By the second half of the year, ISOs could be selling mobile phones in addition to more traditional products and services like POS terminals, ATM machines, etc.
By that time some mobile phones are expected to be outfitted with integrated PIN devices that enable them to transmit POS data as well as carry voice communications.
"We expect ISOs to play a significant role in building our market," said William Atkinson, CEO of Wildcard Wireless Solutions, Vancouver, British Columbia, which is working with Motorola and several other mobile phone makers to develop POS terminals that attach to mobile phones. The devices will be marketed primarily in the U.S.
The POS-enabled phones will help open mobile markets like taxi cabs, pizza delivery and carpet cleaners that have previously been out of reach of the POS market, according to Atkinson.
Unlike other wireless POS devices, the Wildcard Wireless product, named TransAkt, uses CDMA technology, meaning it can operate across different telecommunications systems. Some other wireless POS devices operate on other technologies that limit their mobility, according to Atkinson.
Though Wildcard Wireless has patents pending on its product, named TransAkt, Atkinson expects competitors to enter the market as well to further push production of POS-enabled mobile phones.
Yankee Group, Boston, Mass., also predicts that POS-enabled wireless phones will be used for vending machines purchases and other non-conventional uses in the next few years.
However, Yankee Group analyst Adam Zawell said that POS-enabled mobile phones would be more limited in their capabilities than more traditional POS terminals from companies like Hypercom, Lipman, Verifone and Ingenico. Therefore, in some instances, the merchant will be better off staying with a more traditional POS terminal. The POS-enabled phones will be of more use for someone who wants a phone that can occasionally be used as a POS device, rather needing a POS device that sometimes can be used as a phone.
Atkinson admits that the POS-enabled mobile phones won't replace wired POS terminals. However, brick-and-mortar retailers could use wireless devices to quickly add more POS terminals for Christmas sales and other seasonal rushes.
There's also a tremendous opportunity for ISOs to provide upscale POS terminals to large retailers, according to recent research from Cleveland, Ohio-based LakeGroup West. Ltd., a merchant consulting group.
According to the report, more than 45 percent of retailers are using terminals that are more than seven years old, so many of them don't have some of the added capabilities of more recent models.
Among the most important capabilities of the more recent models, according to Bob Artall LakeWest Group president, is the ability to track customer data and to integrate with backend customer relationship management systems. The CRM systems enable retailers to market products and services to customers who are the most likely to buy them, to better retain old customers and to better attract new ones.
A Harvard Business Review article reported that increasing customer retention rates by 5 percent increased profits by 25 percent to 95 percent.
Even so, many retailers have yet to install front-end POS systems that collect the data necessary to drive CRM engines, according to "First, retailers were concerned about Y2K, so they didn't want to purchase new systems," Artall explained. "Then they got involved in e-commerce, then the recession hit, so many of these POS systems are held together with chewing gum."
The new systems, in addition to being more reliable, offer benefits for the business and technical sides of retail operations, Artall says. "On the business side, channels can be better integrated, training will be easier and less expensive for sales associates and customer service levels could be dramatically improved."
The newer systems are more technically advanced to allow two-way communications between the POS terminals and backend systems, and offer lower maintenance and upkeep costs, according to Artall.
Though the newer systems with the more advanced data collection capabilities are beyond the financial reach of many small retailers, they make good financial sense for those retailers with at least $100 million in annual sales.
Some retailers, like many large grocery stores, have added the new POS terminals on the front end and are collecting vast amount of customer data, but have yet to use this data to better manage their customers and operations.
"Clearly, retailers are resigned to the fact that they have to get closer to their customers. It is absolutely imperative that information gathered on who the customers are, what they are buying, how they are buying and where they are buying," Artall said. "In today's marketplace, there are not only countless places to buy the same item, but there are several channels through which to purchase it. Retailers must gather as much information about their customers as they can, whether it is their best customer or a one-time shopper."
The ISOs serving this market may have an easy time selling retailers on the need for the advanced systems, according to the LakeWest Group research, which says that one-third of these large retailers with systems at least seven years old are expecting to replace them within the next four years.
Retailers believe that POS systems, whether proprietary or package systems, should remain viable for at least seven years, according to Artall. Some of these retailers will try to extend the life of the hardware further by purchasing new software designed to work with newer and older systems alike.
Another factor that will help ISOs approach this market, Artall said, is the fact that POS prices have declined. It used to be that applications needed to be included on each POS system. But the newer systems use a thin-client environment in which the application software resides on a central server. So there isn't the additional expense of having multiple copies of software applications.