Magazine Article | March 1, 2017

SaaS, Security Drive POS Sales

By Matt Pillar, chief editor

With deep ties to foodservice giants and a focus on SaaS and security, 6-year-old POS software provider Bypass is shaking up food and beverage.

“Humans are pretty good at knowing what factors to consider in a decision, but not very good at applying those factors to the decision-making process,” says Brandon Lloyd, cofounder and CEO of Bypass, speaking about his software’s ability to leverage customer data to improve their businesses.

Photo By Puryear Photography

Brandon Lloyd has spent his entire adult life at the nexus of software and payments. In 2001 as a senior at the University of Virginia, Lloyd launched his first company, Off Campus Solutions (OCS), a stored value card platform designed to give college students, faculty, and staff the flexibility to purchase goods and services from off-campus establishments using their on-campus stored value accounts.

It didn’t take long for OCS to catch the attention of $16 billion international foodservice industry giant Sodexo, which scooped up both Lloyd and his company in a 2006 acquisition. At Sodexo, Lloyd assumed the responsibility of integrating the OCS stored value card platform with the parent company’s legacy stored value system investments. He was the youngest executive-level employee ever hired by Sodexo’s North American business unit.

Lloyd set off on a new entrepreneurial journey in 2010, launching Austin, TX-based Bypass. Today, Bypass serves multisite foodservice companies, from restaurants and cafes to professional sports and large entertainment venues. It boasts three of the world’s largest foodservice companies among its clients, including Sodexo.

POS Built For The Cloud
In creating Bypass, Lloyd sought to exploit two macro trends that were changing the POS sales and service model at the time. First, POS was moving to the cloud, but those ISVs who were moving to the SaaS model early weren’t, in Lloyd’s estimation, offering feature-rich solutions that achieved merchants’ needs. Cloud-based POS lite applications, in other words, were falling far short of the functionality offered by on-premise systems. Second, Lloyd and company recognized that the data the POS was gathering, storing, and producing was quickly gaining value, yet severely underleveraged. The POS solutions on the market at the time weren’t exploiting POS data to help merchant operators make better decisions — from sourcing supplies to serving customers.

Multisite food and beverage merchants have several mission-critical objectives, with maximizing revenue, controlling food costs, and managing labor costs among them. “Trying to achieve these objectives in a somewhat uniform way across all of their stores requires the ability to share data, reports, and best practices among one another and with corporate headquarters,” says Lloyd.

Sharing that data means recognizing its value, storing it, and making it accessible, something that Lloyd says was an afterthought among POS developers until recently. “Not too long ago, one of the major food and beverage POS system manufacturers had its system default set to dump data after 60 days,” he says. “Data was deemed an irrelevant byproduct. We felt otherwise. We believe that aside from facilitating transactions, data production is the most valuable thing the POS does.”

It’s a belief that Bypass is taking straight to the bank. In its SaaS model, Bypass charges a subscription fee that’s dependent on the number of devices leveraging its core application. Advanced modules — such as its Applied Analytics or Inventory Management Suites, can be purchased a la carte at a cost based on the number of sites accessing them.

In developing Bypass, Lloyd sought to eliminate islands of data that are symptomatic of on-premise solutions. “In the cloud, we get all the data in one location, where we can compare it, make sense of it, and create actions based on what we are learning,” he says. “Humans are pretty good at knowing what factors to consider in a decision, but not very good at applying those factors to the decision-making process. That’s where we can leverage computers to make the right purchasing, staffing, and promotions decisions, for instance.”

The cloud also facilitates the flexibility for merchant customers to evolve, which is difficult to do when they’re locked into a static, on-premise system for three to five years. As new features and functions are built into the software or new payment tenders are added, those updates happen seamlessly and without disruption. And because data is hosted in a central location and is easily accessible by any browser-enabled device, SaaS lends itself to data access and transparency of best practices.

“We recognized an opportunity to bring a cloudbased solution to market that would deliver enterprise-class functionality and help merchants leverage the data they already had, to help them operate their businesses more efficiently,” explains Lloyd.

Mobile Experience Drives Sales
Bypass is perhaps best known for its implementations at major sports venues nationwide, including CenturyLink Field, Chesapeake Energy Arena, AT&T Stadium, Nationals Park, and several more. When he left Sodexo and began framing up the business plan for Bypass, Lloyd says he recognized that retail sales are a major source of pain for sports and entertainment venues. “In many cases, food service and merchandising providers in stadium settings have more overhead, yet less revenue generation per terminal,” he says. On a busy game day with tens of thousands of customers on hand, these venues need considerably more devices than a typical merchant, yet their IT and POS budgets are generally far more conservative. Lloyd says he knew that solving the challenge at hand — making that low-budget, high-complexity POS equation work — would give Bypass an opportunity to serve massive foodservice providers like Sodexo and Delaware North right out of the gate.

The solution was a combination of tablet and mobile phone-based POS devices linked to its cloud-based back office management and reporting tools. “We chose this niche, we built a solution for it, and we refined the product as we went along.” By 2016, Bypass was shipping more POS devices to the stadium market than Micros and NCR combined.

