Page 23 - GS180102

Views

ISV versus ISO
I suspect the way this is supposed to work
For at least the last six or seven years, analysts have is that you do all this reading and scanning
hinted that value-added resellers (VARs) and independent
software vendors (ISVs) will take on the role traditionally and decision-making while parked in your
played by ISOs in signing up small merchants, and that driveway, not while going down the freeway
ISOs will just want to become the default merchant changing lanes at 75 miles per hour, but I'm
acquirer or software solution used by the ISVs. I don't see pretty sure this also is not going to happen.
this happening anytime soon, at least not for small and
midsize enterprises (SMEs).

I was present when Chuck Smith started Payment while debit cards have reduced the use of cash at the POS
Processing Inc., and I saw firsthand the value-add he (the average debit card purchase is less than $40, and a
brought to his software developer clients in terms of sales, third are for less than $10) people are using debit cards
customer service and support, set-up, hardware, training, now to get cash back, which has become a huge service
etc. It was a lot of work. Software developers and systems by itself.
integrators don't have the expertise to do these things
themselves; it isn't their core competency, and they have Meanwhile, cash in circulation has grown dramatically,
too many other priorities. This might be different for very from $1.2 trillion in July 2013 to $1.59 trillion in November
large enterprises, but for most SMEs, an ISO's availability, 2017. A 2016 Fed study shows that over 89 percent of
knowledge and professionalism are still important, and consumers hold some cash. It is clear that cash is not going
there is plenty of opportunity for the traditional ISO rep. away, as some industry pundits have said.

The card brands as a tollbooth Predictions that checks are dead are similarly incorrect.
For the last 50 years the card brands have functioned as de Check volume has stabilized, and innovations such as the
facto tollbooths for merchants. It doesn't make sense not Deluxe e-check product can now retain the advantages of
checks without the paper. A Fed study shows that checks
to take these cards since you would lose sales, and there is
no real alternative to the five major card brands for the 70 represent the lowest percentage of third-party fraud in
the form of unauthorized transactions. They are still the
percent of consumers who use them.
preferred method of payment for some consumers.
But if banks can offer the consumer an alternative that is
as quick and easy to use; provides rewards and loyalty Of course, a merchant does not pay interchange to process
checks, and for high-dollar payments this can be very
points and other tangible, worthwhile benefits; and doesn't
charge the merchant 250 basis points to use (or more for important. Check 21 doesn't have an opt-out provision
and provides availability of funds quicker than automated
card-not-present transactions) then merchants will flock
to it. clearing house conversion.
As for banks, when was the last time you changed your
Now there are alternatives with compelling value primary bank account? If you are like most Americans, it's
propositions, such as PayWithMyBank. Here, consumers
can pay directly from their banks' online bill-pay service. been over a decade. Consumers are loyal to their banks.
There really is no alternative when it comes to storing
This has two benefits: it eliminates interchange and it
virtually eliminates fraud. Remember, all payments begin your money safely and cheaply, knowing that payments
will go through on time and correctly, and if a mistake is
and end in the checking account, not on a statement from
the card-issuing bank. made, it will be quickly corrected. I don't see this changing
anytime soon, do you?
ATMs, cash, checks are dead,
banks are doomed – not There you have it, a reality check on the state of payments
at the start of 2018. ISOs and MLSs will continue to have
This is the 50th anniversary of the first ATM installation, excellent potential for signing new and retaining current
and there are 3.5 million of them worldwide. ATMs merchant customers and adding value in the sales pro-
are becoming contactless, offering video conferencing cess.
capabilities, changing shape and functionality, offering Brandes Elitch, Director of Partner Acquisition for CrossCheck Inc., has
more than half of the personal banking services provided been a cash management practitioner for several Fortune 500 com-
by a branch teller. Undoubtedly, banks will enhance ATM
capabilities as branches are downsized or eliminated. panies, sold cash management services for major banks and served
as a consultant to bankcard acquirers. A Certified Cash Manager
Accenture determined there is untapped potential for cost and Accredited ACH Professional, Brandes has a Master's in Business
optimization and revenue generation from the ATM. Of Administration from New York University and a Juris Doctor from Santa
course, ATM's are ancillary to a debit card portfolio. And Clara University. He can be reached at brandese@cross-check.com.

23