he payment-processing industry witnessed a changing of the guard during the summer at one of its superpowers. Hypercom's founder, George Wallner, stepped down as Chairman to lead the new in-house Secure Systems & Transactions (SST) group. According to Hypercom, the new entity was created to address growth opportunities in areas not traditionally associated with the payments market.

Under Wallner's guidance, it will integrate Hypercom's recently developed biometrics, secure identification, age verification and transaction-security products and systems.

The release announcing the news described Wallner as Hypercom's "chief strategist." To countless professionals in this industry throughout the last two decades, he has been much more. Even the outspoken Wallner goes so far as to call himself "the man with the message."

Born in Hungary in 1951, Wallner came from a working-class family. "They pushed me to work hard," says Wallner. "Some of it stuck!"

After attending college to study electrical engineering, Wallner opted for the military rather than the marketplace and continued his education, but this time in radio and telecommunications engineering. Upon returning to civilian life, Wallner left Hungary and traveled down under to Australia, where he accepted a position in a factory, soldering screw taps on a transformer production line.

Within a relatively short period of time, Wallner secured a better job in an electrical engineering environment. Working for a company that developed telephone systems, Wallner laid the groundwork for a career that would take him down an extraordinary path.

"Because of the unions in Australia, there were peculiarities in their systems," he says. "My qualifications weren't truly recognized even though I moved up fairly quickly. At the end of four years with that company, I decided to go out on my own as a private consultant."

Staying in the engineering field, Wallner spent the next few years working independently on interesting projects for telecommunication companies and airlines. "I was really more than just a consultant," he says. "I was involved in designing and building electrical telecommunications systems."

It was during this time that an idea started to take form. "I always wanted to do something on my own," he says. "I felt the money was there. As I was working as a consultant, I had control of my time, so I tried several different things."

Those "things" involved designing a communications systems that addressed a multifeature environment.

"If you look at your phone today, it has display, multiple buttons, speaker capability, but back in the '60s and '70s, every phone was standard," says Wallner. "If you designed a complicated system, it was difficult to work the phone from the standard button. You needed a multifeature telephone. At that time, systems manufacturers made the systems, and all phones were compatible with those systems. That just wasn't going to work in the future. You needed to put some intelligence into phones."

Wallner felt as if he delivered that intelligence with his new product idea. Unfortunately, the telephone company to which he presented the idea didn't share his vision. So he did what every great entrepreneur has done throughout history. He produced it himself.

"I went home and sold my only asset, a car," says Wallner. "I started my own company with a name to reflect my message - high-performance communications."

In 1978, Hypercom was born. It's first offering: a multifeature telephone. Shortly thereafter, Wallner got a partner who was good at selling. With no outside capital, doing it all on its own, Hypercom targeted small businesses by going door to door with Wallner's new telecommunications model. His hard work and efforts paid off.

"Our units sold very well," says Wallner. "We got more money and built more units. Then we rented a small space and built a small factory. We then hired employees and suddenly, with expenses under control, it came together." Within a few short years, Hypercom grew to nearly 80 employees, all selling and servicing communications clients. Ironically, the company that had rejected Wallner's idea even became a client.

By 1982, Hypercom was getting serious competition from Japan. "In the Taiwan corridor, the phones were easy to copy without high technology," says Wallner. "They were also priced better, so we decided to look for another product line with more knowledge, more software and not so easily copied. When you think about a phone with a display microprocessor and keyboard, it's not that much of a leap to card reader and modem."

In 1983, under Wallner's vision and expertise, Hypercom designed its first card reader, its first terminal. Simultaneously, Hypercom also came out with a network-access control unit, a telecommunication box to allow terminals to dial into networks.

"There were no networks in Australia at that time to take these types of transactions," says Wallner. "In order to be able to install terminals, banks needed front-end boxes to interface with. Providing both the terminals and the networking equipment - that was the basis of our approach."

This new approach allowed Hypercom to successfully compete in Asia. By the end of 1983, Hypercom derived little if any revenues from its telephone units. Within the year, Wallner switched his company over to terminals. Teaming up with Omron in Japan, Hypercom combined its networking equipment with Omron terminals and created a powerful solution.

"In that relationship we were designing terminals and Omron manufactured them, combining some of their designs," says Wallner. "We modified them, resold them and enjoyed a great relationship with them."

