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The Advantage Independent ISVs and VARs Have Over Verticalized POS Providers – And It’s Not What You Think

Tablet in Restaurant Independent software vendors (ISVs) and their value-added reseller (VAR) channels in the point of sale (POS) space have more competition than they did a decade ago. Some more recent entrants to the space offer verticalized solutions, such as Toast’s restaurant bundle or Clover’s solutions for retail, restaurant or businesses providing services to consumers. Those solutions are marketed as everything the company needs in one package – POS functionality that their type of business needs, including payment processing. Although they appeal to business owners looking for a simple, all-inclusive POS system, the catch is that there’s often no choice of payment processor – and that’s a fact that POS providers can use to their advantage.

Everyone Wants to Save Money

You can definitely get a prospect’s attention by demonstrating how much they can save by having the freedom to choose payment processors. For example, consider a business that only processes card-present transactions. One payment processing company option charges fees of 0.30 percent of the sale total plus 8 cents per transaction and a $20 monthly cost. Another processor charges a flat rate of 2.70 percent. 

It may seem like a small difference when you calculate fees for only one transaction, but for a merchant with 1,000 transactions per month that average $20 each, the first processor would charge $160 per month, the second would charge $540. That’s a difference of $380 per month or $4,560 per year.

By researching your competition and your prospect’s business, you can find the actual credit card processing fees your prospects would pay using a verticalized system and compare them to options they have by using the system you offer. A dramatic difference will be more than enough to get your prospect thinking – and possibly more than enough to offset any cost differences in POS systems.

Also, remember to point out that the payments space is constantly in flux due to mergers and acquisitions. If a prospect is comfortable with the payment processing fees they’re paying now, there’s no guarantee they will stay at that rate if the company changes its policies. However, the merchant may still be locked into using that processor.

A Better Way for POS Providers to Compete

In most cases, when you compare the solution you offer with the bundled solution, yours stacks up as more feature-rich and robust. Your solutions also probably feature a wider range of integrations and hardware options that can help merchants craft loyalty-building customer experiences and manage their businesses more efficiently. So, when you talk with a prospect, you can confidently say that investing in your POS system will provide greater value in the long run.

However, that logic doesn’t always influence a new business owner just looking for an easy way to get off the ground or an SMB business owner ready for a more efficient way to manage transactions. They want something easy and convenient – and they also want something most cost-effective.

That’s where you hold the cards.

Something that merchants may not consider – and something verticalized POS system providers don’t stress – is that transaction fees are a significantly larger cost center than the POS solution itself. The POS system you provide won’t lock your customers into using only one payment processing company. As an independent POS provider, you can advise your clients of options and help them find the best processing rate. With the freedom to choose payment processors and find the best rates, the merchant can save substantial costs over time.

A Winning Combination

It is still a smart strategy to explain how the POS system features you offer differ from those of a verticalized, bundled solution. However, don’t miss the opportunity to use the powerful argument that choosing you as a POS provider can save thousands of dollars over the system’s life by allowing your clients to find the best payment processing fees.

Advise your prospects that the system that will provide their business with the greatest value is one that has all the functionality that will help them operate more efficiently, build revenues and maximize profits and deliver competitive customer experiences – while minimizing payment processing fees.

It’s simply the smarter choice.

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