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Paying the Piper on a Mobile Device

By David Talach

There's currently a buzz in the payment processing industry about the possibility of using mobile phones as payment terminals. While the concept sounds logical, practical implementations often fall short of real-world expectations.

Without a doubt, demand will grow for mobile payment systems in order to meet consumers' desires for more convenient payment options and merchants' needs for more timely and secure payment processing.

There are hundreds of thousands of merchants who are suited to using mobile payment devices including in-home services, home delivery, taxi and other car services, and outdoor venues such as stadiums and flea markets, to name a few. This represents a significant new market opportunity for you as ISOs and merchant level salespeople (MLSs) to begin exploring mobile payment options.

Although the mobile phone is now ubiquitous as a mobile communications device, it falls short as a robust and trusted payment device. In limited situations, it might prove adequate. But it will fall short in circumstances that require a full function, secure and supportable terminal. But then again, who doesn't have these needs when processing payments?

A key selling point of using a mobile phone as a payment terminal is that the solution is less costly and more convenient while also being "multi-talented."

Let's tackle the cost angle first. The theory exists that economies of scale with mass market devices should undercut more conventional payment devices.

But that claim evaporates quickly when you factor in the costs of either obtaining specially adapted mobile phones that are not mass market devices, or supplementing everyday phones with add-on card readers and printers, which are awkward and inconvenient.

To date, many manufacturers have priced traditional wireless payment terminal solutions fairly high, but be assured that as volumes increase, prices will decrease, so lower priced equipment will not likely be the deciding factor for mobile merchants in the future.

Other arguments in favor of using mobile phones as payment devices include size and convenience. But unless you plan to operate without an add-on printer, you'll have to lug around multiple devices, which is not very convenient.

If merchants need to carry a separate printer along for the ride, they will have to juggle two devices in order to process card payments, not to mention in some cases physically connecting a peripheral as they go from door to door.

The above is the same type of story many in the industry have touted about using PDAs: Attach a card reader, and you've got a payment terminal. A simplistic logic exists behind this solution; you already own a PDA, so why not buy another device and add it on?

But if I have to buy a specialized phone to get to that point, doesn't that detract from the original proposition? It's even more complicated if merchants want the ability to accept debit cards, practically a requirement in this day and age. But in addition to a phone and printer, merchants must also carry around a secure PIN pad. So now they're juggling three devices. How practical is that?

Another promise of mobile phone- and PDA-based POS devices is one of "convergence." I can get e-mail, short message service (SMS), instant messaging (IM), HTML, public switched telephone network (PSTN) and POS transactions all on one device.

Cool! Except for one problem. Most merchants don't know or don't care what most of those acronyms stand for and aren't likely to use or pay for these capabilities.

True wireless payment terminals make much more sense for general mobile use. VeriFone Inc. recently introduced the Vx 610, which represents a new generation of wireless terminal that delivers blazing performance, high-end functionality and exceptional ease of use in a sleek, compact design.

The product provides a secure payment processing environment with advanced hardware tamper-detection and response, PIN-entry device (PED) security approval, and 128-bit secure sockets layer (SSL) encryption for Internet protocol-(IP) based transaction processing and application downloading.

The device is agnostic with regard to telecom standards and can support both code division multiple access (CDMA) and general packet radio service (GPRS) networking technologies, giving merchants access to most carriers in North America. It also incorporates a dial-up modem so merchants can plug it into landlines where needed.

This type of solution is smaller than previous generation devices, yet still features an ATM-style interface and includes an integrated printer. In essence, it extends the countertop payment model to wherever consumers are, whether shopping at open markets or buying home-delivered products and services.

As you look at mobile phone vs. integrated terminal options, consider one last thing: processor support. So far acquirers have been shy to offer Class-A certification support to hybrid, low-security mobile phone schemes.

Think about the cost of infrastructure and support that's in place for traditional payment terminals, and then consider the fact that nothing comparable exists to support mobile phone- or PDA-based payment devices. How do you update the device? How do you keep the merchant from downloading other applications onto the device that might have an impact on the payment application?

Does your support organization need to know the operational user interface and functionality differences between 50 different models of mobile phone? How long will a particular phone remain in production? While the mobile phone might prove adequate in limited, niche payment applications, for the most part it's an ill-equipped solution being force-fit into a function for which its designers never intended.

The new generation of true payment solutions for mobile, wireless environments is a more natural fit than a mobile phone when it comes to payment acceptance.

David Talach is VeriFone's Global Product Manager of Wireless and Portables. He plays a key role in analyzing wireless industry trends and defining, designing and delivering wireless products to meet merchants' current and emerging requirements. E-mail him at .

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