So strong was Hypercom in the Asia Pacific region by the late '80s that Wallner made a major decision - to take on the American market. In 1989, Wallner relocated Hypercom's headquarters to the United States.

"We had serious competition when we arrived in the U.S.," says Wallner. "We were number 30 in a field of 30."

How did Wallner face the competition? What was his business philosophy? "We didn't have time for one," says Wallner. "The underlying strategy was what we were doing quite religiously, selling products that were differentiated and provided features and functions that were not available with other products."

Wallner claims it was that philosophy - selling products that combined premium service and features - that propelled Hypercom forward. "It was not by accident that we got American Express as our first customer," says Wallner. "We specifically targeted them because we knew they would appreciate our philosophy - a premium card with a premium product."

Once Amex was aboard, Hypercom expanded into other areas. Citicorp was added to its client roster a year later. More followed shortly thereafter. Hypercom started selling as many terminals as networking equipment.

"Within three years, we become a very strong player," says Wallner. "By 1992, we were number two. That stayed like that for a long time, until VeriFone self-destructed. It took us just under a decade to hit top shop."

Another important philosophy that played into the success of Hypercom involved Wallner's financial strategy. "We believe in not taking any debt to the point that in 1997 when we went public, we had $70 million in revenue and zero debt," he says. Wallner's leadership strategies are just as impressive as his corporate achievements. Take his approach to teamwork, for example.

"Teamwork ... I just tell them what to do!" says Wallner. "Seriously, though, it depends on what we're working on. If I'm not sure of myself, I let the team work, then I make a decision. The only thing I require is that while we meet, everyone should speak his mind. Don't come back to me after the decision is made. Up until that point, speak your mind. Don't tell me later."

Wallner continues, "In many cases, I felt I knew better. I know what I know and I know what I don't. In those areas that I am not an expert, I defer to other people. In the other areas, I defer to myself. You cannot run everything like a committee. There is a place for working with a team. A committee sometimes is a life form with six or more legs and no brain."

Since every successful team demands a successful leader, how does Wallner define one?

"A leader just happens; everyone does it differently," says Wallner. "I have seen a lot of people who I consider leaders. Most important, you have to have a vision and the ability to impart that vision and excite that vision with other people so they come on board with you."

Wallner contends he maintains that vision and excitement by succeeding, one step at a time. "You have to be able to demonstrate at all times that you are moving in the right direction. That's key. Nothing beats that," he says.

As a leader, it is obvious Wallner has accomplished much. What is he most proud of? "Getting Hypercom to where it is today is my biggest accomplishment," says Wallner. "Many of Hypercom's achievements today are not mine, but what I did personally was get Hypercom to the U.S., get American Express' business and put Hypercom on the map. My other big accomplishment was the establishment of the technology basis that Hypercom is built on." The flip side of the accomplishment coin: mistakes. Finances play on that side for Wallner. "After we went public, I let expenses run the finances of the company," he says. "Very simply, I accepted experts telling me it was so complicated I was better off letting them handle things. That assumption is always wrong. No matter how complicated a situation may be, it can be broken down into a bird's-eye view."

Today, however, Wallner is faced with new challenges. "Within the industry today, the really big challenge I have is convincing the industry that the electronic payment terminal space is ready for another major step," he says. "Nothing has changed much in the last 15 years. Hypercom's business did very well with ICE terminals and established a new performance level. Display and keyboards have changed, but fundamentally we haven't change much. I'm setting the stage. The time is ready for the next generation."

Wallner hints at that generation: "Ten years ago we had highly diverse networks, dialing up into proprietary networks. Today we have the Internet, but the point is the Internet has changed everything for transactions. When a terminal dials into the host, everyone is connected through the Internet. From that comes the possibility of changing how we process transactions."

Wallner sees the core of the payment-processing industry focused on converting paper to electronic transactions. "What are paper transactions? Not just credit and debit. Now it's checking - even printing licenses on terminals," he says. "There are a lot of paper transactions today - 38% of all transactions are electronic, 62% are paper. By 2010 it will reverse. We have a ways to go, and we're not going to do it with traditional terminals. Many low-value transactions are being touched too many times - dial-up to processor to card to switches many times. Why not go right to where you have to go? And since I am the man with the message, I am the one with the challenge."

Wallner views technology as the weapon of choice to meet his challenge. In fact, Wallner believes technology will meet most challenges facing the industry today.

