By Dale S. Laszig
DSL Direct LLC
Modular systems were a transformative notion in 1996, when building an "integrated solution" meant simply adding a printer to a credit card terminal. Merchants initially resisted all-in-one systems. They were concerned that a malfunctioning printer would require dispatching an entire processing system to a repair facility. Manufacturers solved the issue with detachable printer modules and plastic housing designed to make separate devices look like one continuous unit.
Verifone called the PrintPak 300 "an efficient unit that uses a minimum of counter space and hides a lot of cables." The solution linked a printer module and Tranz300 series terminal within plastic housing that concealed connecting cables. "Today it's not enough to deliver automatic payment processing," Verifone stated. "Merchants want fast, legible receipts." The PrintPak's modular design made swapping parts, adding PIN pads and upgrading terminals "a snap."
Hypercom called the T7P a "breakthrough" in 1996, positioning the device as an "entry-level POS product," designed to help merchants "upgrade auth-only equipment," and move to debit card acceptance by adding a PIN pad. Its modular printer and 35-key keyboard facilitated receipt printing and single-stroke transactions. "You'll save on clerk training, telephone line costs, processing time, and settlement time," the product brochure stated.
The simple act of connecting a printer to a terminal was a transformative event, a first step toward building the open source, integrated processing platforms that have come to define the payments industry. Engineers have been hanging peripherals on core operating systems ever since. Peripherals can be easily swapped as requirements change, leaving critical operating systems intact. For example, security guidelines periodically require debit card PIN pad updates, a fairly easy task for merchants with detachable debit card readers.
Perhaps the ease of earlier PIN pad swap-outs is partially to blame for the unevenness of the U.S. EMV (Europay, MasterCard and Visa) rollout. In their efforts to comply with the Oct. 1, 2015, liability shift, merchant level salespeople (MLSs), acquirers and merchants have learned there's a lot more to implementing EMV than snapping on a new PIN pad.
Unlike mag stripe transactions, EMV cards use dynamic data to authenticate and authorize a transaction. When a smart card is inserted into an EMV reader, the POS identifies the card's payment brand application and communicates with its chip to confirm the card's identity. It then approves the transaction offline or sends it on to a card issuer for authentication and authorization.
EMV adoption has been uneven in the United States for a number of reasons, including:
Manufacturers have addressed these issues with semi-integrated solutions, designed to take the POS out of the payment flow, to simplify EMV certification and Payment Card Industry Data Security Standard compliance.
"Ingenico Group's semi-integrated solutions limit communications between the terminal and point of sale system to non-sensitive exchanges, preventing card data from entering the POS," said Rhonda Boardman, Vice President of Strategic Development, Acquiring Channel at Ingenico. "Instead, it is encrypted and routed directly from Ingenico Group's smart terminal to the merchant's card processor or gateway."
Shan Ethridge, Vice President and General Manager of North America Financial Services Group for Verifone, said semi-integrated solutions are a "more efficient way to manage EMV and periodically changing payments industry requirements. Fully integrated systems require end-to-end updates with each new security mandate. In semi-integrated solutions, changes are only done to the terminal, where payment activity occurs."
Integration has also played a role in evolving in-store and ecommerce technologies, spawning a series of unanticipated and exciting phenomena. Will Hernandez, payments veteran and Editor at MobilePaymentsToday, has observed the growing "phygital" trend, a term coined by retail analysts to describe the blending of in-store and cloud-based technologies. "Combining the physical and smart experience makes sense," he said. "It's all about enhancing the physical in-store experience when you're in the store."
Hernandez disagrees with some analysts' claims that physical stores are going away. He sees the downsizing of shopping malls as part of a broader transition into rich, interactive commerce environments that leverage the mobile app marketplace. Consumers are constantly surprised and delighted by the capabilities of their mobile apps, he said. For example, when they walk into The Home Depot Inc., they view a remodeled kitchen in virtual reality, or ask the app where to find a specific product in the store.
"The ways in which we interact are changing right now," he said. "People have always enjoyed going to stores, and now they are interested in seeing how their smartphones will make store visits more worthwhile."
Over the years, merchant requirements have evolved beyond PIN pads and thermal printers. Even small and midsize merchants expect their processing platforms to interface with business management systems, seamlessly linking credit card transactions to customer buying histories and automatically decrementing inventory with every unit sold. "Advanced, interactive technologies such as facial recognition may be beyond the needs of most mom-and-pop retailers," Hernandez said. "But beacons, embedded in POS screens, are an easy, affordable way to enliven the in-store experience."
Ethridge added, "Beacon technology in the Verifone Engage line of devices will enable SMBs to directly engage with their customers. Merchants will be able to recognize consumers entering their stores and send them targeted offers."
Today, connected devices provide a single access view across an enterprise, enabling merchants to remotely manage their businesses. Tomorrow, POS integrations may be less about using cables to connect hardware and more about using application program interfaces to connect apps and operating systems. With the help of technically astute MLSs, merchants can continue to navigate the POS roadmap, while having an enjoyable and profitable ride. 
Dale S. Laszig, Staff Writer at The Green Sheet and Managing Director at DSL Direct LLC, is a payments industry journalist and content provider. She can be reached at dale@dsldirectllc.com and on Twitter at @DSLdirect.
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