ne of the technology areas that offer the most promise for reshaping the payment industry is communications. In retail stores everywhere, clerks and customers have had to bide their time while payment terminals dial the bankcard center, wait for a connection and then communicate at slow baud rates, typically 2400 bps.

Bringing the speed, reliability, affordability and versatility of Internet protocol-based technologies to the point-of-sale is arguably one of the most important technological advancements to touch the payment industry in recent years. Retailers, processors and ISOs who are quick to embrace IP-enabled POS terminals will gain the greatest market advantage.

Recently, there has been an explosion of advanced communications options for payment. Service providers and retailers today can choose from an "alphabet soup" of flexible, high-speed alternatives such as DSL, VSAT, T1/T3, GSM/GPRS, CDMA2000 and 802.11a or b.

Unfortunately, this broad spectrum of choices also makes it uncertain which communications methods will gain broad support within the industry.

So, how to choose? One way is to select a payment device that supports Internet protocol.

What is IP Technology?

IP is the underlying technology used to move data across today's modern networks. It relies on standard-based networking protocols such as TCP/IP on which the Internet was built. TCP/IP was designed to make it easy to communicate across different networks (i.e., PSTN, LAN or WAN) using platforms such as computers, cell phones, cable topboxes, etc.

IP is the key to the many advantages to be gained from "always on" high-speed wired and wireless networks. Retailers or service providers enjoy the flexibility of choosing whatever network suits their needs and budget. High-speed, IP-based networks offer the advantages of faster and more efficient transaction processing, lower overall communications costs, reduced support and terminal-management costs, simplified design and deployment thanks to industry-standard technologies, improved messaging between service providers and retailers, and easy and secure access to applications over network connections.

IP-based networks also can be configured in many different ways:

• Wired IP: Wired IP comes in two forms - (1) the traditional method of a dial environment using a high-speed modem, and (2) Ethernet connectivity, which enables POS devices to link to a company's existing Ethernet LAN. The latter is ideal for large malls, quick service restaurants (QSRs) or chain stores.

• Wireless IP: Wireless IP-enabled POS terminals can link to wireless IP-based networks, enabling retailers to perform transactions using data packet technology. These terminals are ideal for mobile merchants, including taxi drivers, distribution companies and resorts.

It is now possible to connect IP-enabled payment terminals, such as VeriFone's Omni 3750 or Omni 3600 wireless terminal, to existing IP networks, including the Internet, corporate networks, retail LANs, wireless packet networks and satellite networks.

Because IP-enabled payment countertop terminals can connect to existing retail LANs, IP connectivity can be used in place of dial-up lines to link merchants with processors. Processors can connect to their gateway from an IP-enabled POS terminal via cellular, ISDN, Ethernet and even high-speed dial.

Benefits of IP Technology

For service providers delivering payment and value-added applications and for smaller-format retailers that rely on stand-alone terminals, IP-based POS devices offer breakthrough capabilities that will transform the payment process. Using a wired IP or wireless IP-enabled POS terminal to route POS data offers important benefits, including:

• Speed: The bandwidth available to an IP terminal using a LAN connection is typically 10 times greater than the bandwidth of a standard PSTN dial-up. VeriFone's wireless Omni 3600 CDMA and GSM/GPRS terminals use an "always on" IP data packet network to achieve average transaction times of 3-5 seconds compared to 30 seconds or more for traditional dial-up. Faster IP-based networks are ideal for data-intensive applications such as electronic signature capture.

• "Always-on" capability: IP not only supports fast end-to-end transaction speeds over wireline or wireless networks, it also supports "always-on" connections, which eliminate the time-consuming dial-up process. Particularly in market segments such as quick service restaurant, where getting customers in and out in the minimum time possible is essential for business success, these high-speed services can be a huge advantage for store owners.

• Security: It's necessary to secure transactions that use IP technology and travel over public networks. VeriFone offers connections with end-to-end SSL security to enhance the encryption already used by both wired and wireless networks.

• Versatility: IP-enabled multi-application terminals that use the thin-client browser with SSL for data communication have the speed and bandwidth to support a variety of different applications at the POS, such as prepaid telco cards, gift cards, loyalty programs and utility payments.

• Lower costs of support: Processors enjoy significantly reduced support costs using IP-enabled terminals. Software updates and configuration changes can be done quickly and seamlessly over high-speed networks, minimizing the amount of help desk phone time that is often required to work through system upgrades with retailers.

• "Thin" and "fat" client terminals: Another exciting benefit of IP-enabled connections over high-speed services is that for the first time, service providers can support a mix of fat and thin client environments on the same terminal. The payment application can reside in the terminal, with value-added applications running on a central server, eliminating the time and expense of downloading applications to hundreds or thousands of terminals in far-flung retail locations. Needed changes and updates could be made right on this centralized server, with all terminals having immediate access to the latest version of the solutions.

• Messaging capability: POS terminals with IP capability also support true messaging using standard e-mail client software. Retailers can order needed supplies, and payment service providers could provide information on future promotions - quickly and easily using popular, PC-based e-mail applications.

Clearly, IP-enabled POS terminals provide retailers and service providers substantial operational and competitive advantages in a challenging marketplace.

Michelle Graff is Director of Global Marketing for VeriFone.