Square, the point-of-sale and acquiring unit of Block, Inc. (NYSE: XYZ), said this week that it is following through on 2024 plans to partner with independent sales organizations (ISOs), a merchant-sales model it abandoned more than 15 years ago in favor of selling directly to merchants. At the Western States Acquirers Association’s annual conference in Palm Desert, California, Square’s global head of resellers, Mike Collins, joined a panel on how merchant sales is evolving.
Let us explain.
Mr. Collins stressed the need to leverage the ISO’s relationship with the merchant and Square’s technology. Firms that do so are not merely offering savings, Square’s original pitch, but delivering a capability that can actually help the business. “You have to lead with technology,” he told WSAA attendees, though the human side of merchant sales still matters.
The panelists picked up that thread. Coming to a merchant with a multiple benefits rather than a price-only angle is the hallmark of a consultative sale, said fellow speaker Shawn Dalton, senior vice president of Exectras. “People do business with people they like and that human aspect of it,” he told attendees.
What was Square’s original business proposition?
A number of years ago, Square was best known for a free, square-shaped plastic card reader that plugged into a phone that paired with a downloadable app for Apple and Android devices. The company targeted the hard to reach, underpenetrated, U.S. small and micro-merchant market; businesses that historically could not accept payment cards or could do so only at a high cost per transaction.
Square solved that distribution problem with a free, self-serve app that was easy to install on a smartphone or tablet by the SMB (vs a third party through a standalone PoS). Once enrolled, merchants gained access to Square’s first-to-market processing service at a flat 2.75% of each transaction (vs 3-6%). The platform also bundled simple wraparound tools for common small-business needs: next-day deposits instead of the typical two to four days, basic operations such as payroll and marketing through a single SaaS system, and no contract requirement.
At the time, this was a novelty. Small merchants were overcharged and underserviced, the company helped “Square” the competitive circle and SMBs signed up directly by the tens of thousands and eventually millions. Square became a poster child Silicon Valley success story, they were faster, better and cheaper and their target market loved them.
What changed?
A lot. That would have been hard to imagine when Square was young and growing fast, but the domestic SMB market is now crowded with lookalike solutions. ISOs, ISVs, Payfacs, and traditional merchant acquirers have all become more sophisticated. Almost every payment provider now has an app and some form of competing offer.
So what does Square do? If you can’t beat them, join them: put a friendly face in front of the prospect, demonstrate live how the Square platform has improved, and let the merchant decide after an on-site visit; rather than leaving the decision to a private review which may be incomplete and subject to the clerk’s limited knowledge. Block said the revived ISO program already had more than 140 participants.
Others may agree.
As AI adoption accelerates in payments, the human element of the sale becomes more important, not less, said Justin Vollrath, founder and chief executive of PayCompass, part of the Exectras Payments venture. “On the sales side, we’re looking at how we can use [AI] to just provide faster access to information,” Vollrath said. “Our goal is not to go away from that human interaction, but how can we make the human interaction faster, more efficient, and more effective.”
Some companies may turn to artificial intelligence to stand out, though not always in the way people expect. AI can analyze statements, generate sales presentations, and provide 24/7 support in multiple languages, stripping out administrative friction and freeing staff for more complex work.
The vertically integrated are tough to compete against.
Even so, the rise of integrated point-of-sale platforms such as Toast can shrink the window in which a sales agent controls the merchant relationship. A merchant already on an integrated POS system is a harder sell because that platform delivers more than payment processing. Any competitor has to match what the merchant already has and still be different enough to justify a switch.
Remind us about Block.
Block builds connected commerce and financial ecosystems for merchants and consumers. It reports two main segments. Square provides payment processing, point-of-sale hardware and software, banking, lending, payroll, loyalty, and other tools for sellers. Cash App offers consumer financial services, including peer-to-peer payments, a debit card, direct deposit, investing, bitcoin, and Afterpay buy-now-pay-later. Smaller businesses include TIDAL, Bitkey, and other bitcoin-related products. Founded in 2009 as Square, Inc., the company renamed itself Block in December 2021 and is based in Oakland, California. Jack Dorsey is co-founder and Block Head. As always, we encourage readers to conduct their own research, including a thorough review of SEC filings, such as the 10K, the company websites, investor presentations and quarterly earnings conference call transcripts. Sources for this document include, but are not limited to: WHF attendance at the WSAA and Digital Transactions.
