by Phil Britt

   With the start of the new year comes several new opportunities for ISOs to expand their businesses thanks to new technologies that are starting to hit the market.
   Some of the technologies take advantage of merchants' desire for portability of POS devices, others offer value-added features, while others provide advantages for business owners and for the salespeople who sell to them.
   Portability is an increasingly desired feature as merchants look to maximize flexibility in using POS terminals while cutting the cost of interchange fees by as much as 1 percent.

Wireless Opportunities

   Lipman's wireless POS device has long been the market leader, but there are several more competitors emerging, providing ISOs with more flexibility in what to offer their current and prospective customers. However, the Lipman device is currently the only one with an integrated printer.
   Apriva, Scottsdale, Ariz., offers a wireless gateway, also known as middleware, Apriva Talk, which connects with a Blackberry customized card reader to provide merchants with wireless payment card capabilities as well as text messaging capabilities. The text messaging and e-mail capabilities enable the user to communicate with fleet drivers, for example, along with the ability for the fleet driver to swipe the payment card at the point-of-sale.
   The middleware is designed to work with various front-end applications, according to Kathy Schauer, Marketing Director. Therefore, a merchant could add inventory, customer relationship management and other similar applications. The more applications, the better the revenue opportunity is for the ISO.
   "Some businesses, like someone selling Mary Kay cosmetics, want to have the inventory in the palm of their hands," Schauer said. The inventory application would enable the user to automatically update inventory any time the merchant sells an item.
   CRM applications could include loyalty programs, customer contact information, etc.
   Another important feature, according to Schauer, is data compression, which enables the device to transmit information in less time, meaning a lower cost per transmission for the merchant. The card-enabled Blackberry device can also store transactions when the device is out of coverage range, then transmit them when the device is back in range.
   Newer companies and devices are in development stages and are expected to be in the general market soon. For example, Comstar Interactive's ChargeAnywhere product is in eight pilots in Chicago and other urban areas. Taxi companies are taking the lead in testing the product as they look for ways to give their customers more payment options.
   ChargeAnywhere is the smallest handheld wireless with terminal features," said Paul Sabella, Comstar Director of Business Development. "It connects directly to the POS network and encrypts transactions."
   The encryption aspect is important, according to company President and CEO, JD Gardner. With increasing concerns over security and fraud, the encryption feature is an important value-added function, according to the company.
   In addition to the encryption, the device also provides the user with wireless e-mail and two-way messaging. A Dallas firm is already using the device to dispatch drivers to and from the airport as well as to collect payment card transactions.
   Another significant potential market is heating, venting and air conditioning, according to Sabella. The main benefit here, the one the enterprising ISO will point out to merchants in this and similar industries, is the better than 1% difference in interchange fees between card not present (called in) and card present transactions.
   "There are also fewer cardholder disputes about charges," Sabella added.
   Another popular application is one that enables the user to download transaction data into a spreadsheet or text file, for input into an accounting program or customer information management system, according to Gardner.
   "Most credit card companies don't allow you to access specific credit card information," Gardner added. "We enable you to track transactions by truck numbers, invoice numbers, etc."
   Comstar is selling the product through ISOs and through processors. The primary prospects ISOs should be targeting for this product, according to Gardner, are companies with fleets, such as taxi companies, limousine services, towing firms, etc., and fast food (also known as quick service) restaurants.
   Another option is a leasing partnership, with the ISO marking up the monthly lease amount to the merchant. The leasing option saves the ISO and the merchant from making large initial cash investments and provides the ISO with a recurring revenue stream. The recurring revenue stream usually is the key to a more solid long-term business.
   While the ChargeAnywhere product works via cellular transmissions, Thales offers a product, Artemis, which operates via a handheld device that transmits to a centrally located base station on the premises.
   This enables a merchant at a restaurant, for example, to outfit the wait staff with devices in order to accept credit card transactions at a customer's table. This way, the card never leaves the customer's sight, reducing actual or suspected attempts of skimming. Such a device also enables the merchant to quickly add devices for rushes, like the holiday shopping season. Similarly, the device has a natural market for seasonal kiosks and for sidewalk sales, according to Justin Collins, Thales Director of Marketing.
   Rather than using telephone transmissions, with a charge for each call (terminal transmission), the Artemis product uses a 900 Mhz radio frequency, much like some wireless handsets and wireless headsets, to connect to the base station. Up to four handsets can connect with a single base station. According to Collins, the base station can handle up to four transmissions simultaneously.
   The product is in pilot at a Midwestern "50's" restaurant, much like the one featured in the movie "American Graffiti". The restaurant is part of a national chain, but part of the pilot agreement is that the name won't be divulged until the pilot is completed in late 2002, after press deadline for this issue. The wait staff takes the order and swipes the card where the patron is parked.
   Two other beta tests are underway with unnamed merchants in Atlanta.
   "We feel there's a premium to be placed on portability," Collins said. "This is a higher ticket item to sell (than a wired device). A second advantage is that it accepts credit and debit cards."
   Merchants can save money by batching transactions and doing them offline, Collins added. Some other wireless devices offer the ability to store transactions when a device is out of coverage range, then to send them later when the device is in range.
   Thales offers Artemis in prepackaged configurations that include two, three or four handsets. This prepackaged configuration provides a good marketing opportunity for the ISO, according to Collins, recommending that an ISO looking for a good upsell should carefully consider the type of configuration a merchant will need.
   "Clearly, there's an untapped market with wireless systems," said Michael Kopp, Chief Operating Officer for Electronic Data Resources, West Palm Beach, Fla. Besides the contractors and pizza deliveries, there's another market with flea markets, trade shows, etc. The opportunity may be even better than going door-to-door and talking to merchants."
   There's one big caveat, however, Kopp added. To date, coverage of wireless systems has been spotty at best. Data communications are more complex than voice communications, so a wireless terminal may not work where a cell phone might operate.
   That's important to note, not only for the retailer's principle location, but also for where he actually does business.
   "The merchant might live in Tampa, Fla., but go to Georgia every weekend for business," Kopp explained. Merchants who do much of their sales at trade shows could have similar communication challenges. Trade shows are a burgeoning market for wireless POS devices.
   Therefore, Kopp recommends that ISOs work with vendors that will provide good product support, enabling the ISO to determine the best wireless solution before attempting to sell it to the merchant.
   In addition to reviewing coverage, also review the processing network(s) the device works with, advises Sam Zietz, President of PayRight Merchant Services, Haledon, N.J. While some wireless devices are authorized for use with First Data and other major processors, others may work with one processor and not another.
   Beyond the revenue opportunities from the devices themselves and the transaction processing, enterprising ISOs can also earn money by selling the wireless communication contract directly through a carrier or a carrier, or indirectly through a POS vendor that offers the wireless devices, Zietz added.
   Zietz, who said he does about 65 percent of his business through wireless devices, said that revenues have grown more than 20 percent annually for the past couple of years.
   "You can't go into it half way," Zietz cautioned. "There's a lot more to it than doing the download. There are a lot more variables to wireless. We know about coverage and certifications."
   Part of being successful in selling wireless devices is providing the right product for the right merchant, added Zietz, who offers several different wireless devices. However, wired devices or the higher card-not-present transaction fees might be better for the merchant who has less than $2,500 a month in credit card transactions, according to Zietz.

