Acquisitions, consolidations and security were all hot topics in 2005.
Nevertheless, I will stand by the prediction I made in an earlier
article and say again that IP is the name of the game.
As more and more merchants establish high-speed connections, the move
from dial to IP is imminent. Lipman USA reports that 71% of merchants
have IP connectivity and 37 % of those (26% total) have high-speed
connections. These merchants will slowly move their high-speed
connections from the back-office to the point-of-sale counter and drive
the point-of-sale transactions through the internet instead of old,
legacy dial lines.
IP is a true win for merchants. These transactions are much faster
than dial as the connection between the point-of-sale (POS) device and
the processor is instantaneous, as opposed to the dialing and
handshake/authentication of a dial transaction. In addition, using IP
could allow a merchant to completely eliminate the need for dial phone
lines. At costs up to $150 per commercial line, these antiquated
connections can be expensive. As IP becomes more mainstream, a fully
IP-enabled merchant can have internet access, voice-over-IP (VoIP) for
voice communication and IP payment transactions operate through the
same high-speed broadband connection. The forecasted theory that: the
organization controlling the merchants’ internet will control their
business, may not be far from reality.
However, we are still in the early adopter stage for retail IP
transactions. At Global Payments, we have seen a 700% growth in
transaction volume on our IP gateway, not including value-added
resellers that aggregate IP transactions and send them to the processor
over a dedicated circuit (leased line, etc). This early IP growth is
being driven by the larger volume merchants that have the most to gain
from increased transaction speeds and cost savings. POS systems and
developers are also driving current adoption. The costs of personal
computer and multi-faceted systems are dropping, driving merchants in
the direction of integrated solutions. Once a merchant has a computer
or integrated POS system, IP transaction processing is often as simple
as plugging in an Ethernet cable into the back of a computer.
As we move into the growth stage of the IP transaction life-cycle, we
will see more merchants, large and small alike move to IP. You will
see very few POS systems and terminals connecting to processors by
means of dial technology as broadband will be in merchant locations
around the globe. Broadband Worldwide predicts by 2007, there will be
nearly 500 million broadband users worldwide. New technologies such as
WiFi are making IP payment solutions even easier to deploy. WiFi
eliminates the need for the Ethernet cable all together, allowing the
high-speed connection to the merchant to be routed into the back-office
and then connected via a wireless local area network to all corners of
the retail establishment. In the future, we will also hear much more
about WiMax networks. WiMax pushes the envelope even farther with up
to a three mile radius for wireless coverage.
Telco and cable providers continue to fight to gain market share in the
broadband, high-speed market. These broadband railroad tracks have
started the transformation into the payments industry and with
broadband users now outnumbering dial-up users in the U.S., the power
is apparent. The Internet has fundamentally changed the way
transactions are processed and the payment business is conducted, as
both large and small merchants convert to IP. Dial is not dead, but it
is dying. Now is the time to prepare for the change, adjusting the way
you look at transaction processing and the shifting needs of our
market.
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