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Street SmartsSM: I Feel the Need for Speed!

By Ed Freedman

I Feel the Need for Speed!

How would you like to offer your merchants an alternative to costly dial-up connections? Or give them the ability to handle more transactions during peak sales times? What about supplying them with a solution that provides enhanced speed, flexibility and security?

If you answered "yes" to these questions, then here's your opportunity to add one of the hottest value-added products to your point-of-sale (POS) tool bag: IP-based terminals. "IP" stands for Internet protocol, a communications protocol on which the Internet is based; it's also used in cell phones, satellite TVs, laptops, PCs and PDAs.

The same technology that allows you to send an instant message can help your merchant customers send faster, more secure transactions over an "always-on" network. If you don't include IP-based terminals in your sales presentation, you're missing out on a very lucrative market.

If you've ever sat in front of a computer and waited 5 - 10 minutes for a Microsoft PowerPoint file to download over a dial-up connection, you know how frustrating and time consuming standard connectivity can be.

Consider that a standard, dial-up connected transaction can take up to 20 seconds to complete. This may sound fast, but if your merchant has customers waiting in line, then those seconds can quickly turn into minutes, very frustrating minutes. Using a broadband network, IP connectivity dramatically changes transaction speed. Merchants can replace 20-second transactions with transactions as fast as two seconds. How is this done? IP-based terminals use a browser with secure sockets layer (SSL) technology that electronically speeds up connection, communication and authorization.

The other outstanding benefit is that IP supports multiple applications at the POS. From credit and debit to gift and loyalty cards, merchants can consolidate all types of communication, both voice and data, into one, high-speed connection.

And since access to IP is everywhere, there's no reason your merchants can't enjoy the hottest technology in payment processing.

IP-based payment technology is widely credited with spurring the rapid adoption of credit and debit card acceptance by the quick serve restaurant (QSR) industry.

But the speed and versatility of an IP-based POS has also created tremendous opportunities in various vertical markets such as liquor and convenience stores, bars and nightclubs, small retailers, independent grocers, dry cleaners, movie theaters, kiosk merchants ... the list goes on.

I know your next question: How do I successfully sell IP? For a definitive answer, I went to a definitive source. One of the industry's leading IP terminal manufacturers is VeriFone Inc.

This company has consistently offered innovative products for you to sell to increase your merchant portfolio. I recently spoke to Rob Campbell, West Coast Regional Sales guru for VeriFone. He offered solid advice on putting IP to work.

"Regardless of what the merchant's specific value-added requirements are, at the minimum, merchant level salespeople (MLSs) can present the many benefits of owning a VeriFone solution (reliability, innovation, being connected) in a consistent way," Campbell said.

"From there, MLSs can choose to specialize in certain types of value-added services that are pertinent to specific markets such as QSRs, restaurants, liquor stores, etc. This way, selling IP, wireless or multi-application brings true value to the merchant and changes the conversation from 'discount rate' to exciting new technologies and income opportunities for both the MLS and the merchant."

As an MLS, you certainly need an edge when presenting new products to prospects as well as existing merchant clients.

"We strongly recommend that MLSs bring along the flagship Omni 3750 and the new 3730LE," Campbell said. "This shows the range of the Omni 3700 family so they can demonstrate everything from a full-featured solution to an entry-level solution.

"In addition, the modular design of the Omni 3750 allows MLSs to explore the various enhanced communication options available to merchants, including CDMA, GPRS, WiFi and Ethernet."

Exactly how can you benefit from selling IP products? Campbell sees you taking advantage of an opportunity to deepen your relationships with your merchant customers.

"By increasing the merchants' reliance on MLSs, these products reduce the likelihood of churn and allow MLSs to become an integral service provider to the merchant," Campbell said.

"Not only do these products foster a long-lasting revenue opportunity, but they also allow MLSs to sell additional value-added applications that will increase the revenue per merchant and make them much more profitable and successful."

The feet on the street were also quick to comment on IP. I recently posted the following on GS Online's MLS Forum:

"One of the hottest technologies at the POS is IP. Do your merchants ask for it? Do you sell and/or service high-speed IP transactions? If so, does it give you a competitive edge?"

MLS responses saddled both sides of the fence. Here are a few:

"IP processing is the most efficient way for a merchant to process electronic payments. It is also significantly cheaper than a dial-up connection, especially for merchants with more than one register. A single cable modem or DSL can easily support 20+ registers at a retail or grocery store.

"For instance, if a merchant has a phone line for each dial terminal and each phone line costs $35 a month, he is paying $700 a month just for terminal phone lines. A nice business DSL or cable modem only costs around $45 a month. Line speed is a key selling point as well. Especially for QSR, cafeterias, call centers and grocery stores. IP transactions only take between one to five seconds. A dial up connection can take around 12 seconds. Faster lines = more customers for your merchant = more money for your merchants = happy merchant." - MCG2

"Are merchants asking for it? Yes, but most of the merchants asking for it are merchants who are already open. Many of them have invested in a POS system or credit card terminal and realize they 'need the speed.' New merchants, on a percentage basis, do not know how much they would love the speed. Am I selling and/or servicing high-speed IP transactions? A lot ... but mainly through POS software and systems like Aloha, PC Charge, 911, Digital Dining, Shift4, etc. Is IP giving me a competitive edge? Does a dial up take 20 seconds?" - Desdinova

"I think this is a fantastic new opportunity. As many businesses connect to a form of high-speed Internet, the savings from releasing a phone line or the inconvenience of a shared line will often out-weigh the cost of the equipment. The other tremendous benefit I see is they are always connected. How many of us have had a problem with a merchant's machine connecting through the modem on a high volume day during the holidays?

