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A Thing
Issue 05:01:01

Industry Update

Banner Day for Authorize.Net

Julie O'Ryan Takes the Helm


Insight and Advice From an Industry Veteran

By Matthew Swinnerton

Cutting the Costs of ATM Cash

By Ann All,


Creating a Mission Statement

By Vicki M. Daughdrill

In 2005 It's All About Execution

By Larry Bleiler


Street SmartsSM:
Staying Alive in 2005

By Ed Freedman

The ISO, MLS and Card Association Rules:
Who Ya Gonna Call?

By Anthony L. Ogden

A Must for 2005:
CISP and SDP Compliance Reviews

By David H. Press

What Will Be Hot in 2005?

By Peter Scharnell

From Tips to Trends:
What's up for 2005

By Nancy Drexler

Securing Your Computer Against Spyware

By Joel Rydbeck

New Products

Making Check Images More Secure

A Thin Client for Batch Verification

The Lockbox Has It Covered

Company Profiles

NetBank Payment Systems Inc.


Earning and Maintaining Trust

Courting Less Than Cordial Clients



Resource Guide


The Year That Will Be: Payments 2005

The street sweepers have cleaned up the streamers, glitter, funny hats, horns and all the other makings of the celebrations marking the transition from an old year to a new one. The parties are over and as we wait for 2005 to unfold, we try to predict what's ahead.

Many in the payments industry think that 2005 will be the year that the recent upheavals, consolidations and technological advances will all begin to make sense.

If there's one way to sum up what the year ahead will bring to ISOs and merchant level salespeople (MLSs), it's probably that a new approach to doing business will be critical to their success. Creativity in solving a wider range of merchant needs based on an excellent understanding of what's available on the marketplace is crucial.

As commerce and payment card transaction processing go wireless, get faster and ubiquitous, there will be far more opportunities for sales agents to inform merchants and earn new business than ever before.

If you don't see the landscape changing, consider everything from last year's lawsuits and Supreme Court rulings, mergers and acquisitions, and innovations in payments products.

In some ways, merchant account processing has become very complex, but that's a good thing for ISOs/MLSs on the cutting edge.

The incredible variety of technologies and systems that allow more types of payments to be accepted, emerging markets and security requirements all create scenarios for you to step in, answer questions, find solutions, and be the informed expert and hero.

How do ISOs/MLSs really know what's important to focus on coming up?

To mark the beginning of a new year and a new era in payments, we talked with several industry leaders about what's on the horizon for 2005. They represent companies that are integral to the transformation taking place in the way payments are made and processed.

Untapped Sources Awaiting Solutions

Everyone we spoke with agrees that last year's events and changes in technology that are falling into place will make it easier for more merchants to accept and process payments in 2005.

This year, while security issues remain important, the solutions that will matter will be those that create environments of speed and convenience for merchants and their customers.

That means wireless and mobile point-of-sale (m-POS) solutions will take off this year.

We'll also see an increase in payments made using cards with contactless radio frequency identification (RFID) or infrared chips. And services not previously available over wireless networks, including check conversion and guarantee, will become available from companies including AIRCHARGE.

With options ranging from cell phones equipped with attachments for processing highly secure card transactions and countertop devices operating on wireless wide-and local-area networks, to systems in which consumers wave a card or fob in front of a reader, it's up to sales agents to get to know their merchants in order to provide the solution that best fits their present and future needs.

"Anybody who should be processing retail but is not is your prospect," said Ben Goretsky, Chief Executive Officer and head of IT development for USA ePay, a payment gateway provider.

"Any merchant who meets face to face with customers with a credit card in their hand, but for some reason is not accepting those cards, this is your client."

Wireless networks are standardizing, mobile phones are becoming less expensive, consumers prefer to use credit and debit cards, and solutions providers are able to get creative in developing the products and programs necessary to reach the untapped goldmine of small, independent merchants not processing card payments.

They number into the tens of millions, according to most estimates. Think about all the landscapers, home product parties (candles, cookware, cosmetics, etc.), artisans at crafts shows or airport shuttle drivers out there.

