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The Green Sheet Online Edition

April 22, 2013 • Issue 13:04:02

Take command of consumer end-point devices

By Mustafa Shehabi
PayCube Inc.

Front-end innovations are driving change across all retail industry verticals. And the ability to create a frictionless, unified consumer experience at the POS and service environments across payment acceptance channels is going to be the single biggest differentiator for ISOs and acquirers.

Examples of channels to address include payment terminals, integrated POS systems, mobile phones, tablet devices, self-service kiosks, ATMs, and e-commerce and MO/TO environments. The fact is, however, that retail payments and associated value-added services, such as loyalty, promotion and couponing programs, are rapidly evolving. ISOs, more often than not, will need to move faster than their current processing and hardware vendor arrangements can accommodate.

For some, this will mean investing in new technology development. The ability to design, build and manage applications on these varied devices and systems will require a well thought out strategy that is tightly integrated with a business strategy. The need to serve diverse merchant and consumer segments complicates the issues.

A changing equipment model

Traditionally, the payments industry has had limited hardware choices provided by entrenched industry players. Now the industry is being bombarded by consumer devices, including mobile phones, tablet devices, card-reader dongles, etc., that are seeing increased consumer acceptance as payment vehicles. Led primarily by startups, the push toward using these consumer devices for payments, as well as POS functionality, complicates the hardware decision and provisioning cycle for today's ISOs, payment processors and acquiring banks.

Leading payment terminals used in countertop and in-lane environments are basically secure devices in themselves. How often do we hear of anyone jailbreaking such a device? Can we say the same for smart phones and dongle card-readers, where jailbreaking is a parallel industry of sorts? (Jailbreaking in this context means overriding limitations built into a device or computer system for security, marketing or administrative purposes.)

The industry is faced with the push and pull between new features/functionality and the security issues that these new consumer devices bring to the table. The acquiring industry has made substantial investments in provisioning merchants with traditional payment hardware and software. It needs to find ways to cost-effectively integrate with the new consumer-facing hardware devices - without wasting the investment already made.

Also, cell phones and tablet devices have useful, functional user interface capabilities but might be challenged when transaction volume is high. Thus, the ability to integrate effectively with the core payment processing infrastructure is essential.

A new kind of commerce

ISOs and acquirers need to look at investing in technology to build their own intellectual property around hardware applications and related technology. Some of these would include:

  • Vertical market specific apps for each terminal/hardware type
  • Cross terminal/hardware apps that allow software teams to reverse engineer and rewrite apps for multiple platforms
  • Point-to-point encryption, specifically for integrating different hardware types and peripherals
  • The ability to aggregate to any device and processor - platform play is key, compared with just an app
  • Content display capabilities
  • Linking of inventory, payment and retail channels
  • Ability to extract and restrict Payment Card Industry Data Security Standard issues to payments

Near field communication, the Europay/MasterCard/Visa (EMV) protocol, mobile devices and quick response codes are all pushing toward cross-channel commerce, not just payments. "Bring your own device" is going to become the norm driving front-end innovation.

The next generation of acquirers must build effective internal technology skills or partner with vendors who can bring the following to the table:

  • Core understanding of transaction acquiring
  • Consumer transaction management
  • Multichannel capability: commerce, engagement and payments
  • Multichannel integration
  • Strong understanding of how to build out technology with data security in mind
  • Strong OEM applications understanding (for example, electronic fund transfer terminal vendors, POS system vendors, wallet vendors, mobile stacks software, etc.)
  • Cross-porting between vendor apps
  • Peripherals and related capabilities
  • EMV and related capabilities - specifically for U.S. PIN-less implementations

The market is equipped with high-quality devices that the acquiring community has distributed to the merchants. Many of these can be repurposed by either upgrading software or incorporating add-on devices. This will extend the life of the existing devices while allowing for a smooth consumer transition to new payment methods. But such upgrades cannot be ad-hoc and must be handled via a solid technology strategy. After all, if 2012 was the year of the device, 2013 will be the year of the platform. Are you ready? end of article

Mustafa Shehabi is the co-founder of PayCube Inc., a payment consulting and IT services company providing custom software solutions and custom gateways for acquirers, ISOs, retailers and varied organizations in the world of payments and consumer transactions, including prepaid and gift card program, loyalty and promotion, payment startup, POS solution, mobile payment and e-commerce players. PayCube uses a on-site and offshore delivery capabilities, with a staff of retail and payment focused software engineers, systems architects, project managers, tech leads and systems analysts. For more information, email ms@paycubeinc.com,">href="mailto:ms@paycubeinc.com">ms@paycubeinc.com, call 925-285-6265 or visit www.paycubeinc.com.

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