Editors's note: This article originally ran in December 2012 and we thought it'd be interesting to share as a perspective on how far we've come. Mobile payments, while becoming ubiquitous, have not displaced the traditional POS system. Rather, as Isaacman predicted, they've supplemented the front counter POS system. Where will 2022 find mobile POS? We'll discuss that in an upcoming article.
Many consumers can’t help but get whipped into a frenzy at the thought of mobile point-of-sale (POS) opening the door for the widespread acceptance of credit cards or mobile payments.
Those of us with a modicum of cash at any given time see a new world of transactions unfolding: a vendor at the farmer’s market, the babysitter, a personal trainer– all accepting good old Visa or MasterCard.
But, in the excitement of it all, have we presented a balanced view of where mobile POS fits into day-to-day commerce, and more pointedly, where it does not?
In search of a more balanced perspective on the role of mobile POS, I spoke with Jared Isaacman, the founder and CEO of Harbortouch, previously United Bank Card (UBC).
A History of Forward-Thinking
Isaacman, it turns out, is probably the best gauge of where the POS industry is heading. At sixteen, he founded UBC with nothing more than a bit of capital in the form of stock certificates from his grandfather and an unwavering confidence in the idea that he could transform the payment processing industry.
Isaacman saw an opportunity to make it much easier for restaurants and retailers to begin accepting credit cards. Within two years, the company was rapidly growing, and now, 13 years later, UBC is one of the largest payment processing companies in the country, handling over $10 billion in credit card transactions annually.
In 2004, Isaacman borrowed a concept from the service industry and started giving away credit card terminals to win merchant accounts. “We were the first to do it in our industry,” he said, “and it fueled our growth.”
So, in 2007, when UBC began dabbling in the POS space, it wasn’t a question of whether or not the company should extend the business model to point-of-sale systems. “There’s no genius to that at all,” Isaacman said. The service industry, for decades, has been giving away the box to gain the service.”
UBC worked on the idea for two years before starting up the subsidy program. “The only thing to prevent you from giving away touchscreen POS systems is the cost,” Isaacman said. A touchscreen POS system is more involved than a credit card terminal. It has to be programmed to fit with a retailer or restaurant’s business. It has to be installed, and the users need training. “It’s a very expensive model,” Isaacman said, “and that’s the only limitation that prevents others from copying it.”
It is, indeed, expensive. A typical POS system sent out by Harbortouch costs around $30,000. But they had the capital to fund their free POS program through the success of UBC’s payment processing business.
Today, POS systems are essentially the company’s product platform– the way they gain and keep accounts. “The touchscreen POS systems are the tip of the spear for us,” Isaacman said. In 2011, UBC re-branded under the name Harbortouch to align under that reality.
“I don’t think anyone has put the marriage together like we have,” said Isaacman. “There are POS companies that have great relationships with credit card companies, but none have created the hybrid business model that we have.”
This appears to be one of the main reasons Harbortouch has no competition in the give-away space. The cost of implementing this business model is enormous. Harbortouch builds its own hardware, imports tens of thousands of POS terminals at a time to keep costs down, and creates its own software.
For two years now, the system has worked. Harbortouch has deployed between 12,000 and 13,000 touch screen POS systems each year. About 75% of the business is shipping complete POS systems to businesses that have never had them before. “If a Harbortouch salesperson goes into a restaurant or bar and the merchant doesn’t have a POS system, it’s not because they don’t know what it is,” Isaacman explained. “They will tell you in two seconds that it costs too much money.”
So, What About the Future of Mobile POS?
This is where I probably don’t need to point out (but I will) that Isaacman clearly has the ability to see opportunities in this industry. Beyond that, he possesses the ability to execute innovative strategies to capitalize on those opportunities.
In terms of the future of mobile point-of-sale, Isaacman made an interesting delineation between mobile as a form of payment and mobile as a system for accepting payment. “Mobile will be the next big shift in the currency market,” he predicted. “We paid with cash, and then with credit cards, and next we’ll pay with our phones.”
However, Isaacman doesn’t see mobile POS taking over the traditional POS systems in 90% of our commerce. The POS system itself functions as the brain of the transactional body, he explained. It’s not a mobile device, and he doesn’t see it becoming one for a long time.
There are places, of course, where mobile makes sense. And Harbortouch does send out mobile accessories with their full POS systems. In the restaurant space, for example, wait staffs can use iPads rather than notepads and pens. Orders can be wirelessly transmitted to the bar and the kitchen.
But for the most part, Isaacman sees mobile POS systems being utilized by micro-merchants, as he has dubbed them: businesses that don’t have storefronts, personal trainers, babysitters, small accounts that are on the go. “I think that is where 95% of mobile POS technology will be and stay,” he said. “For a while at least.”
When you consider where most of your daily transactions take place, the grocery store or drug store for example, it’s hard to imagine such high volume transactions running off of mobile technology alone. The inventory databases that are critical to many retailers couldn’t function off of a stand-alone mobile system. “I don’t think that you will be able to turn an iPad or an iPhone into a POS system that will operate well beyond the micro merchant world,” Isaacman explained.
But, don’t expect Harbortouch to miss out on the aspects of mobile that Isaacman anticipates will change the industry. “We believe there will be a shift in consumer payment trends, and we fully intend to support that initiative,” he says.
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