What's Hot (Handheld), What's Not (Smart Cards) in New Products

Q uestion 1:

What new products do you see on the horizon?

Stacy Bell Advanced Payment Technologies "I believe that we are moving toward using biometrics a lot more. After September 11, 2001, both merchants and customers are becoming a lot more security-conscious. Biometrics will be used in a lot more applications, most importantly at the point-of-sale."

Douglas Mack Card Payment Systems "The only new ideas out there that, in my opinion, are 'hot' would be a solution for pay at the table, PIN-based debit over the Internet, and vending machine card acceptance."

Jason Burgess Artaban Solutions, Inc. "With Bluetooth technology entering the marketplace, I think vendors will began developing more products that are wireless and/or have the ability to operate on a cellular phone and/or handheld PDA."

Robert Carr Heartland Payment Systems, Inc. "Cardless payment products and the Visa pay card are very exciting products for us."

Jared Isaacman United Bank Card, Inc. "The new products that I think we will continue to see being developed are going to be along the lines of integrated platforms ... more products with integrated debit, check readers, credit, smart card, thermal printers and signature capture. I think you will also start seeing some of the large processors getting into the proprietary, custom-made terminals. It seems only logical to design processor-specific terminals in mass quantities at a low cost."

Steve Christianson TransPay Processing "Handheld wireless Palm top credit card interface is already here. Other than that, I see none."

Mitch Lau Money Tree Services, Inc. "As you may know, our handheld instant merchant system seems to be the latest and most innovative product in years."

Alan Gitles Merchant First Bankcard "I am not sure you call it a new product, but the importance of the Internet will continue to grow. Offering merchants products that match those needs will grow."

Stuart Rosenbaum U.S. Merchant Systems "Can't tell. It's a secret - seriously!"

Russ J. Goebel Retriever Payment Systems "The question about new products on the horizon is centered on what our merchants 'want.' Technology is available to make processes more efficient, and thus I believe we will improve our current processes. Examples are: merchant setup, downloads, smart cards, electronic check conversion and all-in-one POS devices."

Larry A. Henry L. Henry Enterprises "Mobile, wireless, self-contained. Once hardware has given the merchant the freedom that new technology is moving toward, I believe that our new products will center on information reporting. Increased use of credit cards, debit cards, smart cards and check processing will allow the merchant to gather an ever increasing amount of data. Whether the data is used for the purpose of tracking inventory, better marketing or improved customer service, information will become an important by-product of the approval process."

Bob Joyce Alliance Payment Systems "I'm not creative enough to see anything on the horizon. My expectations stop at online apps at the point-of-sale, something like what Money Tree seems to have now. I think ISOs should share in the risk and therefore be more involved in the approval process, which would likely serve to enhance the image of ISOs in the marketplace. Image always has been and will be a problem. I don't see that changing anytime soon."

Chris O'Hara Profitscentric "The following appear to have significant growth opportunities: Wireless will continue to gain momentum in both the mobile and 'fixed' wireless segments as more retailers capitalize on the benefits of speed, mobility and the opportunity for reduced telecommunication costs. Also, ATMs and other cash-dispenser equipment should continue to expand as merchants capitalize on the additional foot traffic and incremental profits that can be realized from dedicating a small real estate footprint to cash-dispenser solutions. Check guarantee, verification and conversion may significantly expand should the electronic authorization and settlement initiatives of Visa or the bank-owned SafeCHECK roll out. 'Pay at the table' and signature capture may also expand if the industry elects to bring these solutions to the small-merchant community."

Question 2:

How is the continuing evolution of e-commerce products affecting your business?

Stacy Bell Advanced Payment Technologies "Surprisingly, the e-commerce evolution is really not affecting our business at all. Our market has always been small- to medium-size retail businesses who really only use e-commerce for advertising. New brick-and-mortar merchants are popping up every day, and they still have to have all of the point-of-sale systems that they needed before."

Douglas Mack Card Payment Systems "We do not do a lot of e-commerce, so it really does not affect us." Robert Carr Heartland Payment Systems, Inc. "Not in a significant way. Traditional bankcard products are not viable long term in e-commerce because of the repudiation issue. If a merchant can afford to build in enough profit to cover high fraud losses and high interchange rates, bankcards will work for those e-commerce merchants. However, the promise of huge dollars of e-commerce B2B business with traditional bankcards has become ephemeral at best."

Jared Isaacman United Bank Card, Inc. "United Bank Card has always been a retail-focused processor, but we have seen the demand for e-commerce and have since taken control of our own gateway to meet the market requests. I think the demand of e-commerce is coming stronger from the ISO and agent market than the actual merchants. The risk concerns are always going to be high, but in a controlled atmosphere, which I think most processors and banks are building, e-commerce can be a continuing profitable market to explore."

Craig Millington Compass Bank "The upward spiraling of risk/fraud/chargeback problems and affiliated losses with Web-based sales is scaring our senior management into a constant re-evaluation of the acquiring industry and the potential to get out altogether."

Steve Christianson TransPay Processing "While we do not shy away from e-commerce, we still focus our energies on the $10K-to-$100K volume merchant that is storefront. Unless you get lucky with some large Internet company that is legitimate and does good business and backs up its product, there is simply not enough money in it. The risk is high and the return low. We want to keep doing what we do well and not focus on Internet and risk losing our business to fraudulent operators and low-cash-return merchants."

