Card Establishment Services has begun to install a telecommunications service that promises to slash credit card authorization time for midsize merchants.

The Melville, N.Y., processor recently installed the system, called virtual private line, in two French Connection outlets in New York and New Orleans. The company is implementing it at the clothier's eight other U.S. stores.

The company said virtual private line, or VPL, can reduce credit card authorization time to about six seconds from as long as 40 seconds, which is typical using the conventional dial-up method.

Customers Stalking Off

Card Establishment Services, a former Citicorp subsidiary that is the third-largest merchant processor in the nation, is touting the technology as an answer for midsize merchants who cannot afford the fast but expensive leased communications lines. Such businesses, which average about 50 transactions a day, have become increasingly sensitive to losing sales as customers become frustrated by long waits at the checkout line.

"When a customer is in a strip mall and there are three clothing stores and Johnny's crying on her arm, speed becomes an issue," said Thomas P. Staudt, president and chief operating officer of Card Establishment Services.

Although the virtual private line costs "a couple of cents more [than dial-up] on each authorization," Tom Woodruff, data processing manager for French Connection, said that' "eliminating the chance of losing a customer pays for itself."

"We've witnessed customers walk off a line, especially at this time of year," said Mr. Woodruff.

Digital Technology

The service allows voice and data information to pass simultaneously between the merchant and the authorization center over a dedicated line, using either of two technologies: digital data over voice or integrated services digital network. The process improves upon the dial-up method by transmitting information digitally, rather than using an analog network.

The digital technology is also more reliable, according to Integrated Network Corp., the company that developed and manufactures digital data over voice equipment. The success rate is 99.9%, compared with 90% to 95% for dial-up systems, said a spokesman for Integrated Network.

If the digital line fails, the cash register will automatically revert to dial-up.

Collaborative Effort

French Connection tested the VPL service in one of its five Manhattan stores in August, in conjunction with Integrated Network, Datacap Systems, Nynex Corp., and CES.

Datacap supplies the specialized cash registers, Nynex provides the phone lines, and CES does the transaction processing. BellSouth Corp. provided local phone lines for the New Orleans store.

Datacap Series 4000 registers are used for the in-store data processing, including access to the virtual private line. This eliminates the need for a separate credit authorization terminal. The register slip acts as the customer's only receipt.

Easier to Tally Sales

The new system simplifies things for retail employees as well as the customers, according to Mr. Woodruff. Because the register also serves local system needs - keeping track of the day's electronic transactions itself - it becomes much easier for employees to tally sales after the store closes.

French Connection is currently in negotiation with CES and Datacap to provide debit card acceptance along with credit cards, Mr. Woodruff said.

For Integrated Network, the Bridgewater, N.J.-based company that developed and manufactures the digital data-over-voice multiplexers that are in seven of the 10 French Connection stores, the potential market extends far beyond specialty retail stores. Merchants ranging from Universal Studios in California to Mazzio's pizza chain in Oklahoma are currently using VPL, said Len Eisenstein, Integrated Network's vice president for worldwide sales.

|Tip of the Iceberg'

"This is the first implementation in a retail environment, but it is just the tip of the iceberg," Mr. Eisenstein said.

The DDOV technology, newer and more economical than the compatible integrated services digital network, or ISDN, has helped facilitate delivery of this service to the smaller merchants.

Pat Ludwig, vice president for Cardnet Services at CES, said the expense of buying ISDN equipment had made it prohibitive for smaller merchants until only recently. Although the technologies are basically similar, she said, the ISDN system is slightly less redundant than a digital data over voice line, and DDOV is generally more "easily employed."

In certain areas. Ms. Ludwig said, ISDN is more feasible than DDOV, particularly due to a requirement that the merchant be no more than about 13 miles from the operating center.

In early 1994, CES plans to launch a major rollout - with Integrated Network and the regional bell phone companies - primarily in retail, restaurant, and hotel segments.

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