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Tablets, at least of the aspirin type, are supposed to relieve a headache. For independent sales organizations and other acquirers and resellers, tablets of the computer type might trigger a migraine. Retailers are just starting to adopt iPads and other such tablet devices to run their stores, but the potential that lies in these machines is such that some forecasters are warning that ISOs that remain wedded to the conventional point-of-sale terminal will be left behind.
Consider this number, as reported this month in our Trends & Tactics section: POS terminals now account for about 57% of all acquiring dollar volume. That’s a respectable share, but what might give pause is that that share was 76% as recently as 2007. And by 2017, it will slip to 52%. These numbers are from a report published last month by Adil Consulting, Omaha, Neb.
So what’s happening? Well, PC-based and Web-based spending is accounting for a greater share of processed volume, to be sure, and that’s eating into the portion going through terminals. But the other factor to be reckoned with here is the rise of what Adil Consulting calls “app-based” processing, or transactions handled on mobile devices such as tablets and smart phones. This volume, now around 2% of the total, will rise to a 5% share by 2017, or $112 billion, the firm forecasts.
You might well wonder how this affects ISOs. After all, it sounds like a problem for the terminal makers. But terminals are, and for some time have been, a bread-and-butter product for ISOs. At one time they were a rich source of leasing revenue. Lately, they’ve been offered for free as a retention tactic, often locking merchants into multiyear processing contracts.
As terminals lose share of acquiring volume, they lose potency for traditional acquirers, leaving the brick-and-mortar field increasingly to technology and marketing firms (Square, Groupon, ShopKeep, and so on) that offer tablet-based payments apps.
What makes these apps so attractive, especially for small merchants, is that they automate a series of mundane but time-consuming tasks ranging from inventory control to tax reporting to offers management, freeing up more time for merchants to be merchants. For businesses that don’t have people and departments to handle these routine chores, that’s a big deal. For more on this, see this month’s Endpoint column.
All of which leads to a solution for traditional acquirers. Yes, offer tablets. But above all, respond to that demand for automation. Small merchants are practically shouting that life is too complicated. Make it easier for them, and you won’t need free terminals to keep them.
John Stewart, Editor
john@digitaltransactions.net
