Smartphone-based transactions represent an opportunity to grow U.S. card acceptance, which largely has become commoditized because most brick-and-mortar merchants accept payment cards. However, the challenge for independent sales organizations and other resellers of smartphone-based point-of-sale products may be locating mobile-merchant clients, observers say.

“Our traditional-channel ISOs and processors are most adept at finding merchants with store fronts,” says Paul Rasori, senior vice president of marketing at VeriFone Holdings Inc., a San Jose, Calif.-based terminal maker. “It is a very different approach to reach ‘consumer’ merchants.”

Consumer merchants may include those that sell seasonally or from their residences and do not have a storefront.

Indeed, “finding and capturing merchants may be more difficult than it sounds,” says Tim McWeeney, vice president of North American sales at Way Systems Inc., a Woburn, Mass.-based provider of mobile-payment terminals. “We know the merchants are out there,” but finding them may be like “herding cats,” he says.

Stuart Taylor, vice president of global solutions and marketing at Hypercom Corp., a Scottsdale, Ariz.-based payment-terminal maker, does not see “too much of a challenge” in locating mobile merchants. Small businesses have banking relationships, which makes them “not difficult to reach,” he says.

Moreover, the marketplace buzz about smartphone-based payments likely will help reach businesses that may not have existing banking relationships, Taylor says.

The difficulty in finding mobile merchants may make ISOs ill-suited for the job, contends Nick Holland, a senior analyst at Aite Group LLC in Boston. “I don’t think ISOs are particularly well-equipped to go to these people,” he says “The way to market may not be through an ISO.”

Some mobile merchants are casual sellers that operate out of their homes, and it could be cost prohibitive for ISOs to try and find such merchants, Holland contends. “Are you going to knock on every door?” he asks.

Ultimately, financial institutions may be the more likely sellers of smartphone-based point-of-sale products because they can sell them as part of a small-business package, says Holland. “It might be good for banks to offer as a package a card-swipe reader, check capture and mobile-banking services,” he says. “As someone who is dabbling in small business, you are more likely to have a relationship with the banks” than ISOs are, says Holland.

Some ISOs, however, have been having some success selling smartphone-based transaction products to merchants.

“It’s been working out very well,” says Jamil Adair, president and CEO of Merchants First Choice Inc., and El Paso, Texas-based ISO that is selling VeriFone’s PayWare Mobile system and has received merchant referrals and leads from the terminal maker. “The leads have generated a lot of merchant accounts we have been able to acquire through the program. That’s how we’ve been able to bring the product to market.”

Michelle McBride, CEO of Pay Bizness, a Baltimore-based ISO, has encountered interest among brick-and-mortar merchants as well, including doctors, dentists and barbershops. She also sells VeriFone’s PayWare Mobile service.

“Traditional brick-and-mortar merchants are now moving outside” and going mobile, McBride says, noting she was surprised by the interest from brick-and-mortar locations.

For instance, the barbershop clients like the smartphone-based system because they can “take in more sales by using it” than by taking cash alone, says McBride. Additionally, “it makes them safer because they’re not carrying a lot of cash,” she says. “They love it. They’re using it like gangbusters.”

Some brick-and-mortar merchants may opt for a smartphone-based terminal because the costs typically are lower than a standard point-of-sale system or a dedicated wireless system. Others may use the systems when transacting with clients away from the store location.

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