Mitch Lau Money Tree Services, Inc. "We have been gearing up for the growth by increasing the capabilities of our risk-management software, adding additional risk-management personnel, adding the ability for the merchant to apply online and receive account approval within seconds and, in order to mitigate risk, use identity authentication."

Alan Gitles Merchant First Bankcard "E-commerce is increasing our sales because we sell advanced-technology products at reasonable prices."

Stuart Rosenbaum U.S. Merchant Systems "Actually helping our business a lot."

Russ J. Goebel Retriever Payment Systems "E-commerce trade is balancing out; most folks understand the exposure associated with the Internet. With all the parties within the verticals of our industry, I believe the old saying plays its role - 'Don't put all your eggs in one basket!' E-commerce is one part of distribution in a business model and has its role in the overall success of an organization."

Larry A. Henry L. Henry Enterprises "We have not experienced a drastic change to 'business as usual.' The Web is facilitating the sale and purchase of equipment, supplies and merchant services at very competitive prices. However, most of our business is still done by direct contact, assuring the client of the quality and stability of the product."

Bob Joyce Alliance Payment Systems "Not at all."

Question 3:

What are merchants telling you about smart cards?

Stacy Bell Advanced Payment Technologies "We really don't hear very much about smart cards from any of our merchants. The only time it seems to be mentioned is by equipment manufacturers and processors, not merchants or customers."

Douglas Mack Card Payment Systems "Merchants really are not telling us anything about smart cards. Some of them ask us about them and their status, but we more or less educate the merchants about them.

"We really feel that smart cards are more of a problem than a solution and also think that it will be quite some time before they really take off. In the meantime, most salespeople are using them to push equipment, which, in my opinion, is really a disservice." Tom Haleas Bridgeview Payment Solutions "The small- to medium-size merchants are curious about smart cards, but there is not a huge buzz about them yet. I believe that will change when more value-added components become available and the cards are (much) more widespread. They potentially offer some very interesting features to help merchants increase their sales."

Jason Burgess Artaban Solutions, Inc. "I have not had any dealings with smart cards or an interest in smart cards by any of my clients."

Jared Isaacman United Bank Card, Inc. "Our help desk very rarely gets calls or questions regarding the future compatibility of smart cards. Right now it seems that the merchants haven't seen the cards enough to take an interest. I think the sales force is doing a great job upselling merchants with PIN pads and smart card readers.

"The Nurit 252 and Hypercom S7SC PIN Pad are really going to make smart card deployment much easier. Overall, no one is going to make smart cards a primary focus until the issuing banks start mailing out the new- generation credit cards."

Steve Christianson TransPay Processing "Some ISOs push smart card terminals to get new equipment sales. When we order new equipment for a merchant and it has smart card capabilities, we get it. But 99% of our merchant base has not seen a smart card, and it looks as if branded (MasterCard/Visa) smart cards are a long ways from being a factor in the market.

"Merchants will accept smart cards when the settlement and funding issues are solved on the acceptance end. In the meantime, they are not interested because of the additional cost of equipment and the fact there are none out there to speak of anyway."

Mitch Lau Money Tree Services, Inc. "Merchants will become interested when they see the need to accept smart cards. Currently, there is no demand."

Russ J. Goebel Retriever Payment Systems "Smart cards will be in demand when the consumer starts using them as a payment mechanism. The issuers must utilize a push strategy if smart cards are to gain overall acceptance. At this point, merchants will request the capabilities to accept this payment, and the effect will be felt through out all verticals in our industry.

"Smart cards are popular in Europe and we test-marketed them at the 1996 Summer Olympics in Atlanta, but today we are still stagnating with the acceptance in the United States."

Patti Murphy The Takoma Group "Smart cards are a solution looking for a problem, even today. Merchants care little about these, and consumers are probably even less interested."

Stuart Rosenbaum U.S. Merchant Systems "They don't care."

Alan Gitles Merchant First Bankcard "We don't hear about smart cards, but we specialize in small merchants and we are not very competitive in the convenience market, where they might help."

Larry A. Henry L. Henry Enterprises "At this point, merchants are asking us about smart cards since their customers have not requested the service. Their equipment supplier or bank has told them that they must purchase the new equipment because of the change that will soon be made.

"We do not see this change coming soon or quickly. Smart cards will take a change to consumer habit. This will not happen overnight.

Bob Joyce Alliance Payment Systems "Nothing."

Chris O'Hara Profitscentric "Most merchants view smart cards as another cure for a problem that does not exist in the U.S. market. Our magstripe technology and telecommunication infrastructure are so dependable that there is little reason for merchants to support a smart card device.

"Furthermore, the costly infrastructure required to support smart cards at the point-of-sale is an expensive proposition - even during an optimistic economic environment. It is often difficult for merchants to cost-justify the installation of PIN pads or check readers, both of which are mature products with quantifiable benefits.

"Even in Europe, smart cards have lost a significant reason for their existence now that the adoption of the euro has simplified the currency-conversion issues that we do not face here in the U.S."