When was the last time you walked into a retail chain store or restaurant to offer merchant services only to walk right back out?
Many merchants that have traditionally been the bread and butter of independent sales organizations (ISOs) are no longer as lucrative as they once were. Whether they already have a payments provider or just have someone else in mind, ISOs must find new ways to attract and retain customers.
For many ISOs, this involves:
- Adapting their business models to incorporate software solutions into their offerings, and
- Shifting their focus to untapped markets
ISOs that use software development to tap into underserved markets are known as Next-Gen ISOs. These organizations have embraced digitalization and use technology to fill gaps in the market.
The Next-Gen ISO Business Model
Many of the most successful ISOs are beginning to look like software companies; some partner with developers to create value-added services for their merchants, while others hire in-house teams to develop new tech solutions. Rather than selling merchant services alone, they offer point of sale (POS) technology, inventory management, customer relationship management (CRM) or marketing automation solutions - all with integrated payments.
By providing a robust suite of services such as CRM solutions, scheduling, inventory management or digital invoicing, Next-Gen ISOs help merchants succeed in every aspect of their business - not just payments.
This makes the ISO relationship more valuable since merchants don’t have to search for multiple service providers. Instead of paying subscription fees for every tool needed to operate their business, they can rely on their payments provider for everything. This approach will make your customers happier and more reliant on your business - helping you reduce attrition and scale.
As NMI CEO Vijay Sondhi pointed out in a recent CCSalesPro podcast, “Traditional ISOs have now evolved into Next-Gen ISOs. Some aren’t even charging for payments. However, they do interchange pass-through and make it up on the software stack they sell for a monthly subscription.”
Even without charging for payments processing, these ISOs drive significant revenue through subscription models. The Next-Gen ISO model blends traditional merchant services with software-driven solutions that make ISO businesses more lucrative and enable merchants to outperform the competition.
Where Are the Opportunities for Next-Gen ISOs?
Successful Next-Gen ISOs are adept at finding underserved markets. For example, several of our Next-Gen partners have capitalized on opportunities in field services.
Customers who contract home services (such as repairs, plumbing, HVAC and more) expect the ability to pay with a credit or debit card. Unfortunately, it’s not uncommon for field service technicians to be unable to settle the bill on the spot. At times, they may even default to writing the customer’s credit card number on paper to enter into the system when they return to the office - a potentially dangerous habit.
Solutions that provide companies with flexible payment options enable them to streamline operations and improve the customer experience. The best payment solutions allow businesses to accept their customers' preferred payment methods, including EMV, contactless, mobile wallet, text-to-pay and in-app payments.
Some software providers (and tech-savvy ISOs) make their offerings even more desirable by weaving appointment scheduling, route planning, inventory management and real-time project insights into their payment acceptance platform.
By integrating payment acceptance into a software solution, you can reach new markets and attract customers who otherwise may not be interested in your services.
For instance, a field service provider might not have the funds to pay for modern payment processing independently. However, that same provider would find it difficult to pass up a software solution that enables them to operate their business (and accept payments) from a central platform.
“It’s fertile ground for ISOs and ISVs to go after,” Sondhi said.
Operating in saturated markets doesn’t mean your business has to stagnate. Instead, keep your eyes open for companies that can benefit from new solutions and integrated payments. Look for demand in untapped markets and focus on the unique opportunities you identify. You may be surprised at the niche markets you uncover and the number of merchants who are ready for a better payment acceptance and software solution.
By adopting a Next-Gen model, your business will begin to take on a new shape. Although it may look different in a few years than today, incorporating a digital strategy into your long-term plans will lead to greater success.
For more information about becoming a Next-Gen ISO, or to learn more about partnering with an independent software vendor (ISV), contact a member of our team and schedule a consultation.
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