Internet-enabled credit card terminals are a technological reality. But is the marketplace ready to embrace them?
Manufacturers of the devices, known as Web-enabled point of sale terminals, depict them as a panacea, saying they will be a boon to marketers and all but eliminate chargeback disputes, because all receipts will be available electronically on Web sites.
But detractors say that there is little market demand, and that the extra functions only slow down transaction times.
Developers of the terminals include Hypercom Corp., which introduced its model of an Internet-enabled point of sale terminal in December, and Hewlett-Packard's Verifone Inc., which will make its own available this summer.
Terminal makers say turning the familiar point of sale box into a Web browser will present new opportunities for consumers, merchants, the acquiring banks, and other companies that foster merchant relationships.
Consumers could view targeted advertisements - baby formula for someone buying diapers, for instance -while their groceries were being scanned and bagged, and get receipts through e-mail. Merchants that today keep paper receipts could send them to a central Web site from any computer. They could also fulfill Web orders, arrange shipments, and receive and send e-mails.
It all makes perfect sense - unless, as skeptics point out, the added features produce the one thing customers seem unwilling to tolerate: longer waits at checkout lines.
Indeed, the possibility that Web-enabled point of sale terminals might bog down transaction times may well be a sticking point, industry experts said. The same concerns, real or not, have impeded the deployment of Internet-equipped automated teller machines.
Executives at Verifone, the nation's largest manufacturer of point of sale terminals, say their goal is for the Web-enabled terminals to process transactions in the same amount of time that the tried-and-true terminals do. A company called @pos.com Inc., which is working with Verifone, said their transactions will not lengthen the typical checkout times - 30 seconds at a convenience store, two minutes at a department store, and three minutes at a grocery store.
Experts say the advances could inject a new competitive spirit into the merchant-acquiring business. Right now banks, independent sales agents, and transaction processors are competing for merchant customers largely on the basis of price, but the ability to offer Web-enabled transaction processing could serve as a new differentiator, and produce new revenue streams.
Today, "merchants just go from one provider to another just to get a small discount," said George Wallner, president and chief executive officer of Phoenix-based Hypercom, one of the first terminal suppliers to introduce the snazzy applications. "Profits have been shrinking and the industry has been looking for a long time for ways to add value, to change the equation."
Late last year Hypercom unveiled a line of devices and applications under the umbrella name ePic, for ePos-infocommerce. It calls the terminals "Web appliances" and says smaller merchants in particular may find them appealing as they search for ways to improve their operations without spending a lot of money.
Hypercom, which sells its terminals through the processors and sales agents that foster merchant relationships, has shipped tens of thousands of Internet-enabled terminals in the United States and abroad, Mr. Wallner said. Many of the machines are now being used to display advertising and capture receipts.
Verifone, of Santa Clara, Calif., is focusing on larger merchants and says it emphasizes the technology's advantages in receipt storage and marketing.
Bringing the Internet to the retail countertop is "the wave of the future," said Les Riedl, senior vice president of Speer & Associates, a consulting firm in Atlanta.
Mr. Riedl said one-to-one marketing, couponing, and other promotional practices are far less expensive with Internet technology. The same tasks in the past were cumbersome and required new coding with virtually every new advertisement. The Internet offers "an awful lot of capability," he said. "The real issue is what will make sense in an environment where speed is important."
Not everybody believes that Web-enabled point of sale terminals will catch fire. Julie Fergerson, chief technology officer of ClearCommerce, an Austin, Tex., maker of software for Internet payments, predicted Internet point of sale terminals will suffer the same fate as smart cards: They are "cool," but merchants ultimately will not take to them.
Many merchants do not even program their terminals to put advertising messages at the bottom of their receipts, Ms. Fergerson said. "I don't think merchants are asking for those things," she said.
Nonetheless, Mr. Riedl of Speer predicted that most terminal makers will be offering Internet uses in the next six to nine months. "The acquiring industry clearly will benefit," he said. "Someone will need to provide those value-added services and support those capabilities."
