There are a lot of changes coming to the payments industry during the next 2 - 3 years. With smart cards, NFC mobile payments, location-based marketing, and interactive loyalty... a new world is coming. Your POS equipment could limit your ability to participate—costing you money, inconveniencing your customers, and putting you at risk for fines and higher fees. The right equipment will position your stores to be a part of this new world and take advantage of new ways to communicate, take payments, and extend your business. This article will focus on how to select a payment processing terminal for your POS.
The “stand beside” payment processing terminal that dials the acquirer gateway for authorization and settlement of credit card transactions was once the industry standard. Early versions were little more than a modem, a one-line low resolution display, a small keypad and low-powered processor. They could not support external devices such as printers and PIN pads. The technology evolved rapidly and competition brought lower cost and higher powered devices to market. Multi-lane retailers moved from stand beside dial terminals to customer-facing payment processing devices integrated to the POS and store LAN.
Payment processing terminals continued to evolve over the next several years. A modern CFT (customer-facing terminal) runs a 32bit processor with a full operating system, megabytes of memory, multiple ports for communication and external device support, incorporates a color display, signature capture, PIN pad, magnetic stripe and IC card readers, and more. Retailers now have a variety of choices from several vendors including new entrants from Asia-Pacific. And prices have never been lower. But with those choices comes complexity. I’ll do my best to help demystify the issues in choosing a payment processing system, focusing on CFTs.
In order to select a payment processing device to meet your needs, you should think about how your customers pay, the kind of business you operate, and the systems you have in place and plan to install in the next several years. As stated in the introduction, there are dramatic changes coming to the payments world. Although there is never a 100% guarantee that they will happen as predicted, not preparing for our “best guess” would be foolish.
Your POS should support credit and PIN debit or a payment processing CFT does not make sense. If you only accept signature transactions, adding a PIN pad can reduce your overall processing fees significantly. If you already have PIN pads you should consider adding electronic signature capture. It can virtually eliminate paper receipt storage, speed up the checkout process, and help improve retrievals and chargeback processing.
Owing to Visa’s announced EMV chip card support, you should also look at adding smart card and contactless/NFC support to your payment processing device. Most vendors have announced that their products will include chip card support by 2012. Costs are going down. Software support is becoming more common. At this time, it appears both card types will need to be supported. Along with magnetic stripe support, this means three readers in the payment processing device.
A word about security and PCI. All payment processing devices that accept PIN entry must be PCI approved. Look for devices with PCI 3.0 approval or higher. There are numerous methods for securing card data; encryption, and tokenization being offered in several proprietary forms. The PCI organization has not released standards for certifying card and transaction data security. Until they do, caveat emptor. The data security method from your vendor of choice may only work with a limited number of acquirers, POS systems, and software. At this time, you want to look for vendors that use ISO approved methods. However, that is a topic for another day.
Components of a payment processing CFT:
Let’s look at the basic components of a modern payment processing device. Figure 1 below summarizes the components and in general, the importance and estimated added cost of each component.
Figure 2 is a summary of devices that can be considered to be a payment processing CFT.
* Cost and price estimates for reference, only. Your prices will vary depending on the model selected, quantities purchased, and other factors.
For an investment of a few hundred dollars per lane, you can future proof your payment processing system and prepare for the near term opportunities of mobile POS, smart cards, and enhanced customer experience.
About the Author:
Tom Siegler is the owner of TASIT Consulting, LLC which serves the payments and financial services industries. Formerly, he was VP and General Manager of UIC USA and held the position of Director of Product Management at Hand Held Products before joining UIC. Tom has led the creation of numerous products and services including the secure devices used by major banks and retailers. He can be reached at firstname.lastname@example.org.