We’ve written a lot about how recurring revenue can be used to vastly improve the profitability of your company — and pad your pocketbook for years to come. If you’re a POS VAR, payment processing services can be a fantastic source of recurring revenue and are a “must have” for your line card.
In fact, a recent survey showed that leading POS VARs earn 110% more recurring credit card revenue than the average dealer. More specifically, these leading VARs have more than 15% of their revenue come from card processing residuals.
Beyond the monthly check that comes in the mail, card processing and related services like gift cards and loyalty, can create a stickier relationship with your customers, thus increasing customer retention.
This last point isn’t lost on payment processing companies. The smart ones are now putting a big focus on recruiting software developers and POS VARs because of your great relationship with your customers. Look no further than the recently held RSPA RetailNOW where there were about 30 payments-related companies exhibiting.
There are two surprising reasons for this focus on VARs and ISVs. First, in numerous conversations with processing companies over the past couple months, we’ve learned that, typically, the payment processing business brought on through POS VARs is kept for at least a year longer than business brought on via an agent. Get that? To a payment processing company, the business they book through you lasts a lot longer than that through their agent channel.
Second, what makes this even more compelling is that these processing companies told us that processing volume through VARs is double (or higher) that which is brought on through agents. So, not only do you keep processing business longer, your merchants are processing a higher volume each month.
The bottom line is that processing companies stand to make more money for a longer period of time working with POS VARs as opposed to the traditional agent. No big whoop to you, right? Wrong. Since you get a cut of each transaction, you stand to make more money for a longer time period.
So, I’m back to this: make sure you’re offering your customers payment processing. You stand to have a stickier relationship and make what amounts to free money for years to come.
August 16, 2012 at 10:19 am
Balancing service, costs, and retention will only become more important as competition intensifies. Nice work!
August 27, 2012 at 1:23 pm
I agree Mike.
However, as new entrants attempt to garner more market share – Think Square Payments and the initiative currently in progress by WalMart, CVS, et al retailers will also be looking at a less-expensive alternative to credit card processing.
These lower-priced processing options will leave little if any margin for the typical POS reseller.
Although I agree that relationships and the accompanying services are important to any successful business, margins will continue to erode which means resellers must continually adapt to new technologies and revenue streams.
January 11, 2013 at 8:25 am
VAR POS knows this is a tough business to be in today. Slim margins, increased competition from online sellers, and reverse auctions are typical lament I hear from POS channel. Therefore, without a guaranteed customer base to build, and enter this market from scratch actually be a difficult task.