"The common goal is to get more transactions from more merchants," says Wallner. "Value is lower, but volume is increasing. Increasingly, the business case will have to get better and better. The terminal will have to be used for more than just debit and credit alternatives.

"One can say all we have to do is make a cheaper terminal for smaller merchants. The problem is that there are many other costs that are substantial besides the cost of a terminal. That philosophy won't get you far because small merchants get less practice with their terminals with the less transactions they do.

"Cheaper usually means a smaller keyboard, a smaller display, a smaller terminal. But the small merchant needs a bigger display and a bigger keyboard because they don't have efficiency on their terminals. They need a large, easy-to-operate terminal with lots of buttons and a big display. If you don't make it easy to operate, you set a minimum requirement for user interface. You go below that and you generate more help desk calls than transactions. That's not cost effective."

Speaking of technology, does Wallner see smart cards playing a big role in future industry processes?

"Smart card is not a payment product, it is a technology," says Wallner. "The consumer doesn't care whether the card has a chip or bar code or stripe. All they care about is annual fee, interest rates, etc. When people say consumers won't accept it, the truth is consumers could care less. The controversy comes from the industry itself."

He added, "There was an unfortunate period four to six years ago when banks and associations latched onto stored-value smart cards. This was two separate things lumped into one. Smart cards were the best way to implement stored value. However, stored value had no business case and serious security issues.

"Stored value has a fundamental problem in that it is real money. The card had to be good to make it secure. Therefore we had a situation with this brand new payment technology. It also was intended to be used for microtransaction applications that generated very little margins since electronic cash has little margin. So we had this new, expensive technology targeting lowest and cheapest transactions. It was a mismatch. The stored-value smart value card did not work then and doesn't work today."

Wallner believes those issues created the controversy that resulted in headlines proclaiming consumer rejection of smart cards. "The stored-value application was what was rejected, "says Wallner. "It didn't make a difference what the card was, it was the stored value that made the difference."

Today, Wallner sees a separate issue surrounding smart cards. "The magnetic stripe has no protection against certain types of fraud," says Wallner. "It is 25-year-old technology that both MasterCard and Visa know needs to be replaced. Smart card technology is the best technology to replace the magnetic stripe. Even though it works beautifully, the magnetic stripe is obsolete."

Like every other new technology, the smart card creates a controversy at the bottom line, in how the numbers stack up. According to Wallner, those figures are not yet stacking up nicely.

"Smart cards would instantly combat certain types of fraud such as skimming, which is growing and becoming sophisticated," he says. "Smart cards could wipe it out, but right now paying $1.25 to eliminate a 60-cent expense doesn't work yet. It's coming, though, because the cost of smart cards is going down as the cost of fraud goes up. If fraud justifies 80% of the cost of the card, smart cards will come. And if people add multi-apps to smart cards, that will contribute to acceptance as well."

What could shatter this scenario? Biometrics.

"Biometrics can be implemented much cheaper than smart cards," says Wallner. "I don't see it replacing cards for a long, long time, but it will add security to using cards. The government will get people to start using it. Consumers will get more comfortable putting their fingers on sensors.

"We started talking about electronic signature capture six years ago. The response was, 'No way you're going to get people to sign on a screen.' Then UPS did it and the next thing we know, electronic signature capture terminals take off and everyone is using it. The sky didn't fall in. While consumers may suck their teeth over it, they'll give their fingerprint. Personally, I'd rather give my fingerprint than my signature."

Wallner sees another unique capability of biometrics as paramount to its appeal and acceptance. "It is possible to make fingerprint-based identification verification dumb in that it can only verify identity but doesn't really know the identity," says Wallner. "It is a zero-knowledge system. Hypercom is already working on this technology."

As for the future of the payment-processing industry, Wallner predicts more consolidations, continued drive and a split of certain classes of merchants. "One class of merchants will be putting in terminals that will do more while another class will just go after simple, cheap terminals," he says. "The sad thing is that some of the financial fundamentals, including fee structures, will change. It will be huge."

What does the future hold for George Wallner?

"I will continue to do what I am doing now, in charge of strategic initiatives at Hypercom," says Wallner. "There is a lot that can be done to make transactions more efficient and secure. Our industry also has a good shot at identification-verification security activities that government organizations will be pursuing. It will be big business in the U.S. Our industry is very closely related, and the smart ones in our industry will go after those activities before the government does. After all, we are the experts."