The winners of the last New York City Marathon did not set any records, but the spectators did.
Fans along the route Nov. 6 spent $500,000 on official marathon merchandise.
Why the record pace of spending? Vendors said that while runners sweated and strained, the crowd for the first time had the option of buying souvenir hats and T-shirts with credit cards.
Merchandise kiosks along the 26.2-mile route were equipped with portable card authorization terminals from U.S. Wireless Data Inc. These terminals are battery-powered and use cellular technology in place of traditional phone lines.
"The use of this wireless point of sale device at the New York City Marathon offers a glimpse into the future of cutting-edge wireless technologies," said Alan B. Roberts, president and chief executive officer of U.S. Wireless, based in Boulder, Colo.
Merchant-acquiring banks have long been interested in extending the reach of credit cards. Home delivery and home repair services, flea-market vendors, and other outdoor concessionaires are just a few of the new groups targeted for card acceptance.
These merchants, like others, are wary of fraud and want the assurance of a positive authorization. What's more, the lack of electrical power and phone lines at remote sites means conventional POS terminals are not available.
That's where U.S. Wireless steps in with its POS-50 terminal, and it is having the desired impact on merchant acceptance.
To be sure, major POS competitors like Verifone Inc. and Hypercom Inc. have or will be offering portable terminals. Several suppliers offer "suitcase" products, with all the necessary ingredients - card-swipe reader, printer, and cellular phone or radio transmitter - in a portable case.
The POS-50, however, with its patented design, has gained quite a few converts since it was introduced around this time last year.
"Our customers find the suitcase products bulky, expensive, and unreliable," said Dana Hobika, a sales representative for Boulder Bankcard Processing Corp., a unit of Bank of Boulder.
"The POS-50 doesn't have any of those problems," she added. "We have every reason in the world to support the POS-50."
Besides the New York City Marathon, the POS-50 has been seen on the Rolling Stones tour, at flea markets and sidewalk sales, at University of Colorado football games, at numerous conventions, and in a mobile SuperCuts hair salon.
The POS-50 generated gross revenues of $230,711 in the fiscal year that ended last June 30. A big sales push resulted in revenues of $384,842 for the quarter ended Sept. 30.
"Our sales reflect our status as a development stage company," said Mr. Roberts. "We're still a young, small company so we've got to overcome the roadblock of having people come to know us, believe in us, and accept the fact that we're real in the marketplace. We've got to get our product out in front of the merchants who can use it."
U.S. Wireless also has to convince potential partners and prospective customers that it has the financial wherewithal to survive in a competitive marketplace.
Like many a startup, the company has been spending much more money than it brings in. The company's initial public offering in December 1993 was fully subscribed, and it received proceeds of nearly $12.2 million from the sale of 1,650,000 shares of common stock at $8.50 each.
Earlier this week, however, U.S. Wireless shares were trading at about $2.
The company has also been embroiled in a legal battle with shareholders who allege that U.S. Wireless engaged in deceptive practices when it went public.
The company maintains that the suit is without merit and says it will fight the allegations. Management has declined to discuss details any further.
Meanwhile, U.S. Wireless continues to push the POS-50; it sees potential sales of 1.5 million units in the United States alone.
Although research conducted by other organizations calls U.S. Wireless' market assumptions into question, the company is quickly moving forward with its sales strategy.
To attract users, U.S. Wireless is in the process of building sales and marketing relationships with independent sales organizations and other businesses that can help spread the word about the POS-50.
Since the company's inception, it has worked closely with many of the major telecommunications companies, including the regional bell operating companies, cellular technology providers, and long-distance providers. These companies acted as an adjunct sales force for the POS-50 last year.
"The management of the cellular carriers has been extremely enthusiastic about our company and our product," said Mr. Roberts.
"Unfortunately, the cellular carriers are not schooled in the settlement process," he said. "They're not schooled in the banking relationships that are necessary for any merchant in a credit card environment. That's why I've encouraged the ISO (independent sales organization) channel. The ISOs know the credit card business inside and out."
For competitive reasons, U.S. Wireless declined to name any of the 10 ISOs with which it has sales and marketing agreements.
Card Establishment Services Inc., one of the top three providers of transaction services to retail merchants, last week announced publicly that it had agreed to distribute the POS-50.
Several of the Melville, N.Y.-based processor's customers already use the POS-50, which CES will make available to all its customers starting next month.
"In the past, payment options for these markets were traditionally cash or check," said Michele Glover, retail industry product manager for CES. "Now these merchants can offer the convenience of payment by credit card and enjoy the security of on-line verification as well."
U.S. Wireless also recently completed the acquisition of Direct Data Inc., a Hartland, Wis.-based developer and distributor of POS hardware and software. Direct Data had 1993 sales of $4.5 million.
"The Direct Data acquisition will allow us to become an even greater force in the market," said Mr. Roberts. "First, it will allow us to tap into sales channels opened by Direct Data with the major processing banks, and second, it broadens our product offerings."
Products marketed by Direct Data include receipt printers, POS terminals, check readers, a combination smart card/magnetic stripe POS reader called DesCartes, and a range of smart card and frequency marketing software.
Direct Data is the exclusive North American distributor of the POS-95, supplied by De La Rue Fortronic Ltd., a Dunfermline, Scotland-based firm with the largest base of POS terminals installed in Europe. The POS-95 can be used to authorize both credit and debit cards and has an optional smart card reader.
"The POS-95 represents a very interesting platform for future wireless products by U.S. Wireless," said Mr. Roberts. "We intend to make that product available in a wireless context so that the features and functionality of the smart card can be available wireless."
Indeed, at this stage in its growth, U.S. Wireless continues to pour a lot of money into research and development. For the three months ending Sept. 30 - the most recent period for which the company has released financial data - U.S. Wireless spent $195,054 and dedicated one-fourth of its small staff to R&D.
"Talking long term, we want to be involved in the full depth and breadth of wireless communications as they relate to transactions," said Mr. Roberts. "We are fully committed for the long run."