In its May 2004 report, "Mobile Merchant POS Terminals: Revisiting Untethered Card Acceptance," research firm TowerGroup said that targeting merchants including plumbers, non-store retailers, restaurants and taxi and limousine services who accept the majority of payments through cash and checks will greatly affect the wireless market, especially through handheld devices.

"While m-POS terminals have been on the market for several years, high prices and the need to alter sales force and consumer payment habits have thus far kept deployed numbers low," according to the report. "But this is changing, particularly as merchants seek to add convenience to the consumer payment experience."

By 2009, TowerGroup predicts that both handheld and countertop wireless devices will account for almost one in four new POS terminals delivered in the United States; in 2003, there were 12 million POS terminals in place.

Looking for the Whole Story

Todd Carey, CEO of MP2 Solutions, a company that specializes in mobility products and data management services for mobile workforces, said it's up to agents to find the right partners with the right solutions. This will open up more opportunities for their customers to say "yes."

"In 2005, agents will be able to take advantage of new technology, especially wireless, to make themselves more valuable," Carey said.

"If agents can adapt to a new solution-selling model, they'll find opportunities not around today that will open doors to solutions and revenues."

Because of the increased capabilities inherent in the technologies, new solutions becoming available this year will include a more integrated approach to the merchant's overall business needs.

Prepaid gift and loyalty programs and inventory control, delivery confirmation, signature capture, check conversion and guarantee will all be offered in bundled packages.

Carey said when it comes time to select a system, decision makers want more from their POS systems, and that includes integrated programs and efficiency. "It has to do more than one thing; the device has to be able to grow with the business," he said.

Features on the devices must be flexible, and Carey thinks the way to maximize that potential is through the development of strategic partnerships among solution providers.

Manufacturers will have to think differently, too, when it comes to aligning themselves with other vendors and developing their sales and marketing strategies.

Most importantly, people need to know these solutions are out there. Discovering new and exciting possibilities in payments can be challenging for independent merchants; if they don't know the solutions exist, how do they know to ask about them?

Goretsky said he sees things changing along those lines in the coming year. Beyond educating sales agents and retailers on technical specifications, the emphasis will be on making sure that people know the options are out there so they can choose the right solution.

"Technology providers live and breathe this stuff every day, and getting the information down to the resellers has been extremely tough," he said. USA ePay's Pocket Spectrum solution incorporates a cell phone loaded with the company's proprietary application that communicates with a separate card swiper/printer unit through Bluetooth wireless technology.

"At shows, when people see the phones in the cradles, they're surprised because they have the same phone," Goretsky said. "They ask, 'Are you telling me my phone can be a credit card machine?'

"Wireless terminals are not the only wireless solutions out there. The technology is readily available to the general public. For resellers, it's a matter of informing them it's available."

Out-of-the-Box for Simplicity

Part of merchants' confusion over m-POS solutions stems from how to go about getting all the necessary devices. But companies are coming around and seeing that it doesn't make sense to send merchants to several different providers for cell phones, carrier plans, card swipers and merchant accounts.

Part of the success in m-POS will come from getting packaged solutions to merchants. WAY Systems Inc., for example, set out to differentiate its products in the way they're sold to merchants and how the company deals with ISOs/MLSs.

The company's approach is so unique, in fact, that it caught the attention of several industry veterans. Hypercom Corp. founder and former CEO George Wallner, invested in the company and serves on WAY Systems' board of directors along with VeriFone Inc. founder Bill Melton and Transaction Network Services (formerly U.S. Wireless Data) founder Jack McDonnell.

WAY Systems' Mobile Merchant Terminal (MTT) solution targets the more than 10 million non-fixed location merchants in the United States and is designed to make things as easy as possible for merchants, said CEO Will Gaylin. It's an out-of-the-box system and when the merchant receives the unit, it's already activated and ready to process.

Strategic alliances and relationships with companies such as AT&T Wireless and Visa International, among others, allow WAY Systems to package and bundle the data service so that merchants don't have to think about wireless carriers, plans or processors.