Internet Payments

   In addition to the growth in the popularity of wireless devices, Internet-based systems are also becoming more prevalent. These are payment systems that use the Internet, rather than wired or wireless telephone transmissions, to transmit the payment information.
   Datawire, Toronto, is producing Internet payment systems that work on proprietary technology, said Farid Kassam, Vice President of Product Management and Marketing.
   Datawire's expectations for the Internet-based system are strong enough that the company opened its first U.S. office, in Atlanta, Ga., at the end of 2002. The company also signed a co-marketing agreement with Go Software, which will offer Datawire's Transaction Delivery Network as part of Go Software's payment processing software products.
   The Datawire product is already in use in card-enabled pay phones in Canada, as well as in some more traditional retail applications.
   "This is a more cost effective solution than the telephone networks," Kassam said, pointing to the always-on nature of the Datawire network, which means no per-call charges. By using the Internet for payment transmissions, the merchant can also eliminate phone lines for terminals. Each line costs about $40 per month.
   Many businesses today, even the ones in brick-and-mortar locations, rely increasingly on the Internet. Therefore, the Datawire system provides another way for merchants to leverage their Internet investments, Kassam added. "Merchants are demanding Internet-based services."
   Hugo Boss, a men's retailer with about 500 stores, is already using the Datawire system throughout the company. Similar retailers will provide the best sales opportunities for ISOs, according to Kassam.
   "The sweet spot is retailers with multiple checkout lanes," Kassam said. "These retailers need to consolidate their costs and need to improve the speed at the checkout lines."
   Internet capability will do this because the transmissions are quicker and the retailers could save the monthly phone line charges.

Fraud Protection

   In addition to the Datawire solution, there are also Internet-related revenue opportunities available in fraud prevention.
   At press time,, Hollywood, Fla., was beta testing a "fraud management" program with some large merchants and processors, with the anticipation of going live with it before the Christmas shopping season.
   The company's proprietary software analyzes each Internet transaction for potential fraud, providing the merchant with accept, question or decline advice.
   "Many ISOs share in the risk if the merchant gets into chargeback trouble," says Richard Kwiat, the company's CEO. ISOs can join's partnership program in which they share in 10 to 15 percent of the company's revenues.

"Outside the Box"

   Other ISOs are finding opportunities by thinking outside the box. For example, iPayment, Nashville, Tenn., works with business partners to help merchants develop Web sites. Many of these merchants aren't ready for e-commerce yet, but the Web sites help drive business to traditional locations, according to Mark Wilson, iPayment Vice President of Business Development. Though third parties do the actual Web development, iPayment derives revenues from each referral.
   There are certainly additional revenue opportunities for ISOs in 2003, whether it's offering fraud protection, wireless services or Internet payment programs, or expanding with more traditional services.