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A Thing

Transformation Well Under Way

By Paul Rasori

Last year was a good year for payment systems using Internet protocol (IP)-based communications ... a very good year. As the business world accelerates its adoption of this technology, the opportunity to sell enhanced communication POS systems becomes even greater. The POS industry has embarked on a major transformation.

At VeriFone, for example, approximately 40% of our flagship countertop Omni 3750 POS terminals now ship out with Internet connectivity. That is a tremendous sea change over the past couple of years from a market that was primarily dial-based. It also reflects the general trend, in both business and consumer environments, to an IP-based, always-on world.

To see how much this change is making an impact, you only have to walk into one of the 6,200 McDonald's restaurants in the United States that currently provide free Wi-Fi access to online games using the Nintendo DS system.

Restaurants have signed on to card payment acceptance using IP in a big way. They've caught on to the concept that with IP, card acceptance is not only as good as cash, but it's also better than cash. Customers tend to spend more, and restaurants can serve more of them in the same amount of time.

Walk into any shopping mall in America, and you'll probably have to navigate around a line of mobile carts set up in the middle of the concourse. A recent Associated Press story pointed out that this is a thriving industry; it brings in an estimated $10 billion in annual sales for merchants and landlords, more than triple that of 10 years ago.

This type of scenario is ideal for a wireless IP-based POS solution. Laying phone lines is seldom a cost-effective option, particularly as many of these merchants are likely seasonal.

Many malls already have Wi-Fi hotspots set up to attract customers, so it is easy and cost effective for a mobile cart-based merchant to tie in. If there is no Wi-Fi, it is increasingly likely that the merchant can sign up for a cellular-based IP service at a cost of only $20 to $30 a month.

In fact, except for isolated rural areas, odds are that it's relatively easy to get some form of IP service from the following options:

  • Cable: The most widely available form of broadband, with speeds of up to six megabits/second.
  • DSL: Coming on strong with aggressive price cutting and increased marketing, this service comes in over regular telephone lines without interfering with voice service.
  • Satellite: Increasingly available to rural areas that can't obtain cable or DSL service.
  • Broadband over powerline: A very interesting technology now emerging that sends data over existing electricity lines.
  • Fixed wireless: Fixed wireless is available in limited areas but is expected to be overtaken in the next year or two by something called WiMax (essentially a long-distance version of Wi-Fi with a range of up to 30 miles).
  • Public Wi-Fi: Until recently, public Wi-Fi hotspots were available only in individual merchant locations and public areas. Now cities such as San Francisco and Philadelphia are setting up Wi-Fi mesh networks that make service available citywide.
  • Fiber optics: Some telephone companies are turning on fiber optic networks that will provide broadband speeds of up to 30 megabits/second.
  • Cellular: The major cellular carriers are rolling out higher speed versions of Internet access over existing code division multiple access and general packet radio service (GPRS) networks.

If you think IP is only for big businesses, think again. In August 2005, market research firm International Data Corp. released a survey of small to medium-sized companies with 20 to 500 employees.

One-fifth of the respondents are currently implementing merged voice and data communications or plan to do so within the next 18 months. An additional 40% said they are currently evaluating such a deployment or will make the evaluation within 18 months. Only one-third said they had no such plans over the next 18 months.

In the future, many businesses may overlook wired options all together. Presently, when people think about wireless telephone service they automatically think mobile. But wireless will become an attractive option for fixed countertop locations.

Wireless in a countertop environment eliminates the need for wiring and the cost and delays for installation. Any time merchants want to add a system, move a system or move to another location, the cost and delays increase.

This year, VeriFone began selling to ISOs and acquirers a service that provides wireless cellular data service. They can mark up this service and market it to merchants. Even with a markup, merchants' monthly service bill will be a lot less than it would be paying for a business line to their retail establishment.

Say your sandwich shop merchants conduct 80% of business between the hours of noon and 2:00 p.m. If these merchants don't already have a DSL line, you can quickly and easily provision them with wireless cellular data for less than what they would have to pay for DSL. If by doing so they can increase their lunchtime revenue by 20%, how hard a sale is that to make?

It's ironic, but developing countries are jumping into wireless much faster than the United States is. In Mexico, for instance, merchants are subject to, at best, a sporadic telephone infrastructure, and every phone call is charged a tariff, so using dial up is very expensive.

VeriFone has deployed 30,000 countertop terminals with wireless GPRS connectivity that provides major cost savings. Those types of business drivers are just starting to become evident in the United States.

Whether merchants use wireless, DSL, cable or some other transmission type, the key to making it all happen is an IP-equipped payment system. This technology can no longer be ignored. If you are not on the IP bandwagon, it may take off without you.

Paul Rasori is VeriFone's Vice President for North America Marketing. He plays a key role in helping VeriFone customers integrate current payment and communication technologies. E-mail him at .

Article published in issue number 060101

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