Q&A

Future POS's Giles Talks EMV, Tablets, Reseller Relevance

Source: Future POS of Pennsylvania
jim roddy

By Jim Roddy, VP of Marketing, RSPA

RSPA
Photo Courtesy of the RSPA

Who better to talk about the future of the POS channel than the president of Future POS? I recently sat down with John Giles (pictured) in his office in Butler, PA, just north of Pittsburgh, to discuss a range of important topics facing the retail IT channel.

I always enjoy talking with Giles because he’s knowledgeable — the software company he founded recently celebrated 15 years of business with an RSPA Vendor Of Excellence Award — and he’s passionate about the channel. You’ll see in this interview that he doesn’t pull any punches and offers specific advice for resellers.

Jim Roddy, Business Solutions: What innovations are you seeing from solutions providers that help their end-user merchants apply technology to provide a superior customer experience? What technologies and applications have you seen that are most impactful and what things are you seeing that maybe aren’t as impactful as folks had hoped for?

John Giles, Future POS: I’m seeing things like these kiosk terminals when you go to certain chain restaurants where you can self-serve, pay your bill, look at your check, things like that. Your kids can play games on it. But I’m not seeing the adoption that I would have expected, and maybe that’s just because I’m a technophile — I love technology. I think there are just ROIs that have to be met to prove the model, and I don’t think they’ve been met yet.

I’ve seen apps. We’ve created apps for restaurants to allow their customers to interact with them that were very clever but they just have not rolled out in any mass. I think a lot of that is the economy. The smaller merchants can’t afford these sorts of technologies. But even the larger chains that have the money to throw around, most of them aren’t rolling out anything customer-facing either. You see pizza places that are doing a lot with websites and apps, but beyond that …

The pizza app makes sense because it’s being delivered to my house. I would have had to call somebody and sit on hold for 10 minutes to get a pizza otherwise. Now I can go to a website. Now I can do it through my phone. That makes sense. But if I’m in a restaurant, I expect to see the server with some frequency. I think it’s just human nature. You’re used to that person-to-person interaction. Even though I’ve got this kiosk on the table, I’m still trying to wave the server down just because maybe I’m old-school. I think there are a lot of cool technologies out there. I just haven’t seen anything get any real traction as of yet.

Roddy: Do you think it’s a matter of time or are you saying that maybe for the in-restaurant applications customers are just used to talking to people and as long as there are human beings, that’s how it’s always going to be? Is that your take on it?

Giles: I don’t know that that’s always how it’s going to be. But I think it’s a generational thing. The elderly obviously aren’t going to pull out their phones and start working an app because they can’t read the screen. But even younger people or middle-aged people — I’m not dying to use my phone. I’m not dying to incorporate technology into my meal.

Even with the handhelds, you see servers coming to the table and their attention is focused on that handheld and not looking at the customer, not making eye contact. There’s no real interaction. They’re more like a robot than somebody that you want to relate to. You want to ask them about their kids and see how their day’s going, stuff like that. It dehumanizes that interaction.

Will it take off inevitably? Probably so, but I think the adoption’s going to be a lot slower than a lot of technical people like me would like to think. It could be just because of the human factor.

Roddy: You attended the RSPA INSPIRE Conference in Maui, both of us did. You listened to the EMV panel. What’s your take on EMV? What advice or guidance would you give resellers?

Giles: I’m in the restaurant business, which kind of changes my view on it. But I think EMV is largely … can I say, “A load of crap”?

It doesn’t protect the merchant. It doesn’t protect the consumer. It protects the card brands. Now, Mercury actually had a really good presentation on this that showed that only 9 percent of this kind of fraud actually happens in restaurants. It’s big-box retailers. If I get a stolen credit card, I’m going to go to Best Buy and buy a TV and sell it on eBay. I’m not going to go to the Subway shop and have lunch. They’re going to go for the most bang for their buck. They’re going to go for the biggest reward. They’re not going to go have lunch. The risk to a restaurant merchant is very minimal.

The comparison that I heard was that at $400 a workstation to get this EMV technology integrated, for the two $30 checks that I get burned on a year, I could run for a lot of years, never embrace EMV, and still not be financially behind. The real technology that they’ve glossed over is point-to-point encryption. That is something that’s been around for four or five years and because it doesn’t protect the card brands they’ve not done anything to get behind it.

But that really protects the merchant, it protects the POS VAR, it protects the customer — because as soon as your card is swiped, it’s encrypted. There’s no chance for anybody to steal it and it’s even more secure than I realized after, like I said, Mercury put a really good presentation on. After seeing their presentation I realized that if I crack one encrypted packet from that swiper, I’ve cracked one transaction. Not one swiper, not one card, just one transaction. So what’s to be gained for these fraudsters is minimal — virtually nothing. It’s a ton of work with no return on their investment.

