The days of salespeople peddling point of sale terminals by simply pulling hardware out of a box are numbered.
That model is being replaced by integrated payments from software developers who add payment capabilities to applications that run at the point of sale, in the back office or on mobile devices.
When payment processor Vantiv Inc. acquired Mercury Payment Systems LLC this month, it made a $1.65 billion bet in favor of the integrated payments model.
The deal follows Global Payments 2012 purchase of Accelerated Payment Technologies, which provides integrated payment technology to small and midsize businesses.
Global kept that momentum going in March when it bought Payment Processing Inc., or PayPros, another company specializing in integrated payments.
We are still in the early to middle innings of the proliferation of the smart POS replacing terminals and old cash registers on countertops in our market, meaning the U.S. and Canada, says Matt Taylor, CEO of Mercury Payment.
When the company launched 12 years ago, Mercury predicted that the merchant POS environment would change from traditional terminals to those operating through a bundled hardware and software environment, Taylor says.
POS software just continues to grow and specialize and present more opportunity, but it is very complex, Taylor says. We have dedicated our resources to ensuring that the way we help merchants connect to POS software transcends all of that complexity.
Integrated payments can open vast new markets for payments providers, says Larry Berlin, vice president with Chicago-based First Analysis Securities.
I know an independent sales organization that had some lawn care clients and they combined a payment processing mechanism with the software for scheduling lawn care, Berlin says. Now they are going out to all of the lawn care guys they can find, giving them a mobile dongle to plug in and accept payments tied into their scheduling and other customer service.
Integrated payments are becoming common in the restaurant industry, where systems are developed to combine payment acceptance with the ability to manage orders, tables and food delivery, Berlin says.
As integrated payments become more common, companies working in the payments industry will seek ways to offer marketing analytics, he says.
You tie that type of data to the payment mechanism and you can learn more about your business and your customers, Berlin says. A bagel shop is very busy from 9 to 11 a.m., but what product is most popular after 11 a.m. and how many people are buying it and how are they paying for it? This kind of information is valuable.
Boston-based Merchant Warehouse has been moving in that direction, offering merchants a POS system that incorporates analytics and new technologies.
There is a place in the ecosystem for traditional payment acceptance, but today, when a retailer shops for a point of sale terminal or other business solutions, they expect payments to be part of the integrated bundle, says Greg Cohen, chief revenue and strategy officer at Merchant Warehouse.
Many of these systems are now delivered in a software-as-a-service model or through tablets, making them cost-effective for businesses of any size, Cohen says.
Merchant Warehouse looks at integrated payments as table stakes because modern payments are about bringing integrated commerce and data security to the developer and the retailer, Cohen adds.
Integrated commerce includes mobile acceptance, offers, coupons and loyalty. It enables a merchant to buy a point of sale system for the physical store, website and mobile environment at the same time.
Then the merchant can send out offers and begin running a loyalty program, while accepting NFC transactions all at once, Cohen says. Merchants can also review transactions from all channels directly from their offices to monitor against data breaches.
With those integrated services becoming more readily available for merchants, it is not surprising that the topic comes up when executives discuss their companys goals.
Payment processor Total System Services Inc. plans to make integrated point of sale a key part of its strategy in the coming year, says Mark Pyke, senior executive vice president and president of merchant services for TSYS.
We are investing in this space, Pyke said during a recent TSYS analyst day. We think that integrated point-of-sale is still in the early stage.
However, integrated payments represent a greenfield opportunity for TSYS, Pyke says. We like this distribution channel as well because it provides significant lead source potential.
Relationships with merchants through integrated payments tend to be sticky because it is an embedded solution, Pyke adds. You tend to get better pricing because its not necessarily an acquiring decision but a POS software/hardware decision and acquiring is part of that package.
The terminal maker VeriFone also sees integrated payments as a significant trend.
Payments as a service will be an important global product, VeriFone CEO Paul Galant said during a May 20 presentation at the annual JPMorgan Chase technology conference. We are not just selling a terminal. We are selling a solution that includes a terminal, but its a lot more than just a box.
Selling a terminal now means selling data security, warranty and service, and numerous merchant tools, Galant says. We want to deliver great applications for the merchant to use, whether it is being able to convert currencies in those types of markets, or target offers, coupons or loyalty programs, he adds.
VeriFone needs to work with third-party developers to help merchants get that extra value and for the company to establish its footprint in an important trend in payments, Galant says.
Its critical that anyone selling terminal hardware change their habits, says Richard Oglesby, senior analyst at Double Diamond Payments Research.
Anyone not in the integrated payments space is still running around with terminals, trying to sell them to merchants and drop them on the desk, he says. By contrast, integrated payments players generally target the software developers who, in turn, target the merchants.
Companies seeking bigger play in the integrated payments space must also work with the distributors who work with developers, Oglesby adds.
We have our ISOs and agents on the payments side, but the software developers have their own resellers, Oglesby says. They dont focus on payments, but on selling the software and its a much more highly skilled rep.