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Technology 2006: What's hot?

By Michael Nardy

Making predictions about new technology entails a certain amount of risk. Nobody can foresee which, if any, promising developments are likely to become as popular in the payments sphere as, for example, cell phone text messaging is among teens. Nonetheless, I posted the following questions on GS Online's MLS Forum:

  • What new technologies interest you?
  • What do you think will be the greatest advancement in the payment processing industry over the next year or so?
  • Do you find any technologies over-hyped or undermarketed?

While the answers were extremely varied, POS and invoicing software, biometric payments, contactless payments and wireless terminals had the most traction among those who joined this discussion. I'll address these technologies and delve into their potential as practical additions to the merchant level salesperson (MLS) arsenal of product offerings.

Smokin' POS software

The use of QuickBooks-type accounting and invoicing software has grown tremendously. So have online invoicing products that make it possible for a third party to e-mail, fax or mail invoices to clients.

MLS Forum member River asserted there is need for "cost-efficient POS software for retail management similar to QuickBooks [Point of Sale], proprietary and nonproprietary." I agree. When merchants see that their accounting software is able to process transactions without a terminal and without a separate online gateway (a software-based mechanism for sending credit card transactions directly to a processor over the Internet), the software has tremendous built-in value, especially if it's proprietary.

A QuickBooks-type software product integrating directly into a single credit card processor such as Innovative Merchant Solutions adds a veritable lock on the processing market for those using the application and can also mean huge benefits for the software company.

Clearly, this cross fertilization was part of Intuit Inc.'s motivation in buying IMS, a major bankcard processor: Intuit is the maker of QuickBooks and Quicken software. Other companies have been scrambling to come up with a competitive tie-in solution for processing cards.

River's point about the need for cost-effective solutions for merchants is right on the money. Offering a terminal or other POS processing solution along with online- or computer-based accounting, or other integrated invoicing/billing software, strengthens your offerings as an MLS and continues the trend in offering merchants a complete, end-to-end solution through a single provider.

Thumb a payment

What better way to pay for a sale than to place your thumb on a reader and have your stored card data charged or your bank account debited? However, the feelings on the MLS Forum were mixed regarding the various biometric payment (informally called biopay) options on the market.

MLS Forum member ccguy wrote, "As far as biopay and paying with a fingerprint in the grocery store, that just looks very expensive, and I am not sure how fast that would speed up the line. Also they have money coming out of people's checking accounts, and they have no way to verify 'live' funds. So there are losses for someone on that, and because the credit card number is stored and not swiped, it is a non-qualified transaction."

As most of us know, our portfolio profit margins and our merchants' satisfaction are often dictated by the interchange categories in which we help our merchants qualify their transactions. If we add Level II prompts to a terminal, we can assist them in qualifying at the Commercial Level II or Corporate Data Rate II categories, both of which are significantly lower than standard corporate categories.

But what happens when a client uses a system that stores credit card data in an e-wallet environment, and all the transactions hit a nonqualified level or a keyed interchange category because they aren't presenting complete magnetic stripe data through a POS? Tough issues may arise if merchants find too many transactions are passing to more costly interchange categories as a result of their POS equipment.

MLS Forum member 1stamericard2 wrote, "I think the biopay stuff is the most over-hyped. We have some merchants in our area that [have] equipment collecting dust. No transactions in almost two years. There is a place for biotechnology, not at the point of sale."

The jury's still out on biopay. I expect we'll see less focus on biopay and more on contactless card processing.

Beam me up, merchant

Wireless processing has come a long way from the early days of bag phones (among the first portable cellular phones, they required a large bag for carrying the equipment needed to operate them) and trying to hook VeriFone Tranz 330 terminals up to a wireless signal through a Synapse adapter.

Improved cell phone coverage through general packet radio service technology and the use of online gateways that can push transactions to nearly every processor in the marketplace have changed the landscape of wireless processing.

Companies like Comstar Interactive and Transaction Network Services Inc., for example, can offer their own devices as well as partner with wireless carriers to offer airtime, gateway services and access to nearly every major front-end network. Previously, wireless terminals often only worked on certain front ends. Frequently product offerings were limited from carrier to carrier.

As MLSs get involved in offering credit card processing services to service merchants traveling to job sites, traveling salespeople, delivery people and others needing a completely wireless solution with excellent reliability and coverage, the wireless processing available - including equipment, airtime and gateway services - will continue to improve.

Don't swipe, don't touch

So far this year, use of contactless readers is by far the most popular new POS technology getting press. The following comments from MLS Forum members convey disparate opinions on the subject:

"The PayPass is over-hyped. People are not going to trust it, and merchants (not the big places but the small merchants) are going to worry that they will be hit for chargebacks. Also, the device does not save merchants money. They are getting hit with higher rates with those cards and that is due to how the processors have it set up." ¯ ccguy

"These words may come back to haunt me. But I completely disagree with this [ccguy's] post ... after looking at the number of contactless cards being issued and having seen them in action. Merchants love 'em; customers love 'em. If written correctly, merchants are protected from chargebacks under $25. It's decreasing wait times to pay. I see this being huge in the next 12 months. But, time will tell." ¯ Utah997

"Small ma-and-pa merchants with low-average volume probably won't embrace contactless. They haven't switched from dial up to Internet protocol-based terminals, so I definitely don't see them upgrading to a contactless solution. As a salesman it would be like me trying to get my parents to use the Internet ... [It's] just not going to happen." ¯ Johnmckee

I think contactless payments represent the largest change to bankcard processing in the past 10 years. And it's not just because of the need to limit merchants' liability with chargebacks or process transactions quicker. The entire way in which we interact with consumer goods is changing because of the radio frequency identification technology (RFID) being used in these cards.

In short order, you will see RFID chips in nearly every product sold, and you will see completely scanless, contactless checkouts where an entire cart will be scanned and the contents read using RFID technology. The number of television ads featuring contactless technology also gives rise to my feeling that, unlike smart cards (which never gained foothold in this country), contactless processing will grow significantly just as Exxon Mobil Corp.'s Speedpass grew as a payment method at the gas pump.

The only debatable issue over contactless is not if but rather when they are coming to your area (that is, if they're not in use near you already). In the meantime, my commitment to providing contactless readers to merchants is strong; so is my support for adding specialized interchange categories and increased chargeback protection for contactless payments.

As for the future, it's a fair bet that at least one of the technologies just discussed will be a viable alternative for MLSs to offer for quite some time.

Michael Nardy is Chief Executive Officer of Electronic Payments Inc. (EPI), a founding sponsor of the National Association of Payment Professionals and one of The Green Sheet magazine's Industry Leaders EPI is one of the nation's fastest growing privately held payment processing companies offering ISO and MLS partnership programs and cutting-edge tools to help their portfolios grow. To learn more about EPI, visit or e-mail Nardy at

Article published in issue number 060702

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