vity 101

Dial-Up is the

Weakest Link

by James Stroud

   Though the majority of merchants still use it today, dial-up connectivity is the "weakest link" a merchant can have with a host processor. Fortunately, affordable, simple alternatives to dial-up connectivity are now available in easy-to-sell service packages. ISOs can turn the little-understood, yet important part of a point-of-sale (POS) � known as connectivity � into a new service offering that will expand ISOs' markets and improve merchant retention.
   These new alternatives to dial-up connectivity are sold as bundled services that include everything a merchant needs to have and maintain "always on" managed network connectivity for their existing POS and back-office devices. ISOs selling this bundled service can improve POS efficiency, functionality and reliability for a merchant � no matter its size or location �with as little effort as it takes to sign up for cable TV.
   These affordable, bundled managed network services couldn't have come at a better time for ISOs. Gift card, loyalty and other applications are no longer enough to differentiate ISO product offerings. ISOs need something new to attract merchants and increase their yield from existing customers. But before ISOs can sell managed network services, they need to understand connectivity, the deficiencies of dial-up and the benefits of managed network services. So let's get started.

What Is Connectivity?

   "Connectivity" means the link that is established between a merchant's POS system and a host processor so that data can be exchanged to enable credit and debit card authorizations and other electronic data transfers. It also means the link established between a merchant's back-office devices (such as a PC) to a corporate network, Internet Service Provider or other application service provider like a payroll services firm. Today, the vast majority of merchants use one or more dedicated dial-up phone lines to establish these connections.

Why Is Persistent, Fast, Reliable, Dedicated Connectivity Important?

   The number of electronic payment transactions a merchant must support is at an all-time high and growing fast, making merchants more dependent than ever upon a fast, reliable and affordable connection to their processor.
   Just consider the results of a study released in 2001 by the Federal Reserve, which found that:

  • Transactions involving electronic payments now total 30 billion a year -- a 500 percent increase since 1979
  • Electronic payments account for an astounding 40 percent of total non-cash payments, compared with roughly 15 percent in 1979
  • Credit card transactions represented about half of all electronic payments � 15 billion transactions -- worth $1.23 trillion per year
  • Debit cards came in second place with 8.3 billion transactions valued at $348 billion per year

   Since connectivity is the lifeline that enables merchants to conduct electronic payment transactions as well as other value-added applications and services supported at thePOS, it is critical that merchants have the best method of connectivity available so their point-of-sale stays up and running. Nowadays, if a merchant's connectivity is down, he or she is practically out of business. The type of connection a merchant uses is also important because it determines transaction speed and the resulting level of customer service at checkout. It also dictates the functions a POS system can support, governs how reliable the device will be and directly impacts the overall usefulness of a merchant's payment system.

Dial-up's Deficiencies.

   Merchants using dial-up connectivity require one phone line for each POS system used, meaning that as the merchant's business grows, their monthly cost to connect point-of-sale and back-office devices using phone lines also grows.
   Even worse, dial-up delivers sluggish transaction times of 30-60 seconds, which reduces productivity for cashiers and slows customer throughput in the checkout lanes.
   Dial-up's slow speed also impairs functionality at the POS. ISOs know that merchants can get the most value from their point-of-sale system investment if they use advanced POS terminals that can support credit and debit transactions along with a variety of value-added applications and services. But even today's most advanced multi-application and Internet-enabled terminals can't deliver data fast enough using dial-up connections �regardless how sophisticated the applications they're running.
   If slow transaction speeds, high monthly fees and poor functionality aren't enough to convince you that dial-up is the "weakest link," consider dial-up's dismal record on reliability. Merchants using dial-up connectivity have few if any safeguards. No one at the phone company is monitoring the line 24x7 to ensure it � and the devices using it - are working properly. When an outage does occur, the phone company doesn't know about it, nor does it alert the merchant within a set period of time, or offer a guaranteed time by which the link will be restored. Your merchant's dial-up "connection" could be "down," unable to perform electronic transactions for hours or even days, forcing the merchant to turn away many customers and lose revenue, or authorize credit manually and pay much steeper discount rates to the processor. And when service is finally restored, the phone company may charge the merchant for repairs or replacement of on-site equipment.

Times (and Technology) Have Changed

   If dial-up is so slow, costly and unreliable, why do merchants continue to use it? For starters, until now, faster, more reliable alternatives to dial-up connectivity, such as frame relay or satellite links, were extremely complex, expensive to implement and thus unrealistic both financially and technically for most merchants. Until now, to obtain better connectivity technologies, merchants had to purchase �high tech' access devices. This would require a large up-front capital investment and could squeeze a merchant's budget for POS terminals, training and operations.
   Fortunately, times have changed. ISOs can now market a completely bundled, fully managed network connection service that provides new and existing merchants everything they need - installation, maintenance and managed network connectivity - using existing POS systems.

What You Should Look For

   Be sure to go with a managed network service that provides a total solution for your merchants.
   The provider should be able to offer several service options that meet the specific volume and type of transactions your merchants must support � both now and as those needs change. This keeps connectivity efficient and economical. Network professionals should be available to provide simple guidelines and training that help ISOs determine which service option is right for a particular customer.
   Expert network design, implementation and integration services should be included to make the migration to managed network connectivity easy for your merchant. The managed network provider also should have the latest technology to connect your merchant's existing POS and back-office systems directly into a national TCP/IP over frame relay network and instantly route transactions directly to a specific host, processor or the Internet.
   All equipment and installation required to connect the merchant's point-of-sale and back office devices to the network should be owned by the managed network provider, and guaranteed to be fully operational. This ensures that merchants never need to pay for equipment repairs or purchase upgrades.
   Your merchant should be able to connect to the managed network service using their existing point-of- sale and back office devices. This protects their investment in installation, integration and training, while allowing merchants to take advantage of the speed and reliability that TCP/IP over frame relay and satellite technology can deliver.
   Finally, managed network connectivity is only as good as its speed and reliability. Look for a service that offers 3-5 second transaction times and can support a minimum of six devices with one circuit.
   You'll also want no less than 24x7, end-to-end network monitoring, 99.9 percent network availability, guaranteed 4-hour network restore time and proactive network alerts within 10 minutes of an outage. And be sure the service includes reliable, trained field technicians available across the country to provide certified field maintenance.

Get Connected

   It is easy for ISOs to sell merchants an affordable alternative to dial-up connectivity.
   A turnkey managed network service offers substantial benefits for merchants at a price point that is at or below dial-up costs.
   ISOs in today's market have a new and compelling opportunity to get ahead of the competition and grow market share by helping their merchants get connected and stay connected --helping retailers say goodbye to the era of "the weakest link".