OS terminal manufacturers such as VeriFone and Hypercom represent leading indicators for the industry in the sense that they are forced to place their capital bets two or three years ahead of where the industry is at any one time. It takes this long for their engineers to define the design requirements, hardware specifications, source parts, manufacturing contracts, etc. For this reason, the White Paper released in June by VeriFone represents valuable insights into where the industry is headed and why.

White Papers are one important tool that companies employ to educate their customers when introducing new products. Major POS terminal manufacturers have the challenge of convincing banks, processors and ISOs why they need to replace the installed devices that are working so well and retailers have fully depreciated.

Without explicitly stating the obvious - that the credit card processing business has matured to the stage where it now finds itself a commodity - VeriFone instead focuses on three primary drivers for its justification behind the need to upgrade existing terminals:

• Open new markets.
• Improve customer retention.
• Generate new sources of revenue.

In this White Paper, VeriFone explains how its new Verix 3300 and 3700 terminal families enable customers to obtain these objectives.

Access to New Markets

These Internet-enabled devices provide access to network service providers that can deliver loyalty programs, stored-value load, Electronic Benefit Transfer (EBT), bill payment, check conversion, electronic receipt capture, e-mail and age verification to open new markets. They open doors for sales into fast-food restaurants, check cashiers, medical facilities for submitting claims and government agencies for license renewals.

Online age verification means convenience stores can enforce local compliance with national regulations for alcohol or cigarette sales. Electronic Check Conversion (ECC) means ISOs can start calling on the local insurance agent to convert mail-in premium payments or on apartment complexes to truncate rent payments.

Improving Customer Retention

This benefit goes to the heart of what it means to find yourself selling into a commodity marketplace. Typical commodities we all recognize are salt, sugar, gasoline, electricity, cotton, wheat or rice. If your card-processing program is as good as the next guy's, what are you going to compete on other than price?

It is hard to hold onto customers when your credit card processing is no better than the next guy's. And if the terminal you installed can only do card processing, then the lowest price typically will get the sale.

Falling prices translate directly into shrinking margins and lower portfolio valuations - a spiral that has ISOs looking for alternatives that help them retain their existing customers and grow the business.

VeriFone argues, quite convincingly, that expanding the range of services you offer a client not only serves to increase the revenue stream from your retailer, it is going to immediately translate into a longer relationship for two reasons:

First, your client is that much more hesitant about changing that many services to find an alternative supplier.

Second, you are raising the bar for everyone who wants to consider approaching your client with an alternative.

Generate New Sources of Revenue or Cost Savings

Prepaid telecom card loads represent a compelling new service for many retailers. The margins on these transactions are typically 20% or more for the retailer, and reload services represent repeat traffic as cardholders come back time and again to replenish the calling time on their landline, cell phone or Internet access.

Accepting EBT represents immediate justification for check cashiers who have long resisted installing online terminals. These same storefront operators are looking to ECC for automating their payroll-advance check handling or bill payment.

The more progressive check cashiers also are planning for image-based truncation to streamline payroll check collection. All are new services that can be performed on these multi-application terminals.

Electronic receipt capture (ERC) is another example of how these new terminals immediately can create value for your retailer beyond the cost of the service. They do this by relieving the retailer of the burden of storing paper receipts, retrieving them manually each time a chargeback occurs and doing it within the tight timeframes that card associations have placed on the industry.

National statistics show that retailers don't respond to more than 70% of chargebacks - largely because of the time and labor it takes to locate the right shoebox, pick out the correct receipt and get it faxed back to their bank before the deadline. Automating this function represents a logical and easily justified new service for most retailers.

Another cost-saving service coming to market is electronic payroll. Each payday, or at the employees' convenience, they can approach the multi-function terminal with their "PayCard" in hand. Touch-screen ATM-style lead-throughs instruct them to swipe their card, enter their PIN and sign an acknowledgement that they have received their pay-stub details.

This triggers a receipt detailing their deductions along with a facsimile of their signature as an audit trail to their receipt of this information. This is paperless payroll, and it is inevitable.

Each payday morning the net pay funds are distributed to stored-value cards that employees - whether they are banked or un-banked - can use at any local ATM to withdraw cash or make cross-border transfers with a phone call.

