By Dale S. Laszig
Castles Technology Co. Ltd.
What does the future hold for the credit card terminal? Are there years of useful life ahead or will it follow the Dodo bird into extinction? Perhaps the larger debate pertains to single-use devices in general, specifically how will machines designed to perform a single task remain relevant in an omnichannel world?
This issue was explored in "Are multipurpose devices better than products that perform one function?" published May 10, 2013, by The Wall Street Journal. The perspectives the article presents from two San Francisco Bay Area technology professionals contain shades of a recent GS Online MLS Forum discussion thread.
In the article, Gregor Berkowitz, a technology and product development consultant, defended the belief that multipurpose devices deliver just what we need to make things easier for us. Dan Saffer, Director of Interaction Design at Smart Design, made the case that for many, quality still reigns.
Berkowitz likened app-based devices to Swiss army knives. "They're simple and offer endless varieties of uses," he said. He foresees a future in which the differences between single-use and multi-use devices are less distinct, as "some single-use devices have been adopting the technical features and approaches of the app-based devices in order to stay relevant."
POS terminals are modeling the evolution of app-based devices: they embrace wireless, Wi-Fi and TCP/IP protocols; process more than payments; and come in standalone, integrated and portable form factors. But despite their multi-application and multiprocessing capabilities, terminals are still considered single-use because their main purpose is credit card processing.
Doing one thing extremely well can be a competitive advantage, according to Saffer. He wrote, "[T]here will always be a place for beautiful objects that only do one thing. As long as that object is exactly what it takes to make an activity easy, efficient, fun - or possible."
For example, terminals undergo a rigorous process of hardware and software certifications before they are deployed to merchant environments. In our MLS Forum discussion thread, Maketelinc stated that these devices are the front line of defense as hacks and breaches become increasingly common. "There is still a use for" stand-alone terminals, he wrote.
CardPlayer said, "Lipman understood that it was the agent on the street that drove the terminal choice for the merchant." He added that years later, after Lipman was acquired by VeriFone Inc., Mony Zenou and Mike Grossman "came back with Dejavoo to cash in on the wave of free terminals being given away by super ISOs."
CardPlayer added that it is unlikely that terminals will disappear completely, but they are being forced to retreat on several fronts. "At some point in the next three to five years, the scale will 'tip' and the traditional terminal will no longer be the norm ... but it will take a long time for it to completely disappear," he stated.
One trap merchant level salespeople (MLSs) can fall into is that we get so excited about our technology that we overlook the needs of our target markets. Clearent wrote, "We, as an industry, tend to get excited (rightfully so) with the newest technology. There are some great, new tools out there with more bells and whistles than a parade. Yet, sometimes we forget most of the mom-and-pop merchants don't want or need those yet. In fact, they are happy with a working terminal."
Clearent pointed out distinct advantages to terminals. "Like the good used car bought for transportation, the terminal does what they need, and stays out of the way," he said. "It doesn't require a lot of computer knowledge, and it doesn't require a huge cash investment.
"And to the point earlier, it doesn't create greater data security issues. That, and the fact that the terminal costs have gone down over the past several years, leads me to say that the terminal will always have a place in the market."
Another major difference in the single-use versus multi-use mindset is in the concept of buying only what you need when you need it. While this can be an ideal way for a new businesses to scale, at what point does a merchant begin to consider bringing a payment processing system in-house, and own it outright?
Saffer pointed out that for an app to be a bargain, the device that runs it must be affordable: "Most multipurpose devices are expensive or come bundled with services (like multiyear contracts), or both. ... A $10 alarm clock that you can own is better than any app that you can't."
Now, let's consider the multi-use perspective. Dee Malik, a self-described virtual terminal and "PC kind of guy," finds today's exacting security requirements are adequately addressed by integrated and cloud-based payments solutions.
"In a PC environment [there's] always a way to 'lock down' Internet access when using programs like ICVerify or PCCharge," he wrote. "You wouldn't have the issue because although you could have Internet access you didn't have to have access to the Web, or allow it on that computer.
"At least that was my understanding since I do not sell [credit card terminals] myself. Cardholder data with a virtual terminal and the cloud should be a no-brainer." He added that you can use a payment gateway to solve that issue.
For Greg Leos, Vice President of North American Sales and Business Development at ControlScan, multi-use devices can optimize precious retail space for small to midsize business owners. "Multi-use devices are much more convenient for the retailer who may have limited counter space," Leos said. "But it's the integrated POS that really sparks an interest for business owners.
"With prices decreasing so dramatically, it makes much more sense for a restaurateur or multilocation business to invest in an integrated POS versus a large, single-use, stand-alone machine."
Leos noted that cost, which has been the barrier to entry in the integrated POS market, has dropped precipitously over the last five years. "The upside of this change for business owners is that they now have a multitude of choices," he said.
"The downside is that many of these systems are proprietary to the acquirer which presents a roadblock for the merchant in transitioning from one ISO to another. This might help with merchant attrition but might also make businesses even more unhappy with their acquirer."
Even for an app-based, multi-use advocate like Leos, there's still a place for terminals in our evolving payments sphere. He said, "When it comes to the POS terminals, Mark Twain said it best: 'The reports of my death have been greatly exaggerated.' Much like checks, POS terminals are a staple within the payments ecosystem.
"While their market share will certainly decrease over time, they will never go away. Merchants are simply too comfortable using them."
Dale Laszig is a writer and payments industry executive specializing in business development and sales performance improvement. She manages channel sales at Castles Technology and sales effectiveness programs through IMPAX Corp. and C3ET Credit Card Consortia for Education & Training Inc. She can be reached at 973-930-0331 or firstname.lastname@example.org.
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