Magazine Article | January 14, 2014

VARs, ISVs Rate The Payments Industry

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By Mike Monocello, editor-in-chief, Business Solutions magazine
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Exclusive research reveals how VARs and ISVs feel their payment processing partners are performing.

It’s been a few years now that the payments industry fully set its sights on the POS reseller market as a potential sales channel. The fact that POS resellers and independent software vendors (ISVs) own deep long-standing relationships with retailers makes them powerful trusted advisors when it comes to a retailer’s selection of a payment processor.

Business Solutions’ research shows that the payment processing business brought on through POS VARs or software developers (the “POS channel”) is kept on average for at least a year longer than business brought on through independent agents.

Additionally, the processing volume of accounts brought on through the POS channel is double (or higher) than that which is brought on via agents. In short, the POS channel gives the payments industry longer relationships with bigger higher-volume retailers than independent agents who peddle processing services and no POS technology. It’s no wonder the payments industry has been flooding events like RSPA RetailNOW to court resellers!

Rate your overall satisfaction with your payments processor partnerships.

Moreover, this is a mutually beneficial arrangement. Many POS VARs point to recurring credit card residuals as a key to growth and, in some cases, the only business line keeping their business from going under. It’s essentially free money on a monthly basis, and VARs love it.

No matter which side you’re on, the credit card industry equals big business, and there’s a lot of money up for grabs for everyone involved. With so much at stake, and to see how well the payments industry as a whole is doing in the eyes of POS resellers, Business Solutions recently conducted a survey of its POS VAR and ISV readers.

Where Are Payment Processors Doing Well?
The results of the survey, taken by 111 POS VARs and ISVs, shows that, in general, payment companies are offering the right services to the channel and treating them well.

With technological advancements rampant in the payments space, the survey revealed that nearly 80 percent of respondents felt their processing partners did very well to extremely well at assisting retailers accept new payment types.

Subscribe to Business Solutions magazineLet’s be honest, many POS VARs have little to no interest in learning the payments industry. After all, they’re retail technology specialists. Therefore, many POS VARs look to their payments partners to assist in on-boarding customers. Again, the payments industry received high marks. Eighty-two percent of survey respondents felt their processing partners were quite to extremely responsive during customer on-boarding. Similarly, once the initial relationship was established, 76 percent of respondents felt their processing partners were quite to extremely responsive with ongoing support of customers.

When it comes to understanding compliance and industry regulations, payments companies shined again. Approximately 65 percent of respondents deem their processing partners as quite to extremely helpful with keeping up to speed on the maze of regulations.

Finally, overall satisfaction of VARs with their payment processing partners is high. Eightyseven percent are moderately to extremely satisfied while only 4 percent show any level of dissatisfaction. (See the chart on page 40.)

All of these positive responses are quite significant and a little surprising, considering that many processing companies are new to the POS industry and had to develop internal departments and partner programs specifically for POS resellers.

What types of incentives do your processing partners offer?

Room For Improvement
Despite overall high praise for payments vendors, there are still areas needing attention. When asked which types of payments retailers want/need to accept that cannot currently be processed, 59.7 percent indicated “mobile payments.” Nearly 32 percent indicated “online payments.” Considering the hard trend of increasing retail transactions via mobile devices and online, it’s clear that payments companies not able to handle such transactions need to step up their game or be left behind.

When asked how helpful their payments processor is with promoting their business potential and increasing visibility within their respective markets, only 14 percent responded “extremely helpful.” Nearly 32 percent responded “moderately helpful.”

As mentioned earlier, it’s clear that payments companies have placed a high level of importance on, and invested time and resources in, the POS channel. Based on the results of this survey, their efforts have been effective and well-received.

That said, these positive findings raise a couple questions in my mind. First, you hear a lot about how processors are often selected based on who can offer better rates. With the POS channel so happy with its partners, will jumping ship for lower rates be a thing of the past?

Additionally, if the POS channel is happy with its partners, what do processors entering the market or looking to win market share have to offer to pull those channel partners away from their existing payments companies?

I’m sure the answers to these questions will become clear in the near future. Clearly, those payment companies who’ve been slow to create VAR programs and enter the market face a steep challenge. That said, with how much money is at stake, I don’t foresee the challenge as keeping newcomers from entering the market and setting their sights on the POS channel. We’ve already seen companies enter the market with a lot of gusto by launching innovative — or at least, disruptive — programs such as “free” POS.

This brings me to my last question: “When the dust settles however many years from now, what’s the POS channel going to look like?” I’ve heard from more that one industry insider that the payments industry will “ruin” the POS industry by driving prices into the ground with its competitiveness. This has already happened to a certain extent. However, maybe this disruption came at just the right time.

POS VARs are dealing with adversity on many fronts, and their futures lie in a business model not built on one-time sales but rather recurring on revenue-generating services just like payment processing. It might be painful for VARs old enough to remember the glory days of big paydays from installations, but, ironically, payment processing might be one of the services that keeps some POS VARs in business.

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