HISTORICALLY, ISOs FOCUSED ON TRANSACTION PRICE TO WIN NEW MERCHANT BUSINESS. They now are
looking for solutions that will attract new merchants, retain current merchants and generate new revenue streams.
The emergence of multi-application terminals and the Internet are transforming the payment terminal from a commodity
to a powerful business tool that can help ISOs achieve these goals.
ISOs, once limited to a narrow selection of proprietary applications, can now partner with Internet
content providers to offer value-added applications like electronic bill payment, order fulfillment, customer loyalty
programs and so much more, right at the merchant countertop. These new and innovative value-added applications go far
beyond simple credit and debit capability, increasing merchant loyalty by offering merchants the services and tools to
run their businesses. Value-added applications make it possible for ISOs to rise above the fierce price competition
they face when dealing only with simple payment solutions. Instead, Internet connectivity and the ability to offer
multiple applications allows ISOs to support value-generating services for merchants — and in turn, merchants are
likely to remain loyal.
But in order for merchants to benefit from Internet connectivity at the point-of-sale (POS),
they must have the right solution to meet their needs. One that will support payment and value-added applications,
yet not inhibit access to the Internet. There are currently two communication models for connecting terminals to the
Internet: direct connectivity using an industry-standard TCP/IP protocol, or connectivity through proprietary gateway
networks using a PC-browser model. Direct Internet connectivity is proving to be the flexible and innovative model of
choice in the industry, and the browser model is proving slow and inefficient in the utilization of the Internet as
a delivery channel. The key to understanding the benefit of direct connectivity model vs. browser model rests on two
major functions — open access and speed.
Many of us, in our role as consumers, are familiar with using the Internet as a browser: to
research hotels, look up sport scores or the weather, or search for information. However, in a merchant environment,
the power of the Internet comes from its unique 'connectivity' capabilities leveraging the open standards associated
with communications between service providers and users. Instead of building proprietary side streets for information
routing, e-services providers can leverage their existing Internet infrastructure highway to communicate with the
countertop — not matter where that merchant is. Placing gateway barriers between the merchant countertop and the
content providers will inhibit innovation, removing many of the advantages inherent in Internet standards. Remember
the old days of AOL? Subscribers did not have direct access to the Internet; instead, the AOL gateway determined
which sites users could access. It wasn't until this barrier was lifted that usage grew to new heights.
Then there's the issue of speed. Imagine trying to browse the Internet using an 8-bit processor
— this would be like surfing the web with a 286-PC! With direct connectivity, applications can be locally stored on
the terminal to manage the data flow, menus and display formatting, with only the true data being shared between
service providers and the merchant. Further, many of the countertop applications, like bill payment or loyalty, can
store data in the terminal to be sent later in batch mode. Without high bandwidth direct connectivity, this process
would require a web connection for each transaction, adding time and cost to the process.
So, what is the entrance fee to this expanding world of value-added e-services that can generate
new business for ISOs? Let's examine the requirements:
Direct TCP/IP support from the countertop terminal ensures that the power of open industry
standards deliver value to the device.
A true hardware-based multi-application environment ensures that payment and value-added
applications can securely reside on the same device, and that information — such as purchase amount — can be
shared between applications locally.
Ability to store applications locally on the terminal ensures faster and more efficient delivery
of data. E-services providers simply transmit the raw data — not formatting and printing instructions — to the
The 'right' user interface. Clerks use most countertop payment terminals, not consumers.
Therefore, you need to understand this when considering the value of e-services such as advertising or surveys.
If the terminal is used by merchants, applications such as supply ordering, bill payment, tracking shipments, etc.
will be more valuable than consumer-oriented services such as advertising.
The possibilities of Internet-connectivity in a multi-application environment are endless. But
you'll find that the technology is the 'easy' part. As an industry we must come together to implement the business
and revenue plans for success in this expanding world of the Internet countertop. The payoff is huge — new services
will attract new merchants and deliver more revenue. And isn't that better than competing solely on discount rates?