Hypercom says the point of sale industry is on the cusp of dramatic changes. The company is negotiating with content providers like iamnetworks.com and AdForceInc. to have their material pushed to consumers through point of sale terminals. "The big challenge[those companies] all face is to deliver the right content to the right audience," Mr. Wallner said.
While Hypercom is targeting smaller merchants and touting its devices as all-in-one substitutes for personal computers, Verifone is taking a different approach. Emily Hart, product manager for large retailers at Verifone, said a "very small percentage of small merchants" do not have PC systems in place, and PCs are "much better-suited to doing e-mail and Web site creation."
Verifone considers large retailers the "sweet spot," Ms. Hart said. "They're the retailers who will get the most benefit from being able to target their customers. They obviously have a much larger customer base [and] they actually have the networking infrastructure within the stores to be able to take advantage of this kind of device."
Verifone hooked up in January with @pos.com, a San Jose, Calif., company that claims to have developed the world's first Web-enabled payment terminal. Formerly known as MobiNetix Systems Inc., @pos.com has decided to get out of the hardware manufacturing business and instead license its technology to terminal makers like Verifone. Hand Held Products, an affiliate of medical supply maker Welchallyn of Skaneateles Falls, N.Y., is also a licensee.
A company called receiptcity.com, created in February as a majority-owned subsidiary of @pos.com, has built a center to mine transaction information. The data center, which has yet to sign up its first retail customer, plans to tailor advertisements and promotions to individual customers and shoot them to the terminals while shoppers are there.
"What we're doing is we're bringing Web-based techniques and solutions to exist within the amount of time that someone's spending at the checkout," said Scott Allan, chief operating officer of receiptcity.com.
At the end of the transaction, customers would request an electronic receipt that would be sent to a "Web vault." Merchants are promised the efficiency of a totally automated system, and consumers would be charged nothing to use receiptcity.com's Web to access receipts needed for returns, warranty claims, or charge disputes.
Verifone says these applications will appeal to market research houses that could quiz consumers during idle transaction time. Ms. Hart of Verifone said: "Imagine a survey question where you have just bought Welch's cranberry juice. Ocean Spray would love to know why you've just done that." Calling someone two weeks later during dinner is more expensive and less efficient, she said.
Hypercom says its ePic product line is vastly different from Verifone's plans in that the technology connects merchants to just about everything on the Internet. "If a merchant wants to access Yahoo, we just enable that particular access," Mr. Wallner said. "Whatever is on the Web, we can display on the terminal."
Instead of giving consumers discount coupons for the items they are actually buying at that instant, Mr. Wallner said, the terminals would display ads and marketing materials throughout the sales process.
Hypercom has developed a set of Web-enabled servers called ePicPortz, which support a range of screen and application gateway functions. ePic features work with the company's ICE series terminals - browser-equipped devices with interactive touch-screens controlled by consumers instead of merchants. Merchants can flash ads from their Web storefront, dispense loyalty points, or offer real or virtual coupons.
"When a consumer touches an e-coupon on the screen, the redemption rate is 10 times higher," Mr. Wallner said.
Hypercom says terminals are a less expensive, simpler way for smaller merchants to handle their Internet business. The ePicPortz gateways were built to support Web hosting packages, including Hypercom's own ShopHostz.
Retailers "very often don't want to put a PC in the store or they don't want to make the PC available to the staff," Mr. Wallner said. "These are merchants that would get one or two orders a day through the Web. Why not allow the terminal to retrieve orders and complete the fulfillment report right on the screen?"
Additionally, Hypercom is gearing up to run a central server in which merchants can store and retrieve electronic receipts. Its software is already being used for servers run by individual transaction processors. While many larger merchants have been capturing receipts electronically for years, "the Internet makes electronic receipt capture practical and cost-effective for merchants of all sizes," Mr. Wallner said.
Richard Cornelius, associate partner in the financial services group of Andersen Consulting, said that "bringing additional intelligence and additional capabilities" to credit card terminals "will absolutely be successful." But not everything will sell, he said. The acquiring industry will have to experiment to find the "long-term nirvana."
