Magazine Article | March 1, 2003

Will That Be Debit Or Credit?

Source: Innovative Retail Technologies

When it comes to processing transactions at the POS, your customers should be given plenty of fast payment options.

Integrated Solutions For Retailers, March 2003

Perhaps it's best that retail IT executives don't have much choice as to which payment processing program is built into their POS software. Most will admit they've got bigger things to worry about. But successful transactions are the heart of retail, so retail IT staffs shouldn't overlook this important element of the POS. Tony Abruzzio, executive VP/general manager at payment processing vendor Go Software, shares his thoughts on the subject here. Adding retail insight are Margo Weeks, VP of IS (information systems) at Radio Shack Canada; Ron Mathis, VP of IS at Party Concepts Inc.; and Robin Scott, director of application development at Brookstone.

1. How does payment processing software get integrated with POS systems in the first place?

Abruzzio: We pursue POS software developers and integrators and market our product to them. We recognize that a huge percentage of POS systems, especially in the lower tiers, are still DOS-based, which creates a window of opportunity for Windows-based POS vendors. We try to seize that opportunity by becoming a standard element of the bundled system.

2. Is sophisticated payment processing software available to retailers of all sizes?

Abruzzio: As communication technology has gotten more sophisticated and come down in price, we can market to smaller retailers. Technologies like DSL (direct subscriber line) have helped take small retailers' credit processing times from 15 seconds to 3, for example. DSL is a household technology that can be used by small retailers to compete with the large chains. Its speed is important, but that small retailers find it affordable is more so. The Internet once again has proven to be the great enabler in retail technology. Payment processing is affordable, achievable, and generally dependable now, to the point that retailers don't scrutinize the configuration. They simply want to know the functionality is there, and if it works with the major banks.

3. What should retailers expect of their payment processing configuration?

Abruzzio: Aside from the obvious one (speed), a retailer should be able to accept multiple tender types, increasing its potential customer base. A retailer should gain the ability to process debit, credit, gift cards, checks, and cash without having to use several peripheral systems.

Weeks: Retailers should expect flexibility and the ability to add new technologies. The ability to use IP (Internet protocol) and the existing network in the stores is a great benefit. At Radio Shack Canada, redundancy is also of great concern. We must have a redundant system, as we simply cannot be down. Of course, security is always an issue, and transaction tracking would be nice to have. This would allow us to track returns better.

Mathis: We've seen our percentage of credit card sales increase from 10% or 15% to almost 40% over the last six years. So, it's becoming more important, but it's still just one piece of the POS puzzle. It's an infrastructure thing - it doesn't get the glory, but you can't run the POS without it. Speed is a big concern, but a bigger issue is handling data incorrectly. It's a major problem if a customer gets billed twice or if the charge is delayed. You lose customers if this happens.

Scott: The payment processing application must be able to communicate with the credit processor we use without having to write a new interface. If an interface must be written, we expect it to be done at no cost. The ability to handle gift and debit cards is a significant requirement. No firm has been able to communicate with our gift card processor out of the box. Speed is a high priority, but even higher than that is availability. The service has to be available every time we call.

4. What if I have a poor payment processing configuration?

Abruzzio: You won't be able to process multiple tender types, and you may not be able to get funds transferred efficiently to your bank account. It's no joke; it happens. Payment processing is usually not the most important factor that goes into a POS buying decision. But, retailers need to ensure they'll be serviced immediately by their payment processing or software vendor should problems arise.

Mathis: The payment processing configuration doesn't do much to enhance the customer's shopping experience. Customers don't compliment you on how fast your transactions can happen. But when it doesn't work, customer service goes to heck.

Scott: The thing most adversely affected by poor payment processing is customer satisfaction. In dial-up mode, there is a built-in delay. If a card must be authorized manually, the delay increases. In busy seasons, this can be a huge customer service issue.

5. What payment processing technologies are on the horizon?

Abruzzio: Retailers already have RFID (radio frequency identification) options to pay for gas and in QSRs (quick service restaurants). Unattended kiosks are becoming a popular payment vehicle, even in general retail. Authentication, via smart cards and fingerprint recognition, is still growing, albeit slowly in the United States. Authentication will grow, but there's currently no "killer application" that's intriguing the public into having and using smart cards. As far as the debit versus credit debate is concerned, the landscape should change as POS developers build tighter relationships with banking institutions.

Weeks: We currently use an administration card to give employees access to our transelect machines [in Canada, the transelect is a standard machine required of all merchants who handle electronic payment processing]. Eliminating this card with a biometric security system would be beneficial. I can see biometrics playing a role in the process of maintaining customer security during authentication. Electronic signature capture is still very important. We sell services, and signature capture is an easy way for our customers to sign up for them.