ISOs and agents have relied on value-added services for decades to differentiate themselves and ensure repeat business.
But as the trusted older generation of value-added services ages, many ISOs are finding innovative ways to bring value to the merchants.
From prepaid cards with new features to cloud-enabled point-of-sale systems, the next wave of value-added services is exploding onto the processing scene.
Technology is defining the latest inventory of these products and services, helping ISOs put a new spin on some of the mainstays while also creating more obscure, niche offerings.
That holds true with gift and loyalty, sources say.
Merchants don’t know their customers nearly as well as they should, even though today’s loyalty schemes track a customers’ favorite products and how often they visit a store.
And the gift and loyalty category has widened to include a vast set of products and services, such as mobile marketing, fundraising and data-capture services that track customers’ buying habits.
The new services are about to give ISOs an unprecedented opportunity to separate themselves from the competition, says Steve Schroeder, senior vice president of sales and marketing and partner with the Langhorn, Pa.-based gift and loyalty processor AmeriCard Gold LLC.
“We’re about to enter the golden age of loyalty,” Schroeder says.
Digital-age technology is advancing at such a rapid clip that it has put century-old companies out of business.
And that fate awaits ISOs that don’t keep up, industry sources say. But ISOs that do use new technologies in the form of value-added services can vastly improve their brand, says Marc Beauchamp, CEO of Performance Training Systems, a Houston-based consulting firm.
Check services was one of the only value-adds available when Beauchamp entered the industry two decades ago. Now, ISOs have progressed light years ahead of those day, he contends.
“As technology gets more advanced, we’re going to see more and more value-adds being offered in the industry,” Beauchamp says.
Industry consultant Mark Dunn watched some of the early growth of value-added services in terms of using equipment for multiple purposes. Dunn, who now owns FieldGuide Enterprises LLC, an ISO consulting firm in Heartland, Wis., worked for a company 20 years ago that was a major distributor of VeriFone terminals. The company specialized in finding additional valuable services they could provide from VeriFone equipment.
“Most of the value-adds started with the devices, being the point-of-sale terminal,” Dunn says. One of the early services involved using the terminal as a way to track employees’ time and attendance. Check verification and terminal leasing were among the other limited ancillary products that existed around that time.
The dawn of the Internet in the mid-1990s brought landmark change for value-adds. Processors began offering retailers an e-commerce presence along with web hosting, payment gateways and point-of-sale terminals that connected to the Internet.
In the past decade, it has become more difficult for ISOs to sell on price alone. At the same time, it’s become easier for other players to enter the merchant acquiring marketplace because they can assume a relationship with a bank without liability.
Meanwhile, technology barriers have created a shrinking pool of merchants who are signing on with proprietary gateway and point-of-sale software systems, says Dustin Niglio, president of San Diego-based ISO Payment Logistics Limited.
An agent can promise to save a restaurant all the money in the world on processing, but that’s only going to go so far if the merchant has to scrap his POS system, Niglio says.
The combination of those factors has created a perfect storm that has forced the industry to diversify.
“The only way to combat that is by adding value,” Niglio says.
The electronic payment technology boom in the last decade has brought about two of the industry’s biggest value-added success stories, and longest value-add mainstays — gift cards and loyalty schemes, Beauchamp says.
Now gift cards have found their way to grocery store shelves, and loyalty programs have taken on countless forms.
Loyalty and rewards have exploded in the past five years, as Visa and MasterCard got behind them and all of the major players came up with their own rewards.
“Now it’s part of the consumer thinking that you might be rewarded for making a purchase,” Beauchamp says.
AmeriCard Gold LLC believes the holy grail of value-adds lies with gift and loyalty. Not for reasons you might expect, though.
Schroeder of AmeriCard Gold says loyalty has lagged behind because few brick-and-mortar merchants are using it properly. As a result, merchants are about to start seeking out the next generation of these programs.