Is the payment processing business the next great thing for accounting software vendors and their channels?
After all, they have been willing to pay a lot to get into this business. This was shown by Sage's acquisition of Verus Financial Management earlier this year. The purchase price was less important than the fact Sage paid five times annual revenue for the payment process. It hasn't come close to paying that multiple for an accounting software company.
Similarly, when Intuit acquired the operations that became Intuit Merchant Services (which markets QuickBooks Merchant Services) in 2003, the evidence is that it paid a premium. While Intuit doesn't break out the revenue on merchant services, it reported that out of the $116.7 million in cash paid, it recorded $98.4 million as goodwill.
Meanwhile, another accounting vendor, Cougar Mountain Software, started its payment processing services in 2004. Cougar, which is in the POS market, joins another POS vendor, Synchronics, which has been offering its own services for years.
Advisors, consultants, and resellers have a potentially large stake in the future of these ventures. Both Cougar and Synchronics share fees with their channels that stem from the businesses that use their processing services. Intuit offers deals on fees to customers referred by ProAdvisors and to ProAdvisors who process their own payments through Intuit.
Sage has an even more ambitious plan: It wants to train resellers as Independent Service Organizations whose jobs will include recruiting merchants to use the Verus services. The pay off is that ISOs get a piece of each transaction long as a merchant uses those services.
In a world of declining margins, this looks like a natural. Credit cards are the life blood of retail--of course payment processors handle debit cards and check conversion--but credit is where the volume is. And why not? The sales data needs to get into accounting systems.
So why shouldn't the people who sell and install these get a cut?
