell on cost and VARs sell on value,” says Brent Gephart, executive VP of NorsePayments. “A VAR may not necessarily be as competitive on pricing as a merchant services competitor, but selling a solution such as a POS system creates an opportunity for VARs to make money by becoming a recommended partner and offering a bundled solution.” Another option for resellers to overcome competition, according to Gephart, is to develop business partnerships with merchant services companies [e.g. banks, payment processors, and payment acquirers] and allow their sales experts to sell on the VAR’s behalf. “Even though the VAR will have to provide a percentage of the sale to the merchant rep, it’s better than losing out on the deal altogether,” he says.
JetPay’s Fuller agrees with this strategy and adds, “It’s uncommon to find processors that sell complementary IT solutions that address payroll, HR, and other areas within a business, which is another reason forming business partnerships creates an offering that’s so much more attractive to the end client and helps resellers build long-term business relationships.”
Another benefit of providing a more complete solution and experience to the client is that it makes customers less likely to nickel and dime resellers on price. “VARs can maintain healthy margins because their software, support, and other valuable business services are bundled in with the payment processing service,” says Gephart.
Fuller concurs with this advice and adds, “Once the payment processing discussion begins, ask the decision makers directly if there is anything they do not like or wish they could change about their current payment processing system or provider. Even if they say they are content with their current provider, remind them that rates are typically adjusted twice a year by the card brands, so getting a free price comparison from their existing merchant processing statements is a no-lose scenario.”
Payment Processing Pitfalls To Avoid
Any time you’re addressing a new market, it’s important to understand the business drivers, challenges of the market, and the value proposition you’re going to deliver. “Nonretail markets such as professional services are very fragmented, too, which means that VARs/MSPs need to first understand the infrastructure that is already in place before proposing their solution, which is a key prerequisite to earning the prospect’s respect as a trusted adviser,” says Narlinger.
Gephart advises VARs new to selling payment processing to be realistic about the learning curve required before they can compete on their own. “Although partnering with a payment processing company may initially mean settling for lower payment processing revenue, it enables inexperienced VARs to increase their margins over time as they develop their payment processing expertise,” he says.
The number one pitfall to avoid when selling payment processing, according to Lodes, is focusing too much on price. “When selling payment processing services, the discussion should be centered on the features and functionality of the entire solution,” he says. “Be sure to speak to the specific benefits the solution offers the customer. Not only will this approach shorten the sales cycle, but offering integration as a key point in your conversation allows you to address security and PCIcompliance benefits that a competitor selling a nonintegrated solution won’t address.”