Point of sale terminal manufacturers are laying the groundwork for a futuristic world in which all merchants have Internet-connected devices on their counters, and customers can use handheld gadgets to zap payment information to them without swiping a card.
Some of this equipment is available today Hypercom Corp. has been particularly aggressive in marketing Internet-enabled terminals, which can help merchants with record-keeping and other historically paper-based tasks and some is in development. Verifone said last week that it had agreed to work with Palm Inc. to develop a system that would let people who use Palm personal organizers transfer payment information from their devices to Verifone point of sale terminals using infrared technology. Retailers could then beam a receipt back to the Palm organizer.
The biggest sticking point, it seems, is not supply but demand. Despite the many benefits that manufacturers are touting about Internet-enabled terminals which let retailers use browsers to track package shipments, store receipts, and send e-mail, among other things merchants are not sold. Independent sales organizations, whose business it is to equip merchants with the gear they need to accept card payments, report that demand is slow and Internet connectivity is a tough sell.
You have to make the merchants change their philosophical thinking regarding that device in front of them, said Paul Martaus, president of Martaus & Associates, an electronic payments consultancy in Mountain Home, Ark., that specializes in merchant-acquiring issues. The terminals are there to authorize credit card transactions. When you talk to merchants about the Internet, their eyes glaze over and they see their clerks scanning porn sites.
Terminal vendors say the type of Internet connections their terminals use do not let clerks surf the Web. Such assurances may be helpful, but they do not address pocketbook issues: merchant-acquirers say it is hard to persuade retailers of the benefits of buying new terminals that come with a new monthly fee of at least $10 for an Internet connection.
Phoenix-based Hypercom was first to market with an Internet-connected terminal, the ePic ICE touch screen, which it introduced in December 1999. Today, it has seven increasingly sophisticated models, ranging in price from $380 to $800.
Hypercom says it has installed 200,000 Internet-connected terminals worldwide, of its total of more than three million installed. George Wallner, founder, chairman, and chief strategist at Hypercom, sees payment terminals evolving into multi-function, PC-like devices with color displays that sit on the counter and face the customer, who can watch advertisements while the transaction takes place.
The browser turned the terminal into an open-ended device for applications that we never envisioned, Mr. Wallner said. It is not the Internet that is important, it is the browser that allows developers to download their own software.
Think of what the PC used to be before Netscape, he said. You could only do what you had in the PC, but once you got Netscape, suddenly that became unlimited functionality.
Mr. Wallners idea of what chores the terminals would perform has changed over time as he has gained merchant feedback. The most popular function, for both merchants and processors, is electronic receipt storage, which frees merchants from the onerous chore of filing and keeping thousands of receipts. Visa and MasterCard require that merchants keep receipts for six months.
Some features that Mr. Wallner thought would be a hit stock quotes, weather, and white pages proved to be less important to merchants than predicted.
One size does not fit all, he said. In some places the cost is everything. In other places, certain applications are valued.
Verifone, the Hewlett-Packard Co. subsidiary, began selling Internet-connected terminals in May, and has few such terminals installed. Its worldwide installed base reached nine million in September, but only a handful are Internet-connected.
Verifones first Internet terminal client, Moneybox, is an automated teller machine operator in the United Kingdom that will use the terminals to let customers shop the Web from convenience-store kiosks. In the United States, Verifone is still developing a strategy to sell terminals bundled with Internet connections and related services.
We are working through how to package it to make it as simple as possible for the ISO to sell it, said Stuart Taylor, director of emerging markets for Verifone. If anything is slowing us down, it is the learning exercise of how to package these things.
Verifone sees opportunity in places besides the Internet. Mr. Taylor said the relationship with Palm came about because that company and other handheld appliance manufacturers want to turn their devices into personal points of sale. The key thing they look at is making the device manage your payment information, he said.
Eventually, Internet connections will allow manufacturers to distribute advertising to the terminals. A clothing retailer, for example, could attract advertising from a sweater manufacturer, which would pay to advertise on a receipt or terminal.
Verifone is using a partnership with a Web company, Food.com, to promote Internet-connected POS terminals at restaurants. Food.com, of San Francisco, runs a national service that posts menus so that people can order takeout or delivery food from local restaurants. Most of the 17,000 participating restaurants receive the orders by phone or fax and take cash or credit card at the persons front door, but the Web site is encouraging the restaurants to switch to a terminal-based approach. Restaurants that buy Verifones Omni 3300 terminals can take orders and receive payment through the Food.com Web site.
Other terminal makers are exploring the Internet, though with less ambitious plans. Atlanta-based IVI Checkmate Corp. introduced its first Internet-connected terminal in September with one major client, a Canadian hardware retailer that plans to buy 2,000 of them and use the Internet connection to manage its loyalty program.
Michael English, a spokesman for IVI Checkmate, said his company is skeptical about the potential for Internet-enabled terminals. Merchants, he said, do not want anything that might slow down customers. First and foremost, you want to have the customer checked out, he said. Then you want to be concerned about value-added applications.
