here has been a lot of discussion and anticipation about using the power and speed of the Internet to process transactions at brick and mortar establishments. We now see Internet Protocol (IP) processing turning into a reality.

The high cost of bandwidth that was once a limitation to most retail merchants is now becoming a non-issue. In fact, IP solutions now provide cost savings to the merchant, as they reduce the need for additional phone lines and other related costs. Standard Internet connections such as DSL and cable modems allow merchants to free up essential telephone lines and continue to take calls and send faxes while they process transactions.

Also, using an IP connection for credit and debit authorizations means that merchants will experience reduced network communication expenses and faster transaction speed because the communication connection constantly remains on.

Because of the need for speed in the marketplace and the cost saving capabilities, more and more networks, terminals and software products are being certified for IP processing. But with all of the new technology and processing options, where does IP processing really make sense for the small and mid-sized merchant?

Do you Want Fries with That?

One very obvious place where the speed of processing is critical is in the quick service (QSR) or fast food restaurant environment. We now see more and more terminals at multi-lane fast food restaurants, due mainly to the ability of using the Internet to provide two- to four-second transaction times.

In addition, Visa and MasterCard have put together some great QSR processing programs that do not require a signature and guarantee the transaction against chargebacks. This enables the restaurants to process an order in the same amount of time and as securely as a cash purchase.

A faster transaction means more sales and quicker turnaround times and the ability to attract new customers that want the convenience of using their credit and debit cards. Also, studies show that when customers use credit and debit cards for purchases, the average bankcard sale runs 30 - 80% higher than the average cash sale. These are only a few of the compelling reasons for using IP processing at a QSR establishment.

There are other scenarios where IP processing also makes sense. Busy establishments including nightclubs, theaters, independent grocery stores and convenience stores that have multi-lane settings and the need for quick transaction times will benefit from using high-speed transaction processing.

Yeah, But Is it Safe?

Whenever you mention processing over the Internet to your prospective merchants, security always becomes an issue. Equipment manufacturers are now adding sophisticated security features at the terminal level.

Advanced IP-ready terminals such as VeriFone's Omni 3750 and Lipman's NURIT 8320 feature Visa and MasterCard's PIN Entry Device (PED) and Triple Data Encryption Standard (3DES) security regulations that help reduce fraudulent tactics such as card skimming. These security regulations also ensure secure software downloads and prevent inter-application data access and tampering at the merchant level.

Additional products such as Paymentech's NetConnect contain security measures that go beyond standard practices. With NetConnect, merchants' transactions are transmitted with the highest degree of security because Paymentech authenticates every single transaction and requires them to be encrypted using SSL encryption.

This gives your transactions an additional layer of security not provided by a typical Internet connection. And, NetConnect's built-in security features make it a powerful tool against hackers who steal merchant ID numbers and use them to make fraudulent card refunds. When looking at IP products and services for your merchant, always make sure that the security issues are addressed and that you can effectively sell the features and benefits of the secure IP solution.

It's All About Networking

Another area where it makes sense to use high bandwidth technology is when merchants need to integrate multiple locations or terminals into a single payment and reporting system. Retailers are always looking for ways to integrate their payment processing with a back-end system for data retrieval, reporting and reconciliation. IP processing is not exclusively about speed. Merchants can now take advantage of the powerful networking capabilities that the Internet provides.

Networking processing, inventory and accounting systems together in one location can drastically help companies run more efficiently and effectively. Think about franchise or multi-location establishments that have a need to tie all their systems together.

Integrating multi-establishment payment processing with back-end customer relationship management (CRM) and inventory management systems previously required big budgets and a development team; however, IP technology and software advancements are making it much less painful to accomplish. MLSs should check with their processors or service providers to see what kinds of integrated solutions are available to sell today.

Virtual Reporting and Reconciliation

In addition to credit card processing, retail merchants now use many value-added products and services such as electronic check conversion, gift and loyalty, and pre-paid cards. The need for keeping track of all these transactions is crucial to the merchant.

That's where Internet reporting comes in.

Most value-added service providers offer an Internet reporting system that lets the merchant view all of the transaction and processing data via a Web site. While you could use a dial-up connection to access this information, a high-speed cable or DSL connection makes it much quicker and easier to access, download and run reports.

Merchants now have 24-hour access to research and can reconcile transaction and settlement information, confirm ACH transfers, obtain statement information, and access it all at high-speed via a secure Web site.

By partnering with value-added service providers that use the Internet to provide reporting, you can now help your merchants manage their businesses more effectively; they will be less likely to jump to another processor that can lower their rates a few basis points. In addition, providing your merchants with products that use Web-based reporting will also be another good selling point as to why they should upgrade to a high-speed connection at their places of business.

In this day and age, the merchant processing industry is becoming increasingly more competitive. By learning how to sell IP processing and which solutions to sell, you can increase your chances of offering your customers something that your competition cannot.

While many high-speed transaction processing products and services are currently in use today, it is important for you to learn what works and what is still vaporware. Work with your processor to find out the solutions currently certified and functioning and then, learn the features and benefits available to your customers.

Peter Scharnell is VP Marketing for Electronic Exchange Systems (EXS), a national provider of merchant processing solutions. Founded in 1991, EXS offers ISO partner programs, innovative pricing, a complete product line, monthly phone/web training, quarterly seminars and, most of all, credibility. For more information, please visit www.exsprocessing.com or e-mail Peter at peter.scharnell@exsprocessing.com .