Technology is an Epidemic, of Sorts.
It’s Poised to Change (yet again) the Landscape
for Merchant Service – and Every MLS

By: Biff Matthews, President, Cardware International

The gray (or black, depending on the manufacturer) box POS terminal is becoming
the newest member of the Club of Technology Has-Beens.  First there was AMCAT,
then Datatrol, then terminals made by GTE, Omron and Verifone.  Even the current,
6th generation “boxes” can’t meet all of the needs of today’s merchants –  much
less tomorrow’s. 

The requirement now is a fully integrated, “end-to-end” retail solution.  95% of
merchants have at least one terminal, and half of those have upgraded in the last
2 years or so.  As a result, the MLS who is not already in the equation cannot
gain a foothold, and even the lure of free terminals won’t change that to any
meaningful degree.

I am amazed at the number and variety of terminal manufacturers entering the
US market with low price points.  They are coming onto the scene on the down
side of a technology bell curve whose slope becomes more vertical, as software
becomes more virtual.  And that is a trend that is unstoppable.    

Virtual terminals are widely accepted because they are online, and eliminate issues
with compliance and integration.  Virtual terminal also offer, in my view, better and
broader opportunities than proprietary software loaded onto an appliance.

Virtual terminals are also easier for merchant employees to understand and use. 
And they are easier for an MLS to sell, compared to PC applications software,
where the intricacies and quirks of PCs inevitably present issues.  Virtual terminals
are pleasantly cut and dry by comparison, and are virtually free of such
time-wasting nuisances.   

Recently, Verifone and Microsoft teamed to provide a fully integrated, “end to end”
solution with MS business that takes in credit card processing, accounting, and
ordering.  Verifone brings the sophisticated credit card app; Mr. Softie contributes
accounting and sales orders.  Surely this will hasten the death spiral of Verifone’s
own gray box.  But one suspects they fully appreciate that, just as Hypercom did. 
And that’s fine with them. 

The end result, for the MLS, is that the days of lucrative equipment placement,
and equipment upgrades, are nearing an end.  We have encountered, to reference
a current concept, a technology “Tipping Point*. 

As a result, tomorrow’s successful MLSs will need to develop new skill sets, or
partner with an individual or company that can provide them.  The MLS will also
have to show greater patience, because the time from sale to implementation
will be longer.  He or she will need greater capital, too, because getting paid –
and payback – will take longer.

And there’s more.  The MLS will have to do more and better listening, learn to
delve deeper, and understand the merchant’s needs more fully.  The MLS will have
to have a greater understanding of business in general, and the technology of
accounting, specifically.  Effective partnering, which leverages the contacts
(as well as the knowledge) of others, will be essential.

There will also be heightened specialization, with delineation by business type. 
An MLS will be a specialist in retail or hardware or automotive parts retailing,  
because the respective business needs of those merchants will be that different.  
Perhaps most notably, the MLS will have to have a long view of his business,
with an eye toward sustainable residuals.

The few opportunities that ever existed for big bucks will be tomorrow’s 8-track player.  
And all of this will occur in an environment of competition - but not the type to which
we’re accustomed.  This competition will come from peers who step up and acquire
in-depth knowledge, but also from software integrators, value-added resellers,
hardware suppliers and accounting firms.  All of them will vie for the business
that was formerly the exclusive purview of today’s MLS.

The challenge is that the salespeople from many of those integration companies
and accounting firms already understand the longer sales cycle, and have the
capital to manage it.  It’s inevitable that some MLSs will invest time, money and
training to acquire new skills.  Others will understand they can’t be all things to
everyone and will partner with firms whose skills are complementary.

I predict that more than half of today’s MLS population will exit the industry,
moving on to a different “quick dollar” opportunity.  This will happen sooner if
knowledge becomes codified, and state and federal regulators impose certifications,
licensing, or both, as is the case with real estate agents.   

The gray box has been the industry’s foundation - built on the migration from
paper to electronics, with price as the (recent) sweetener.  It was custom-made for
quick-hit equipment placement, and good residuals on the relationships created.

But the demise of the old-style gray box, and the demise of the old-style MLS,
are both imminent. The bell curve that describes the product’s life cycle has
effectively rung. 

In the recent past, a company could turn the curve back upward with a significant
new product or service.  But as we evolved from one generation to the next,
demands increased.  And we have rung that bell all we can ring it. 

Biff Matthews is President of Thirteen Inc, the parent company of
CardWare International.  He is one of 12 founding members of the ETA,
serving on its board, advisory board and committees.  (740) 522-2150

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