ou need only flip through recent issues of The Green Sheet to learn that POS terminals are no longer the cash cows they once were for ISOs and merchant level salespeople (MLSs). With the proliferation of free terminal programs and merchants' ability to purchase equipment on the Internet, ISOs and MLSs can no longer count on income from terminal and other POS hardware sales.

Some in our industry argue that terminals are actually becoming an expense for ISOs and MLSs because their cost can no longer be passed on to merchants.

Bill Pittman, President of Transaction Processing and Integration Software LLC, shares this view. "Terminals are part of the cost of sale, rather than a revenue stream, like it used to be," he said.

But Pittman doesn't feel the situation is dire for ISOs and MLSs. Rather, he thinks sales professionals can earn money selling, or even giving away, POS software by leveraging what merchants already have: PCs and Internet connections.

"Software is and will always be less expensive than hardware," he said. "With PC software you are able to piggyback off the PC that the merchant already owns and leverage the Internet connection they have."

Pittman also pointed out that hardware is more expensive simply because it is a tangible device. "With software, once it is developed, your variable costs are minimal versus hardware, where you have physical costs to manufacture and ship the equipment," he said.

A familiar face, a new venture

For those who have been in the industry for a while, Pittman's name is probably familiar; he founded GO Software in 1993. In 1999, he sold GO Software to an e-commerce company and spent the following year building that company's e-commerce platform. (VeriFone acquired GO Software in March 2005.)

"This industry is addicting," Pittman said. "Once you learn, understand and get involved, you want to make it better." It wasn't long before he began work on his next venture: He founded TPI in 2001.

A small but growing company, TPI develops and sells electronic payment solutions that are alternatives to stand-alone POS terminals. The Redmond, Wash.-based company employs 15 people. In late March, it expanded its operations and opened an office in Savannah, Ga. The Savannah office's purpose is to increase sales, support and product development.

TPI's POS software solutions employ the Internet as a low-cost, high-speed communications network. As such, merchants are able to use their existing equipment to integrate payment processing into current business and accounting systems. No additional equipment purchases are necessary.

TPI's payment processing solution, SmartPayments, can be used in almost any setting, including in-store purchases, online purchases and mail and telephone orders. Also, merchants can integrate payments into existing services, making a third-party provider, and any associated costs, unnecessary. "SmartPayments is a complete end-to-end solution on a disk," Pittman said.

Advantages for ISOs and MLSs

TPI sells its POS software through several channels, including the ISO/MLS channel, which it understands well. "We recognize that to be a success, we need to help you make more money," Pittman said. "We do this by providing lower-cost, higher-value software solutions that allow you to get merchant accounts that you may not otherwise be able to get."

It may be difficult to imagine our industry without POS terminals, but there was probably a time when people couldn't imagine a transaction being processed without a "knuckle-buster" card imprinter.

To thrive as technology evolves, ISOs and MLSs need to stay on top of developments and determine what they mean to each ISO and its merchants. In the case of software versus hardware, TPI's SmartPayments software offers a variety of benefits:

· Faster transactions: When TPI's POS software is used, the company reports an average transaction time of two to five seconds versus 15 to 30 seconds for dial-up terminals.

· Lower start-up costs: To run TPI's POS software, merchants need only a standard Web browser; supplementary hardware or additional phone lines are unnecessary. Also, since the software works in both retail and Internet environments, merchants don't need two separate merchant accounts with two distinct service providers to be able to serve both in-store and online customers.

· Increased mobility: Since TPI's SmartPayments software runs on a browser, payments can be processed from anywhere, at any time. Mobile merchants can use cell phones; there's no need for phone lines, or even an electrical outlet.

Tailored, flexible solutions and support

Another significant ISO/MLS benefit of TPI's software is that it can be private labeled. "Unlike terminals, where everyone is selling the same boxes, with software you can create your own version with your unique brand and logo," Pittman said.

"Private-label software protects you from having to compete on price and makes your product unique in the eyes of the merchant," he said. "We are helping the ISO enable the merchant ... and we are doing it with a product they can get at a lower cost and can private label to differentiate themselves from their competitors."

TPI's SmartPayments works for merchants of all shapes and sizes and ISOs of all stripes. Some ISOs use TPI's SmartPayments software as a single-PC solution for mom-and-pop merchants. Others use it to provide payment gateway services for other merchant types. The cost to ISOs is a fixed-fee software license. "There is no per-click fee," he said. "You buy it once and then you're done."

ISOs that become their own gateways can grow their markets with a fixed-cost infrastructure. They can target stand-alone small merchants with TPI's Virtual Terminal. Integrated POS systems, like Microsoft Corp.'s Retail Management System; accounting applications, such as Intuit Inc.'s QuickBooks' kiosks; e-commerce applications; and dial, Internet-protocol and wireless terminals all work with TPI's SmartPayments Server.

An additional ISO benefit is TPI's tiered products and pricing, which allows TPI to meet the needs of a variety of business types, from single-store locations to multi- location national chains.

The company also offers a tiered support system. "We are flexible with support," Pittman said. "Pricing is contingent upon the merchant's needs. The low-end merchant is very price sensitive. The reality is that [the] market is commoditized."

TPI's support system simplifies things for merchants who can ill afford the high cost of support when things start to go wrong. On the other hand, TPI offers more robust products and services to meet the needs of higher-end, less price-sensitive merchants.

Merchants can use the software's image/receipt capture and retrieval capabilities for chargeback protection as well as online and real-time reporting. They can also take advantage of support for multilane customer-facing PIN pads such as models in the VeriFone Omni family, the Ingenico eN-Touch 1000 and Hypercom's Optimum L4100.

SmartPayments software provides the glue that integrates your merchant services with merchants' existing systems; all of these features help ISOs up-sell hardware, keep merchants happy and prevent merchants from switching service providers, Pittman said.

Carpe diem

With a surging number of businesses of all types and sizes using PCs to run their affairs, Pittman thinks now is the time for ISOs and MLSs to benefit by offering POS software solutions to merchants.

He also thinks TPI is the ideal enterprise to partner with ISOs and MLSs in this endeavor. Pittman's rationale is clear: "We are a company that does what they say they are going to do."