Delivering on the Promise
The dawn of the 'Information Highway' brought with it great promise for the global business community. Instant access to information, ideas, individuals, and commerce would transform, virtually overnight, the way organizations interacted with one another, their customers and suppliers. The Internet also brought promise for seamless global commerce, creating tremendous value for everyone in the payments chain.
Why then, are more than 90% of the 30 billion annual U.S. transactions still being completed via legacy telecommunications networks?
The barriers for transactions to ride the Internet can be summed up in three words: speed, security and reliability.
A serious deficiency with the Internet is that it does not offer centralized management of performance with committed SLAs (service level agreements). Unlike with dedicated circuits and private networks, the transaction processor can call the telecommunications provider if transactions are not getting through. The Internet, being a loose federation of cooperating (and competing!) carriers, is built so that packets hop from carrier to carrier, in a manner that is not centrally managed or controlled. Combine this with capacity fluctuations, point outages, reachability problems, packet loss, and performance can vary significantly. Even the best Internet carriers frequently suffer from packet loss that exceeds several percent, and reachability levels sometimes drop below 98% (at 98% reachability two out of 100 destinations are not reachable). This explains why most processors are reluctant to add "Internet" to their repertoire, because of the support nightmare that would ensue from the inability to manage performance.
All this has begun to change however. The age of reliable, secure, device-independent transaction delivery over the Internet is finally here. In the coming months, the payments chain can look forward to realizing the cost-effectiveness, ubiquity and speed of IP, with the type of mission critical security and reliability previously found only through those big, expensive, private pipes.
Next generation intelligent, overlay networks that are designed for transaction delivery, bring to transactions what other overlay networks have done to optimize the delivery of Web content. These are parallel, secure, distributed networks that overlay the Internet and provide a single point of management without a single point of failure. These networks 'read' the underlying Internet and make routing decisions in real-time to get around congestion and failures, and most importantly, do so in a manner that takes all the provisioning and deployment concerns away from the processor and provide secure, high-speed, managed transport.
Making Processors and Independent Sales Organizations (ISOs) More Competitive
What does all this mean for your business? IP-based transactions provide a host of tangible benefits to the ISO community and their merchant partners. In an industry that has become increasingly competitive, cost reduction remains a key value proposition for the payments' chain.
Next generation IP networks can now effectively provide high quality transaction processing at costs comparable to dial and at speeds comparable to frame-relay. The cost savings achieved by forward thinking adopters of this new technology, both large and small, will provide immediate benefits to merchant partners.
Take a department store example: a five-store chain might be able to cut its costs to a fifth of what they are currently paying for frame relay by switching to IP. For the smaller retail merchant, say one with four checkout lanes for example, the cost savings from aggregating all the checkout terminals over a single 56Kbps dialup connection to the Internet (or high-speed Internet where available) could be over $100 per month. At the same time, transaction times would shrink from about 15 seconds to under five seconds (because the terminal "consolidator" would allow the terminals to stay connected, thus eliminating the dial delay). End of day settlement times would shrink as well.
Increased Services Revenue, Increased Technology Span
The benefits provided by IP transactions over an intelligent network extend out well beyond cost alone. The ability to deliver multiple transactional services over a single network provides ISOs of all sizes with numerous additional transactional revenue opportunities.
Customer attrition is a major concern for the entire ISO community. By providing additional transactional services, like on line credit obtainment, to the credit-only merchant, ISOs can reduce merchant "churn" considerably, with upstream benefits to the merchant acquirers and payment processors.
With the migration of transaction delivery to IP, everyone in the payments chain benefits by enhancing their merchant product offerings and realizing new revenue generating opportunities.
IP transaction delivery also expands the possibilities for integrating various devices and technologies into the payments chain. No longer can only point-of-sale "terminals" do transactions, but so too can PDAs and cellular phones, interoperating seamlessly with conventional terminals, and best of all, adding this additional functionality requires little or no work for the payment processor.
Using IP as a means of transporting mission critical transactions is no longer a mere vision for the payments' community. With next generation transaction networks the future is now.