The retail payments industry continues to be battered by the economic downturn. Everyone is looking for ways to cut costs and increase sales. As I've said before, with challenge comes opportunity, and it's important to innovate and position yourself for economic recovery. One of the biggest problems for businesses coming out of a recession is facing the consequences of decisions made solely to save money. When it comes to payments, these bad decisions can be particularly disastrous if issues such as cardholder data security have not been appropriately considered. This month, I will focus on developments and trends in IP payment terminals, while looking at opportunities to maximize these POS devices.
The Evolution of the PaymentTerminal
IP (Internet Protocol)-based payment terminals hit the retail payment scene a decade ago— terminals like Hypercom's ICE and the Verifone Omni were ahead of their time, with a huge range of value-added options and security features. These terminals also carried with them a hefty price tag. Today, IP-based payment terminals make up approximately half of all shipments from manufacturers, though there remains a significant installed base of dial-based terminals. Transaction processors estimate that one fifth of the terminals they support are IP-based.
IP terminals, which feature an Ethernet port to process credit card transactions over a broadband
network, were developed to take advantage of the benefits of broadband IP technology. Compared to the dial-based terminals that had been in use for almost 20 years, IP terminals boasted a huge difference in transaction speed — from as much as 20 seconds to under 6. This benefit explains why QSRs were among the most prominent early adopters.
In addition, IP-based transaction processing is significantly less expensive — approximately 22% less, according to a 2007 Strawhecker Group study. The elimination of dedicated dial lines also represented a cost savings for those early adopters who had access to broadband infrastructure. As broadband access has increased, so has the adoption of IP terminals by merchants.
Fueling growth in IP terminal adoption is the shrinking difference in costs between dial and IP terminals — today the difference is less than $100 in most cases, and some ISOs selling IP-based transaction processing have started to emulate the free terminal model so popular with dial terminals. Recognizing demand, even transaction processors are beginning to get on the IP terminal bandwagon with terminals designed to operate on their proprietary platforms. First Data's FD50
terminal, introduced in 2008 features advanced features at a relatively low cost, including touchscreen technology and 5 USB ports. It is also designed to support contactless payments in the future. The terminal runs on First Data's processing platform.
Towards a More Integrated POS
In recent years, the benefits of fully- integrated POS have become well understood by merchants: integrated solutions eliminate dual entry error, make settlement and other administrative tasks easier and are faster for the customer. While most in the industry agree that integrated solutions are superior to stand-alone devices such as payment terminals, there is a mixed bag of possible strategies to accomplish full integration. Many believe that PC-based solutions are the answer, while others turn
to hardware and software that can create the linkage between an existing POS device and IP-based payment processing.
In hard economic times, merchants are tempted by free or low cost payment terminals, and have
difficulty justifying the expense of a new, fully-integrated system. However, there are ways that merchants can maximize the decision to purchase an IP terminal, ensuring their complete POS system is more integrated than stand-alone.
A good example is PAX, a fast-growing global terminal manufacturer. At the 2009 ETA Conference, PAX introduced a new product line to the North American market that uses advanced control and management features to enhance transaction security and make administrative tasks easier. By integrating payment engine software into the S80 desktop and S90 portable products, PAX has extended the terminal's sophistication in terms of management and control. The S80 or S90 with the TransNet payment engine can be deployed remotely — configured by the ISO, it can be shipped to the merchant, where it downloads its configuration automatically— with no technical support required. The individual terminal's software can also be easily updated remotely or enmasse without the typical one-to-one, legacy download process. Its management suite delivers a host of alerts and reports, designed to allow ISOs to deliver better support to their merchants, without significant cost. It also has PCI compliant default settings that help the merchant maintain compliance easily. The PAX terminals offer built-in support for WiFi or GPRS, RFID, and EMV, in addition to standard dial, Ethernet and USB interfaces. The President of PAX's U.S. subsidiary, Ken Paull, says "we're seeing more merchants looking for this level of control and support from ISOs."
Ultimately, IP terminals are not created equal anymore, and making good, cost-effective choices today will place you in a better position as the economy recovers and sales pick back up. Be sure to consider any solution's security approach — PA DSS and PCI compliance are a must— and look for features that offer you and your merchants the maximum degree of flexibility and control — from processor choice to data access. 
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