xpressing dissatisfaction with the market's current POS terminal offerings, First Data Corp. struck out on its own. In late September, the mega-processor introduced a proprietary terminal, fulfilling its promise to "get very nimble at the street level."

In early 2006, First Data announced plans to spin off Western Union, its money-transfer network, and reorganize the company. (The spinoff was completed Sept. 29). A result of that restructuring would involve a shift to a sales-oriented, sales-supportive culture and a refocus on small and mid-sized merchants, said Ed Labry, head of First Data Commercial Services.

Taking its new feature-laden terminal, the FD-100, to "mom and pop" merchants fits that strategy, according to the company.

"The scale and buying power of First Data is being leveraged to bring this ... terminal to merchants," said Kim Fitzsimmons, President of First Data Independent Sales Services. "[A]s the payments industry evolves, we needed a feature-rich and cost-effective terminal that small and mid-sized merchants can utilize in the marketplace today."

The FD-100 replaces First Data's LinkPoint AIO terminal.

Fitzsimmons declined to discuss the new terminal's price to ISOs, but said the FD-100 will have an attractive price point, enabling ISOs to set the price to merchants.

When asked what First Data would have to charge ISOs for a comparable terminal from a traditional vendor, she said, "We don't believe there is another terminal with the combination of features and benefits" offered by the FD-100.

The new device has 64 megabytes of memory, "faster download speeds of six to 10 seconds, five USB ports, two RS-232 ports and a true 32-bit [200 megahertz] processor," said Eric Nelson, First Data's Vice President of Product and Business Development for Terminals and Hardware Solutions.

It also has a touch screen, Internet-protocol connectivity with dial back-up, and secure sockets layer encryption protocols, all as standard features. The product is built upon the Microsoft Windows CE operating system.

"When you combine all that [with its] sheer power and memory ... there is no other comparable device in the market," Nelson said. "Once you start bundling this all together, you can see why we went down this path.

"It is a mini-PC in the skin of a terminal," he said. The five USB ports let merchants add a keyboard, a PIN pad, or a reader for contactless cards, checks and MICR [magnetic ink character recognition]. The ports provide scalability for future expansion of applications, without forcing merchants to choose between peripherals.

First Data pushed PIN-entry out to a peripheral device, because merchants have reported that PIN pads are too cumbersome for terminal integration, Nelson said.

The hitch to merchants is a lack of portability. The device is proprietary to First Data and not transferable to other processors, according to the company.

Vendors react

Creating a terminal that works only with First Data could be considered a good business decision, because merchants can't easily switch processors, said Scott Holt, Director of Marketing for terminal manufacturer ExaDigm Inc.

Whether merchants will opt for the self-branded terminal depends on how much information they are given by their ISOs and merchant level salespeople.

"One thing I'd like to highlight is First Data's announcement is unfounded in terms of claims," Holt said. ExaDigm's XD2000 terminal approximates the FD-100, having a 32-bit ARM processor (operating at 100 megahertz), the option for 64 megabytes of RAM, a host USB port and a PC-based system.

ExaDigm has sold the PC-based terminal with a Linux operating system for over five years. Embedded device manufacturers often shun Windows operating systems in favor of Linux platforms, which are generally viewed as more stable.

The distinguishing factor for ExaDigm is the lack of a touch screen, which is in development for the next terminal upgrade, Holt added.

"Is [First Data's] real agenda to deliver a terminal to provide the greatest number of features and benefits that everyone can use?" Holt asked. The answer is no, he added.

A statement released by terminal manufacturer VeriFone said, "Our experience has been that proprietary terminals have not been widely accepted, as they lock a merchant into a single processor, which reduces the value of the merchant portfolio down the road."

Fitzsimmons would not disclose the manufacturer of the new terminal. "We work with a variety of suppliers to meet [customer] needs. ... And we will work with a multitude of suppliers to meet our demands," she said. She did not rule out the possibility of an expanded terminal line in the future.

Fitzsimmons said First Data did not have price conflicts with vendors. "As the technology across the board demands better, faster, cheaper, the terminal manufacturers, when possible, have passed on savings."

Peripheral-friendly world

Dan Schatt, Senior Analyst with Celent LLC, sees First Data's move as positioning itself for the future - to take advantage of multiple new technologies as they reach a tipping point. These include contactless devices and mobile phone payments, tied in with near-field-communication (NFC) marketing.

"First Data is setting itself up for the longer term here. If their POS devices are positioned appropriately, there's a lot more they can do with payments and loyalty rewards together," Schatt said.

With the spinoff of Western Union, First Data is under the gun to come up with new markets, he said. As banks have moved their card processing to TSYS Acquiring Solutions or taken it in-house, First Data has found it increasingly difficult to play an effective role, he added.

"One opportunity for them is to position themselves ... to grow their product pipeline. If they can roll out terminals with innate capabilities that can be leveraged, they can continually cross-sell new products and services," Schatt said.

Multiple USB ports on a terminal would support many peripherals, as technologies prove themselves with consumers. "Contactless readers are still in their nascency, but the reality is convenience will win the day," Schatt said. "Early pilots are confirming customer acceptance of mobile as a payment vehicle."

And after NFC comes into its own in 2011 or 2012, he predicted, the technology will enable merchants to send targeted, location-based promotions to mobile phones in the neighborhood. By then, First Data could have a large installed base of peripheral-friendly terminals.