Lloyd says that while sporting and entertainment arenas marked the company’s start, those installations account for only about a third of the company’s 200+ site portfolio today. The massive exposure to food service merchants that Bypass enjoys on game days has driven a lot of business to the company among other foodservice industries, namely multisite restaurants. “They see the front-of-store POS — the loyalty and payment applications and intuitive transaction interface — and it piques their interest,” says Lloyd. The multisite branded restaurant business is somewhat similar, albeit steadier, and it’s a market Bypass was interested in pursuing. “The POS gets us a first look, but it’s the very complex back office tools we offer — from exception reporting tools that validate that the sales a waiter made match end-of-day inventory to tools that enable restaurateurs to model and modify recipes — that really set us apart.”

"Not too long ago, one of the major food and beverage POS system manufacturers had its system default set to dump data after 60 days. Data was deemed an irrelevant byproduct. We felt otherwise."

Brandon Lloyd, cofounder and CEO, Bypass

“If you build a POS solution for a small or medium-sized business, you begin by building something that applies to everyone. We didn’t do that, because the enterprise that we chose to serve has such complex needs,” says Lloyd, adding that those needs have long gone unaddressed by the major market players, despite a market hungry for innovation. He’s also quick to add that Bypass is not afraid to identify the businesses that aren’t in its wheelhouse — and to recommend they look elsewhere for a solution. “If an interested merchant has fewer than 10 locations, we encourage them to look at other POS providers that are better suited to small and medium-sized businesses,” says Lloyd. “As they grow in size, they also grow in complexity and diversity of the user base. That’s the difference between ‘POS 1.0’ and ‘POS 2.0,’ if you will. Larger chains have district managers, regional vice presidents, and franchisees, to name a few,” he says, “who all require fundamentally different software to run their business.” Lloyd points to complex device management tools, role-specific user controls, and financial controls as examples. “That’s our sweet spot. Not a lot of folks in the cloud world can meet those needs of the enterprise merchant.”

Providing Payment Security
In addition to the move from on-premise servers to the cloud and the newfound recognition of the value of data, Lloyd says payment security is a third major trend that’s driving business at Bypass. The EMV standard and PCI standards for payment security have caused merchants to budget for breach prevention. Often, that priority contributes to a comprehensive POS overhaul decision. “Effectively, merchants are saying okay, we need to be more secure, and we need to accelerate our use of data,” says Lloyd. “Their existing solutions say that simply can’t happen, so they look for something that solves their needs.” While payment security has long been recognized as critical, it’s not been recognized as a catalyst for POS change until only recently. The more merchants learn about the expense and reputational damage associated with hacks, the more payment security becomes a selling point. That’s a trend that Lloyd saw coming, which is why Bypass built its platform with the assumption that every merchant it sells to will be victimized by hackers. “The idea that you can avoid being hacked is dead,” says Lloyd. “Instead of building a fortress, we need to be building systems in a manner that gives hackers nothing of value when they get in.” P2PE (point-to-point encryption) and the absence of key and PAN (primary account number) data make Bypass customers far less interesting targets for hackers, a point not lost on Bypass sales representatives.

In addition to payment security, Bypass customers seek assurance that their POS applications will run seamlessly in the event of an internet outage. The software was designed to automatically convert to offline mode in that event, allowing the merchant to continue operating without interruption.

"In the cloud, we get all the data in one location, where we can compare it, make sense of it, and create actions based on what we are learning."

Brandon Lloyd, cofounder and CEO, Bypass


Keeping The Business Focused
Asked what concerns him most as CEO of a successful and rapidly growing software provider, Lloyd doesn’t hesitate to admit that maintaining the company’s focus is his primary anxiety. “There are so many opportunities brought to us every week, far more than we can do, and sometimes they’re tempting but just outside of our realm of expertise,” he says. Those opportunities come from both the client side — new sales opportunities that threaten to take Bypass in a different direction, and the vendor side — new technologies or applications beyond the core of the company’s POS and operations platform. “The nature of this POS change we’re seeing will continue to bring us opportunities within our wheelhouse, and if we focus there we’ll be successful. If we get too far out of that wheelhouse, we risk overextending the organization.”

To avoid that overextension, Lloyd says his team evaluates how it’s going to spend its incremental hours based on two criteria: whether the effort will improve the lives of Bypass users and whether it will have a material impact on clients’ businesses. “We see shiny new objects every day, but most do not produce a material business impact. Some of the solutions that do produce a material impact aren’t all that shiny or even new. Those are more attractive to us. We say ‘no,’ or ‘we’ll see,’ to lots of different offers because we’re driven more by substantive opportunities than flashy ones.”

One such opportunity that led Bypass to a fruitful business relationship was the recognition that collaboration among payment processors, device manufacturers, and application developers is marking this new era of payment technology. “This collaboration is increasingly producing full stacks of merchant solutions, such as the offering we’ve developed in conjunction with First Data and Clover,” says Lloyd. “We’ll see more of this as payments become a more commoditized business.”

As for the channel, while Bypass doesn’t currently have a channel sales initiative, Lloyd hasn’t ruled it out. “There will always be a role that the channel plays in providing customer support, and we recognize and value that,” he says. “Lots of those relationships are created locally, and they’re personal.” Still, Lloyd does predict ongoing change. “We’ll see change in the tools that VARs and ISOs sell to merchants — the devices and the applications they offer,” he says. That will require the channel to be nimble with its value proposition, and perhaps beef up its services offering. “Calling on an established relationship when your POS goes down? That’s not going away,” says Lloyd.