If they see point-to-point encryption, they’ll just move on to somebody that doesn’t have it. Maybe someday that fraud changes as computing power gets bigger, but not dramatically because every transaction is locked down.

That’s the technology that I wish the card brands would have gotten behind. To date, most ISOs can’t even offer it, and that’s what would really protect you. EMV? It protects the card brands from those two transactions a year that you have to worry about.

Point-to-point encryption saves your butt from a PCI [Payment Card Industry] breach where they got everybody’s credit cards who has come to see you in the last year. That’s the honey pot that these hackers will go after. But once it’s encrypted, it’s not a honey pot anymore.

All that EMV generally does is shift your fraud from brick-and-mortar to the Internet because now I don’t have to have a card present. I can type in a number and an expiration date and buy whatever I want. In Europe they actually showed that exact metric. When EMV was implemented they loved to tell you, “Brick-and-mortar fraud went to virtually zero.” Yeah, because it all went to the Internet. You really didn’t gain anything. You just inconvenienced a ton of people to shift your losses.

Roddy: One question resellers keep asking is, “Is there a way that I can make money from EMV?” Do you think that’s feasible in the restaurant industry?

Giles: It’s not super-practical. I think that there have been a lot of credit card reps out there putting the fear of God in these merchants. They’ve actually sold them hardware that they didn’t need and that is of no use. But they’re saying, “Look, you’re ready for EMV.” Well, not really. You have the hardware that could take the EMV but it has to be injected with a PIN that you don’t currently have.

I think that there’s been a lot of noise made about it, and the card brands are partly to blame for that. They’re like, “EMV, it’s coming, it’s coming. Liability shift.” I’m sorry, but the liability shift happened years and years ago when the credit card brands got big enough to say that they were going to fine the merchants. The liability has pretty much been on the merchant anytime things go south for a very long time. This is just one more iteration of it.

I don’t think that EMV is going to be the Holy Grail that people think it is. I think that some people use it as a sales opportunity. But with the certification process involved in EMV, it’s really not going to be widespread any time soon. These people that are getting beat over the head, “You need to get EMV hardware,” they’re probably buying something that is not going to be of use to them inevitably and is going to be of minimal value long-term.

Roddy: There was also talk at INSPIRE about the role tablets play in hospitality and retail. What’s your take on where you see tablets fitting in?

Giles: They have their place. They’re kind of a cash register replacement. Now, when you say “tablet,” I think the tablet as a POS device has tons and tons of potential.

I think that the tablet POSs that you’ve seen in the last three to five years are of little to no value. Most of them have gone iOS-only and that’s an evolutionary dead-end because Apple is not going to make a full-sized iPad workstation. If they did, it would be priced right out of the market because everything Apple is extremely expensive. I bought my kid a charger for his iPhone last night; it was 25 bucks for a piece of wire. I don’t see them coming out and competing with the hardware manufacturers that we currently have in our space.

I feel like the iPad stuff is an evolutionary dead-end. I think that the two types of consumers that buy them are underfunded people who are looking for something cheap and they’re going to grab their kid’s iPad and try to make it work for their business. Or the other group would be people that are just technophiles that love Apple, love iPads — “I love my iPad so much I want to have it at work with me every day.” But I think both of those people are going to realize long-term this really wasn’t the mission-critical application that I need to run my business and I need to go reinvest in something that is better.

It lowers the barrier of entry to getting a POS system. But you get what you pay for. I think a lot of these iPad customers realize pretty quick, “If my business does any volume, this isn’t going to work for me.”

Roddy: Do you think there’s better hope with Android tablets with better functionality?

Giles: I think Android tablets are going to be cheaper. Their price-point is almost half that of what you get with an iOS device. But beyond that, because Android is wide open, you have third-party manufacturers making hardware for it. Just like the Windows PC and the IBM PC, they published their specs. Apple didn’t. You had to buy everything from Apple. If you want a printer, you have to buy it from Apple.        

There was that stagnation of innovation with Apple whereas back in the computer wars Apple should have eaten IBM’s lunch. IBM had an ugly-looking clunky box but because they allowed everybody to make stuff for it, it became this self-starter community saying, “Look I made this for the PC.”

If I wanted to make it for Apple, I’d have to license it through Apple and jump through 50 hoops and it would quintuple the cost of my device by the end of it. I think Android is that new IBM PC versus the Macintosh battlefront, and Apple has not learned anything from their previous lessons.

