The Dark Art of Payment Processing
With the growth and proliferation of bundled POS/Payment solution providers, it somehow seemed appropriate to address what many recognize is indeed a confusing world; that of credit card payment processing. Is bundling your POS and credit card processing with one vendor a good thing? Are there benefits for or against this approach?
First, let's discuss why so many POS vendors appear to be heading in this direction. With the migration from license-based POS solutions that were front-loaded with big license fees and smaller on-going maintenance costs, the new model is a flat "rental" fee that means minimal up-front cost and the allure of an easy transition from one solution to another. To support this notion, many POS vendors actually advertise the fact that there is no contract and the application can be used month-to-month without any long-term commitment. It sounds very appealing to the operator, and quite frankly it is. It has also become much easier to switch vendors, export your data, and move on with your new partner. This is great for the operator, but not as reassuring for the POS vendor who is constantly fighting not only for new business but to stop poachers with their existing users. So how do vendors make their solutions more sticky? Payment Processing.
While it may be easier to unwind a POS solution, it is not as easy to unwind from a payment processor. Additionally, while the POS vendor may allow you to go month-to-month, it is extremely unlikely that the payment processor will be quite so accommodating. A typical payment services contract is at least 2-3 years with some unsuspecting operators actually agreeing to 5 year agreements! With a long-term contract in-hand and a tightly integration between POS and payments in place, this creates a de-facto POS contract which allows the supplier to breathe easier.
Now, this is not necessarily a bad thing: a payment processing solution tightly integrated to POS can provide some interesting and useful functionality such as strong analytics and reporting, integrated card/purchase history, and even the ability to dynamically update a customer's online card information in cases where they are given a new card to account for a loss or theft. With the two systems tied together, vendors will eagerly - and accurately - share with you that the integration is symbiotic and very valuable. The marketing department will love some of the analytics that can be collected and reported upon that gives a much better idea of the purchase patterns of your customer both inside and outside your walls.