I’m going to give you my two predictions for 2018 in the merchant services industry. One prediction is great for you, and one is potentially bad if...
Square is Becoming a Serious Threat
In part one I presented my first prediction for 2018. Please review that episode if you missed the good news prediction. Cash discounting is going to be a great opportunity this year in our industry. However, my second prediction is the bad news! Watch out for a strong competitor this year. I believe Square […]
In part one I presented my first prediction for 2018. Please review that episode if you missed the good news prediction. Cash discounting is going to be a great opportunity this year in our industry.
However, my second prediction is the bad news! Watch out for a strong competitor this year. I believe Square is going to shift their strategy to outbound and become a serious competitor in 2018. Too long our industry has looked upon Square as outsiders, doing flea market merchants and mobile processing. Every rep who is working in the field right now will tell you that is no longer the case. Square is targeting YOUR MERCHANTS with good products of which YOUR MERCHANTS are taking advantage. This episode will give you tips on how to compete in 2018.
Several executives from Square actually approached me a couple years ago about working with them to build a sales team. So, I know how interested they are in doing this. A traditional merchant sales team would not work for them because of their pricing set-up. Therefore, I turned down their offer. But with their brand recognition in the market place, they are eventually going to figure out that getting a large, straight commission sales team in place either over the phone or face-to-face could save them millions in marketing costs. At the present time, the cost of acquisition for Square is their biggest problem. They spend too much money getting a merchant. This year I believe you’ll see them start to chip away and get merchants locked in.
I’m giving this “bad news” to motivate you. Take Square seriously, especially if you’re an executive in a processing company. You should already be conducting strategy sessions to answer the question, “What are we going to do to compete with Square?” I believe too many processors are trying to compete with technology rather than marketing. You are not going to beat a Silicon Valley start-up gone public with better technology. That is NOT our industry’s strength by any stretch. Our strength is feet on the street, better service and a well-established payment processing infrastructure. Also, realize Square basically gives away technology. I think the cost for the holder for a Square register is about $100. There isn’t much you can do to compete in that arena. If you do want to compete with them on technology, prepare to spend a ton of money – just as they do to acquire a new customer.
Here’s some GOOD news – you don’t have to compete with them on technology! Decide what your company does really well. Then translate that into competing with Square. Square is terrible at service and has issues with their underwriting and billing. To be competitive you need a solid idea of the strengths for your particular processor.
I think a huge open market right now is to compete on price. Everyone seems to have the idea they can’t compete on price with Square. But I disagree. The whole idea of Square is they are at 2.75%. The reason they are at 2.75% is because they service all business types. Guess what? Many of you are selling merchant services, and your effective rate is 2.5%. People don’t have a huge loyalty to Square. You could target a specific business vertical this year. Say, for instance, “Hey everybody, we noticed that Square is really kicking our butt in auto repair. But we know the actual effective rate for auto repair is usually about 1.8%, so we are going to do a 2.25% flat rate for auto repair. We have a new program with no other fees. We are going to compete with Square on that.” Auto repair businesses don’t care one bit about the Square register or their technology. All they want is that flat rate because it is simple. Just do a lower flat rate. Compete on price.
There are many different ways to compete. Compete on service. Or compete on email and technology, not trying to compete level playing field technology. But you could say, “Look, the Square register is nice for $100. But, let’s face it, you need something more robust to run your business. Here is a Micros system (or whatever higher level of technology.) Look what we can do.”
One final note about competing with Square. They haven’t rolled out Cash Discounting… YET! This is a key opportunity for you to get the jump on them. I don’t think they will roll it out this year at all. They are too visible and can’t take the risk of attracting Government attention with Cash Discounting. This is a big weakness. It represents a large enough financial penalty with their customers to get the edge and sell them another system like Clover or Poynt to replace the Square register. Say to merchants, “Square is charging you 2.75%. We are going to be charging you basically .25% – almost nothing. We’re going to save you 85% compared to what you’re paying Square.” That’s how you can compete.
My advice to individual reps, executives of processing companies, or owners of an ISO is to think about this issue. How are you going to compete with Square? Have a conversation with those you need to send to the field. Help them compete with Square. Think about a pitch.
I predict Square will become a serious competitor in the brick and mortar of “mom and pop shop market” in 2018. That is the market of which we are all so fond and we love to go after. Start preparing to compete!
Read previous article here: http://www.ccsalespro.com/two-predictions-2018-part-1/ My Two Predictions for 2018 – Part 1
Read the next article here: http://www.ccsalespro.com/300-deals-per-year-rep-learned/ A “300 Deals-Per-Year Rep: What I Learned