By Dale S. Laszig
DSL Direct LLC
Henry Ford's cars were available in "any color the customer wants, as long as it's black," according to Ford's autobiography, My Life and Work, published in 1922. Eighty years later, merchant level salespeople (MLSs) were saying similar things about POS terminals. At a time when POS devices rolled off assembly lines for quality assurance testing, daisy-chain downloads and mass deployments, a terminal's receipt header was a primary differentiator. Countertop terminals were a focal point of payments in the early 21st century. Unlike today, when merchants accept payments on phones, tablets and laptops, there were only a few ways to accept payments back then, and only a few products built for that purpose.
POS manufacturers shipped truckloads of devices to resellers and designed promotions to help partners "pull through" products out of warehouses and into the hands of ISOs, acquirers and MLSs. The following quarter, they would do it all again. The pull-through game was equally intense for resellers and manufacturers. Resellers had to commit to larger and larger shipments to qualify for discounts. Manufacturers had to ship those orders by the last day of every quarter. Looking back, I see a race to the bottom that had little to do with added value, problem-solving or innovating. The pull-through game was all about price.
Ford had "famously remarked that the use of the moving assembly line allowed for the work to be taken to workers rather than the worker moving to and around the vehicle," according to the company's website. Researchers observed that the assembly line, with its signature conveyor belt and distributed labor, reduced Model T production from 12 hours to about 90 minutes.
Ford flipped the script by bringing work to workers, and in a similar way, digital technologies disrupted commerce by bringing the shopping experience directly to customers. When transacting on connected devices or in stores and restaurants, today's customers expect speed, convenience and choice, and merchants have upped their games accordingly. POS manufacturers have mirrored the changing shopping paradigm in interesting ways, first by expanding products and services far beyond countertop products that once ruled the day, and next, by leveraging a deep technology experience to drive innovation and excitement. Beyond that, these tech titans, well-versed in regulatory, security and compliance issues, focused on helping resellers improve efficiencies and create new revenue streams in the digital-first era.
Winston Fong, vice chairman of the board at Castles Technology, a global technology provider, agreed that the POS manufacturing landscape has significantly evolved in the past two decades.
"Originally, the focus was on moving as many terminals as possible through the channel, often with heavy emphasis on price-based promotions," he said. However, in tandem with technological advances, "leading OEMs have become more like technology companies that offer modular, flexible and customizable solutions. This shift has changed the game, moving the focus away from pushing terminals to providing solutions that add value and solve specific problems for merchants."
Distributors have also evolved from transactional, price-focused enterprises into strategic partners that collaborate with OEMs and channel partners to create new revenue streams through subscription service offerings, Fong noted, adding that formerly hardware-centric resellers, for example, are leveraging technologies and managed services. He cited the following examples:
Advanced technologies have made it easier to manage large populations of connected devices, Fong stated, adding that cloud-based terminal management systems (TMSs) can be accessed from anywhere with an internet connection, which has simplified deployment and management for merchants and providers alike. Fong further noted that modern TMSs have enhanced security to protect against fraud and data breaches. Advancements in encryption, tokenization and other security features protect sensitive information, he pointed out, adding that unlike monolithic predecessors, next-generation TMSs can be integrated into other enterprise systems, such as inventory management, CRM and accounting software, to eliminate redundancies and streamline operations.
Using advanced analytics, Fong added, modern TMSs provide insights on transaction trends, customer behavior, and operational performance. Fong also said these insights can help merchants manage hardware fleets and stay informed. Modern TMSs are mobile-compatible, which makes them easy to access and manage from anywhere on smartphones and connected devices, he added.
Reflecting on recent changes in encryption methodologies, Fong stated that encryption algorithms have become more complex and offer greater security against brute-force attacks. Modern key management systems (KMS) enable service providers to securely manage keys throughout their lifecycle, from generation and storage to distribution. Remote key injection, which distributes encryption keys over a secure IP network, has also simplified KMS.
With looming threats of quantum computing attacks that could potentially crack public key infrastructure, Fong stressed the need for encryption methods that are quantum-attack resistant, noting that post-quantum cryptography is being developed to address this challenge.Fong has also seen growing adoption of end-to-end encryption (E2EE) that secures data in transit and at rest. He explained that E2EE data is encrypted on the sender's device and can only be decrypted by the intended recipient.
A hundred years after Ford's gasoline jalopy roared through the streets of Detroit, electric vehicle manufacturers are remotely updating car firmware and software. Some even sell directly to consumers, disintermediating traditional car dealers. The pull-through game has changed. With SaaS driving recurring revenue, quarters no longer reset to zero. And savvy distributors can get you the car or POS device you want in any color. . 
Dale S. Laszig, senior staff writer at The Green Sheet and founder and CEO at DSL Direct LLC, is a payments industry journalist and content strategist. Connect via email dale@dsldirectllc.com, LinkedIn www.linkedin.com/in/dalelaszig/ and Twitter https://twitter.com/DSLdirect.
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