Many of these PayCards will have a Visa or MasterCard logo on them that will make them acceptable at PIN debit-based retailers such as the local grocery or gas station. Not only do retailers streamline the payroll process, they provide a new employee benefit and reduce their fraud losses on payroll checks.

A related cost-saving new service being deployed through these Internet-based terminals is time-and-attendance tracking. Store personnel easily can punch in and out, and the terminal tracks hours worked and automatically feeds the payroll system. These and other applications are listed later in the column.

Terminal Functionality Needed to Deliver These New Selling Opportunities

Here are the components you can expect to find on these new multi-function terminals:

• Faster processors able to perform multi-application processing so that during authorization wait times, advertising can be streaming across the terminal screen.

• Upgraded printers that are more reliable, easier to load and able to print complex symbols or graphics that advertisers want placed on their coupons or as reminders at the foot of a card transaction receipt.

• Increased memory for an expanding series of onboard software applications.

• Dynamic memory that can be allocated where and when it is needed by a chip that ensures protected envelopes of processing - a critical requirement in a business that has strenuous certification testing before a terminal and application are authorized for originating payment transactions.

• Internet browser to graphically display Web pages, e-mail, spread sheets for inventory look-up or viewing of digital receipts in settling a customer dispute or responding to a chargeback.

• Faster modem speeds for processing data-intensive transactions beyond the traditional simple card authorization - transactions such as application software upgrades, check images and downloads of digital receipts.

• Touch-sensitive screens that can capture digital signatures and display full-motion graphics with high-resolution color. The ATM-like lead-through prompts dramatically reduce the training time for new employees and make transactions like bill payment a self-service application.

• Remote site server applications such as ECR, check image archives, streaming advertising and e-mail are becoming service extensions, as evidenced by Hypercom's ePic strategy.

• Software development tools, online technical support and Web-based training are quickly becoming table stakes for vendors such as VeriFone that are fully committed to providing multi-function terminals.

Excerpts from This White Paper

Value-added applications ideally suited for high performance terminals such as the VeriFone Omni 3300 and Omni 3700 include:

Electronic Gift Cards - Represent a fast-growth opportunity for merchants and payment providers. Card activation and acceptance at the POS improves customer service for merchants and generates transaction revenue for service providers.

Loyalty Programs - Help merchants improve customer service while managing loyalty schemes that result in new sources of revenue and improved merchant retention.

Pre-Paid Telecom - A fast-growing service for long-distance, cellular and Internet. Telecom "top-up" services allow consumers to reload minutes onto a card at a POS terminal while also eliminating the costs associated with issuing plastic cards.

Bill Payment - Combining bill payment, such as utility payments, with traditional credit and debit is a natural extension for POS devices.

Stored Value - Enable retailers to load additional value onto these personalized retailer cards. When a card is presented, the terminal could be used to add cash value, calling card minutes, parking time or other forms of value.

If you are interested in any of the following applications, link to the White Paper for additional detail on: Age Verification, Electronic Messaging, Time and Attendance, and Consumer Surveys.

Web Sites for More Information on Multi-Application Terminals

www.concordefs.com/retailers/top/univ_terminal_photos.htm

An example of a multi-function, branded terminal provided by Concord, called its STAR Universal Terminal.

pos.epson.com/pointofsale/irtouchscreen/ir_register/index.shtml

Epson's extension of the multi-function terminal to incorporate the POS register as a fully integrated unit.

www.connexcenter.com/features.htm

A multi-function device that represents a bridge into markets such as apartment managers, insurance agents, attorneys and CPAs. Notice the smart card reader built into the device.

www.hypercom.com/products/Product.asp?Nav=56&Nav=47&Nav=442

Hypercom's top-of-the-line multi-function terminal. It is worth spending time at this site to understand Hypercom's ePic strategy.

Eric Thomson is Executive Vice President of Profit Source Advisors. He can be reached at etprosc@attbi.com.

Author: VeriFone

Date: June 2002

Size: 14 pages

Relevance Rating: High

Web Address: www.verifone.com/pdf/MultiApp_White_Paper.PDF