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Tablet POS is Changing the Game, but Proceed With Caution

Eric Lindeen by Eric Lindeen
August 12, 2013
in Industry Opinions
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There Are 5 Factors Contributing to Slow Credit Card Growth in LATAM:

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I was recently engaged to assist a small cafe with the evaluation of point of sale (POS) alternatives. After a quick review of the market, it seemed clear that the new tablet-based registers were clearly less expensive and had advantages over traditional cash registers with a separate card reader. I immediately dove in to investigate the alternatives, but was surprised at how difficult a comparison would prove to be.

It didn’t take long to identify the major players and find some basic information about features. Since the providers are all primarily payment companies, the interchange rates and terms were prominently displayed. I quickly discovered that the software was not as easy to compare. There were reviews (mostly written by people who hadn’t used the POS apps in a real environment), demo videos (that provided only a high level overview), and screenshots (that did not indicate functionality).

The next obvious step was to try each of the apps. I downloaded them to an iPad for my test. However, each blocked me from opening the POS to even look at the screens until I had created a merchant account. That seemed like a lot of overhead just to see how the app works. More importantly, since I didn’t own the cafe there would be additional steps to get the owner’s banking information. A quick call to the companies that offer support (not all do) confirmed that demo accounts are not available.

It is clear that when payment providers are creating a product to compete with physical devices (cash registers), they aren’t thinking like device sellers. I understand that the credit risk folks don’t want fake accounts trying to run real transactions. It is also fair that some consumers will not remember to switch from test mode to production when they go live. These providers’ experience with micro-merchants has probably reinforced these trepidations. But limiting customer access to even the setup features until their account is approved and active is a significant barrier.

Stymied, but not defeated, I decided to use personal accounts for the test and set up the café’s business account after final selection. I used my PayPal account for one POS, created a new personal account for another, and created a dummy account for the third (it was caught and disabled 2 days later). I was finally able to access the software for my evaluation, even if only temporarily.

In terms of usability there are some significant differences between the products, though not what I would have expected based on the video demonstrations. Depending on the particular type of business you might be running, I am now convinced that it is worth spending time on comparison. If you have thousands of SKUs like a wine shop, different breakfast and lunch menus like a café, or rely heavily on tips like a hair salon, the choice of POS apps can really impact your efficiency. It is worth the effort to evaluate the alternatives to see what will be the most effective for your business.

Feeling confident in my new knowledge I asked a lunch shop owner, who was struggling to keep up with their card charges, if he had tried the tablet POS from the company with a particularly shaped card reader. He was using a traditional register with a card machine 6 feet away. He was clearly flustered as he ran back and forth between the two. The owner frowned and replied that yes, they had, but it frequently failed when reading debit cards. He therefore went back to the reliable solution. That was a problem I hadn’t read about in the reviews.

There are some great new capabilities in these POS solutions, but they are still early in the development cycle. Whatever shape of dongle you choose, you are likely to see continued improvements to both the hardware and software in the coming years. As the payment processors push up-market from micro-merchants into small businesses, they will learn to adapt their offerings for a different set of concerns. Until then, there is still a market for the traditional, proven, solutions of the past. The future is coming, but it isn’t quite here yet.

Eric Lindeen is marketing director for Zoot Enterprises Inc., a provider of loan origination, account acquisition and credit risk management solutions for large financial institutions. You can follow him on Twitter @EricLindeen. Visit Zoot’s Credit Strategy Session.

Tags: Merchant AcquiringMobile PaymentsmPOSPoint of Sale
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