I think the Android has a lot of potential because now you can get a tablet or I can get an Android workstation that’s cheaper than a Windows workstation. You’re never going to see an iOS POS ruggedized workstation that is going to be cheaper than a PC-based workstation. That’s just never going to happen. It’s a niche market. I don’t think Apple would want in it to be honest. I think they’d look at that volume and turn their nose up to it and go make a new iPod or something.

Roddy: That was my next question. Apple could choose to get into it but it seems like it’s not lucrative enough for them.

Giles: It’s not profitable. It’s not very lucrative. Do you want to compete with a $500 all-in-one? No — not on price you don’t. You can make yours prettier, but now you’re the expensive option. You’re not the iPad coming in and saving them money. You’re the iOS workstation that’s coming in and costing them more than a Windows PC, probably. Or as much as a Windows PC, but an Android workstation is going to eat both of your lunches.

I see a ton of possibilities with Android. That’s one of the things that got us excited. But not knowing how the OS war is going to shake out, we went cross-platform with our app just to hedge our bet both ways. There are people that love their iPads and God bless them. We’ll sell them software too. But long-term, I’ve seen this play out before and I think I know how the story ends.

Roddy: We’ve talked about a handful of topics here. What do you think are the biggest issues facing the retail IT channel in 2015 going into 2016? What are the things that resellers need to pay attention to that are really going to impact them — changes they need to make to their business?

Giles: I think that seeing how every credit card processor is now getting into POS, I think you need to keep your eye on that ball. Because even though the offerings aren’t great today, they’ve certainly got the money to make their offerings great.

Clover I know is one of the ones that I hear people saying they have fits with yet every bank is selling it. When you go to get a loan for your restaurant, the guy there giving you your loan will say, “Oh, would you need a POS system too?” I think you’re going to see more competition from these products.

Right now they are not able to gain much market share because of their lack of functionality and lots of other factors that they just don’t have the full POS picture together yet. There’s no service. There’s no on-site guy that will come fix it on a Friday night. But as they overcome these hurdles, they will become very legitimate threats, and you’re going to have to figure out a way to beat them.

Consequently, if you’re not looking at the credit card side of your business as a VAR, you’re really, really missing the boat and you risk going the way of the dinosaur. Because if you’re not doing payment processing and POS, every one of your competitors is and they’re making money on both sides of the fence, and you need to do the same.

Roddy: You said, “Figure out a way to beat them.” What particular things do you think a reseller can do? Or what have you seen other resellers doing?

Giles: I think you have to leverage your local presence. You are the guy that’s going to come fix a problem on a Friday night. Don’t tell me about a printer in the air that’s going to be mailed to you and you’ll have it by Monday. When that thing breaks on Friday, your business is crippled until it’s back up and running. I think with a lot of these ISO offerings it’s, “Yeah, here, we’ll mail it to you in a box. Set it up yourself. We’ll talk you through it over the phone from India, and when you have a problem, call a guy in India.”

That’s not going to work for a high-volume business that needs a mission-critical system that’s going to be up and running no matter what — if the Internet goes down, if the router fails, or whatever. It needs to keep ringing sales and getting people in and out the door.

Companies like ours, we’ve been around for 17 years. We know how mission-critical that is. I’ve been the guy taking that call at two in the morning when the guy’s flipping out because his system’s not working. I know how mission-critical that is based on some very colorful conversations.

In the credit card business you sell your service, you move onto the next guy. There’s not much interaction after the fact. I think that that’s the piece that they’re missing today that the VAR offers. The VAR can be that trusted adviser that can tell you about different options, “You can go with A, B, and C and here’s why A is better than B and here’s what B has over C.” You can educate them, be that trusted adviser.

You can come in and fix things when they break in a very timely manner. You can give them quality support in English any time of the day or night.

It becomes more of a relationship than what they would have with these guys that just plop the system in their lap and walk away. I think that’s a niche that the VARs are going to have to fill if they want to stay relevant.

Roddy: We started this conversation talking about the customer experience for folks who are eating in a restaurant. Those folks in a restaurant typically want to talk to people and they like having a friendly, maybe regular server who can make a recommendation for them off the wine list or off the menu or something like that. It sounds like from a technology standpoint it’s the same way. You want somebody who will come in and shake your hand and see what you need in your business. That’s way different from, “Here’s a box. Plug it in.”

Giles: Sure, sure. That’s the piece of the business you have to embrace to differentiate yourself. Otherwise the POS becomes a commodity and it’s like, “OK, who’s is cheaper?” “Well, I can give you mine for free!” Never mind that you’re going to get killed on your credit card bill.

There are lots of angles that these guys are using to sell systems. I think it’s the customer satisfaction after the fact that they’re lacking on because they don’t have this nationwide network of people that will go out and service the systems and keep the customer happy.