"We wanted to make this very easy for everyone," Gaylin said. That includes everyone involved in the process, from sales agent to merchant to processor because sales agents don't always understand old-fashioned wireless and processors don't always support the niche markets this product is targeted to.

The shipped units include the phone, the MTT cradle and separate printer that attaches to the merchant's belt. The solution is certified to all the major processors and is highly secure with end-to-end encryption.

Wallner, who spent many years developing POS terminals for Hypercom, said the MTT solution is a way to provide true mobile architecture in a portable, robust device, giving merchants a convenient answer to the problem of accepting card payments. "Mobility means that it can be carried by and stay with the merchant, and can be operated when the merchant is holding it," Wallner said. "This solution really makes mobile transaction processing practical."

Paul Rasori, VeriFone's Vice President, Marketing, agreed that bundled solutions made possible through partnerships between vendors will proliferate in 2005.

"There will be companies that step up to provide turnkey packages, which include broadband connections or wireless communication packages, that really take it to the next level and make it deliverable by the MLS," he said.

VeriFone is also making things easier for ISOs/MSLs. The terminals in the company's Omni 3700 line are all upgradeable so that agents learn one product and can then choose which upgrades they need to know about in the future, Rasori said, including the new generation Vx solutions.

"In 2005, we're going to maintain our IP momentum and at the same time establish ourselves in the wireless space," he said. "We see tremendous growth opportunities for our customers. We can play a role in serving lower-needs merchants [smaller independent businesses]."

Other wireless terminal manufacturers are taking an integrated solutions approach to features. Lipman's NURIT line "has dozens of features built in," according to Tim McWeeney, Regional Sales Manager for Lipman USA. He said the security elements alone in the ergonomic, easy-to-hold wireless terminal are superior to other solutions.

"Every transaction from our wireless device is fully qualified and almost always treated as swiped [interchange rate]," he said. "These devices allow agents to bring merchants to multi-app and online debit, which you can't get in the mobile environment."

McWeeney said it's up to the manufacturers and ISOs/MLSs to educate merchants so they can make the best buying decision possible.

Not Making Contact in 2005

Payment solutions using contactless technology will see tremendous growth in 2005, according to hardware and software provider ViVOtech's President and Chief Operating Officer Mohammed Khan.

"In 2003, in the United States, roughly 65% of transactions were cash and checks," he said. "There is a huge opportunity to replace these with contactless."

In 2003, ViVOtech placed 2,000 contactless-enabled POS locations. In 2004, that grew to 50,000. The year 2006, Khan said, "will be a lot more beautiful."

He attributes the anticipated increase in contactless solutions to the speed and convenience in transactions, especially for consumers (contactless transactions process in two to three seconds, 63% faster than cash).

Bringing enriched payment offerings, including such value-added applications as loyalty and prepaid, to vertical markets will also contribute to the growth.

Cards and fobs that consumers wave in front of or over a reader are not only fast and easy, they're also more secure than mag-stripe cards because the data transmitted can't be replicated in a subsequent transaction, Khan said, and the consumer never loses control of the card.

As the card Associations, issuers and acquirers prepare their networks for the increased payload from more card-originated payments, ViVOtech will be working with Visa, MasterCard and American Express as an important part of its growth stategy.

"As a technology company, ViVOtech will continue to develop partnerships with other providers to offer all-inclusive solutions," Khan said. "Our goal is to work with service companies to help them expand their programs."

Khan said another contactless technology, near field communication (NFC), through which two consumer devices establish a link at close range, will also be big for ViVOtech in 2005.

Ingenico will also look to contactless solutions as a growth segment this year, said Michael English, Director of Marketing and Communications.

Despite previous issues with reluctance to the technology from card issuers and retailers, "2005 will be a significant year for contactless," he said.

"Especially in quick payment segments, including quick service restaurants, parking garages, gas stations and movies, merchants benefit from shorter customer queuing, and in not losing revenue from walk-aways.

"This is not purely technology; it's a solutions sale," English said. "These are prime value-added products; it's terminal sales and additional opportunities in prepaid products for revenue streams."

This is the first of two articles on innovations in the payments industry and what you need to know about selling them.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.
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