"The specific question to be answered in my opinion is: How can we make this 'turn key' for the merchant and easy to understand for the agent? Unless the router is very close to the terminal, you will either need to run long cat 5 cables or the merchant will need to install a 'drop' near the terminal to plug the machine in.

"What I see is the need for an agent manual of sorts on how it works, what's needed in the way of equipment, cables, installation, including who does what, etc. Just a simple 'how-to-make-it-live' guide. We try to provide very specific training on these issues because many agents do not understand the technical side of making IP work." - SalesAMS

"Many merchants with a POS system want high speed credit card processing. They have invested thousands of dollars in a system, and they want the most out of it. POS Systems work with DATA CAP's net e pay, 911 software, PC charge and some others. The merchant in a storefront with one terminal is not ready for IP or high speed until the telephone company lowers the price of having DSL service in a location.

"The only other drawbacks I see are the following: 1) Cost of DSL service is reasonable; 2) Does the terminal have dial up back up? 3) The value-added providers are not processing IP yet, check services, gift cards, etc. This is very important, as selling value-added services is becoming very important. If all of the answers were 'yes,' IP would start growing quickly. And some processors are charging a set up fee for IP processing, which is not practical. Here's a suggestion: If a company can come up with a device that would turn all the old terminals in the field to be able to do IP transactions, that would be a big hit as long as it was affordable." - ccguy

When presented with the issues raised in these MLS responses, Campbell was quick to come to the defense of IP.

"Time is money," Campbell said. "Calculate how much business walks out the door when a merchant is busy. A merchant's productivity can be suffering from lost sales due to lengthy waits in lines, caused by slow authorizations or downloads over older, dial only terminals. With the VeriFone Internet-based terminals, POS transactions can be processed in only two to four seconds. Ed, that's as fast if not faster than cash transactions!"

Campbell points out that many businesses already have a digital subscriber line (DSL), cable, local area network (LAN) or wireless access and can easily convert to IP-enabled payment transactions, thus eliminating the cost of stand alone dial lines, which, on average, cost more than $50 in the United States.

Additionally, merchants using multiple terminals can easily connect them to a single broadband drop using LAN or WiFi, further reducing monthly telco expenses. Terminals using the Ethernet option can be connected to DSL, cable modem, frame relay or very small aperture terminal (VSAT) satellite connections.

DSL, which operates on standard telephone lines, is an increasingly popular broadband option, especially among small businesses. Another high-speed option is cable modem connectivity, which is highly suited to sports bars and other entertainment venues that are already using cable television service.

Campbell stresses that you should consider the following before selling an IP solution to your merchants:

Who is your processor? Most processors today have an Internet gateway.

  • Does the merchant have a current broadband Internet connection?
  • Does the merchant have a router, or is his PC connected directly to a broadband modem?
  • The merchant might ask, "What routers does my carrier support?" Most consumer-grade equipment will work with the various carriers, but it's always best to check with the broadband provider.
  • What about security? IP technology provides added security that's not available with most dial connections.
  • Is there additional paperwork? In most cases no, but certainly contact your processor to determine the additional information they will need to complete the application.

If you've ever felt unlucky that you weren't in this great business 20 years ago when electronic terminals replaced the previous paper-based method of processing credit cards, here's your chance to be part of the next major changeover in terminal equipment.

Within the next few years, retailers will switch from dial-up to IP connectivity. The merchants processing the most volume, the ones that you weren't able to switch over before, are suddenly in the market for new terminal equipment because of the amazing benefits of IP connectivity.

Benefits include faster transactions, flexibility on terminal placement and the elimination of telephone line expenses. So why isn't everyone selling it now? Overcome your fears of learning how to sell this option. Team up with a local broadband provider and learn how routers and WiFi work. If you're willing to put in the time to learn about IP, you'll end up outperforming everyone else tenfold!

For my next column, I'll tell you what I think will be the most compelling issues of 2005. Watch for my next post on the MLS Forum and send your comments to streetsmarts@totalmerchantservices.com. I appreciate your feedback. Keep it coming!

"My future starts when I wake up every morning ... . Every day I find something creative to do with my life."
- Miles Davis

See you where the rubber meets the road.

Ed Freedman is founder and President/CEO of Total Merchant Services, one of the fastest-growing credit card merchant account acquirers in the nation. Freedman is the driving force behind all business development activity as well as the execution of Total Merchant Services' marketing plan, including recruiting and training independent sales offices and establishing strategic alliance partnerships with leading vendors, so that Total Merchant Services can provide its customers with the highest quality and most reliable services available.

To learn more about Total Merchant Services, visit the Web site at www.totalmerchantservices.com. To learn more about partnering with Total Merchant Services, visit www.upfrontandresiduals.com or e-mail Freedman at ed@totalmerchantservices.com.

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