Finances Pull Plug on Card Link
The nation's only provider of credit card authorizations over radio waves announced it has ceased operations.
Digital Radio Networks Inc., a small telecommunications company that struck a major deal to transmit credit authorizations for Visa U.S.A. earlier this year, was forced to shut down Aug. 15.
John Remondi, a managing director of Boston-based Fidelity Capital Markets Co., a major investor in the company, said his group turned off the tap after determining that "the economics weren't there," according to a Washington Post article. The venture capital company is a unit of FMR Corp.
The company's failure cames as a surprise to many in the industry who believe that radio wave technology represents a viable communications alternative for banks and other businesses that presently send large volumes of data over land-based telephone lines.
Higher Speed, Lower Cost
"For midsize merchants who have dedicated a phone line to get authorizations, this technology has the potential to speed up response times and lower transaction costs," said Gregory J. Holmes, a spokesman for Visa U.S.A. "We hope a new provider of the technology will emerge soon."
For radio-based authorizations to be cost-justified, a merchant should authorize about 300 transactions per month, Visa officials said.
Vienna, Va.-based DRN was thought to be the only company in the United States to offer radio-wave telecommunications services for credit card authorizations. However, a number of other companies, including Bison Data Corp., Buffalo, N.Y., provide radio networks for other data processing functions, including the operation of automated teller machines.
Transmitting data over radio waves is generally thought to be faster, more reliable, and in many cases cheaper than dedicated telephone lines.
"The applications for this technology are endless," said Joseph Wolfson, president of Bison Data.
In addition to improving response time to authorization requests, bankers and credit card company officials have said, radio-based systems eliminate the danger of service interruptions caused by phone outages.
A Fast Channel
Digital Radio Networks' telecommunications system, which was slated for completion early next year, was to act as a high-speed communication channel between merchants and the financial institutions that handle their credit card transactions.
A merchant's request for authorization would be sent from a radio transmitting device at the point of sale to a DRN radio tower. The tower is linked to Visa's processing site by a high-speed fiber optic cable.
An authorization decision typically takes about five to seven seconds with the radio communication; the average over a dedicated phone line is more than 20 seconds.
About 1,200 U.S. merchants, including Herman's Sporting Goods and the Trump Shuttle, tested the radio-based system.