It can be argued that broadband IP transaction processing should be easy to sell – and it can be with the right tools. Network Configuration Management is changing the landscape of dial to IP conversion, and ISOs stand to gain the most from this evolution. We are entering the next phase of broadband IP at the countertop – recognizing that IP is not just about speed, it’s supposed to make life easier – not more complicated.
    Since the first IP terminal was released more than 5 years ago, merchants and ISOs have come to recognize the benefits of IP for transaction processing. While IP terminals were assumed to be simple replacements for their dial-based counterparts, practice demonstrated that when it came to deployment, IP terminals presented a dramatically different picture. Requiring additional routers, cabling and extensive network upgrades, these new terminals soon became a nightmare to all but the most technically savvy ISO. With merchants frustrated by seven hour installs and ever increasing costs, technology adoption lagged, and many ISOs became intimidated by the spectre of IP. New technologies are helping to stem the attrition risk for these ISOs, allowing them to offer a more cost-effective, simple path to IP-based processing.

Reducing Attrition with Better Technology

    Can better technology offerings help ISOs reduce merchant attrition? The answer, in the case of dial to IP migration at the countertop, is yes. Today’s merchant wants IP-based processing; many have broadband access in place and recognize that they can save money and get faster transactions by moving off of dial. The demand for IP has grown to the point that ISOs without an attractive IP migration strategy risk losing merchants. At the same time, the infrastructure behind broadband internet has become more established, and with that has come more competitive pricing, bundling options and negotiating power for the ISO. With newer players coming onto the broadband network provider field, network access costs are being driven down. This entrenchment has led to better rates for aggregated transactions, as well as new room to negotiate for ISOs. What’s more, the internet lends itself inherently to bundling service offerings such as voice and enterprise data together with broadband transaction processing for lower prices. Faced with these ever-decreasing communication costs, the ISO can’t stay out of the IP game for long.
    IP technology offers several key advantages over dial-based transaction processing. First, it is faster. As anyone with a dial up internet connection knows, modems are slower than broadband connections. While a typical dial-up transaction is authorized in 12-15 seconds, IP transactions complete in under 5 seconds. While transaction speed is important, particularly in improving customer service, it isn’t everything. Cost is the other key advantage to IP-based transactions. A dedicated dial line for processing transactions typically costs $50 per month, an ongoing cost of doing business. With many of today’s merchants already utilizing a broadband network for inventory control, email or web surfing, migrating transaction processing onto this network means a savings of $600 on each terminal, per year. Finally, IP-based solutions are inherently more reliable than dial-up, meaning less down time and fewer missed opportunities.

Hurdles to Successful IP Sales

    If IP-based processing has such well-known benefits for merchants, why are so many still operating on dial-up connections? There are several reasons for the entrenchment of dial-based transaction processing. First, the business model is one well understood by the players in the industry. A change in this model, and the way ISOs are compensated, is often a hard sell. Second, merchants are familiar and comfortable with their existing set up. Payment terminals as a technology have not changed to any great extent, so the Tranz330 that a small mom and pop store is using may fit the bill quite nicely. A low volume merchant like this may not need IP, and it will not likely be cost effective. Higher volume merchants like convenience store/petroleum outlets or Quick Service Restaurants (QSR) stand to gain the most from an IP solution, but are often the most reluctant. They fear the cost of retraining staff on new equipment, the capital costs associated with replacing existing terminals (often very costly Ruby or PC-based systems), and the complexity of deploying a completely new system. That apprehension is often shared by ISOs reluctant to encourage this transition, concerned that the complex installations will require more technical expertise than they have available. Add the cost of a technical expert to the IP terminal, routers and network upgrades, and the value equation for IP is diminished.

Dial to IP Conversion: A Better Sales Model for ISOs?

    How can ISOs sell broadband IP transaction processing to merchants?
    Today’s ISO, competing in a stiff marketplace, can sell new technology solutions if the right conditions are met. First and foremost, an ISO needs to make money. IP terminals are so often a losing proposition because the ISO just can’t make an enticing value proposition when additional costs are factored in, from additional cabling, routers and network upgrades, to a day or more of paid time for onsite technical expertise. Second, ISOs need to know they are selling a product that will not haunt them with ongoing support problems. While support is sometimes delivered by other providers, customer retention is key in the retail industry, and solutions that require constant help desk assistance quickly earn the ISO a bad reputation. Third, ISOs want a model for IP transition that is simple. From quick installs, to pricing options and simple support structures, it’s got to be easy. Finally, the ISO needs to retain existing merchants, reducing attrition. With turnover high in this competitive market, ISOs can satisfy existing customers by offering technologies that lower their costs and improve operations, without labour intensive deployments.
    Several providers have entered the payment processing landscape offering an alternative solution: ‘black box’ products, or IP converters. These products remove much of the cost and complexity associated with IP terminals, while offering the speed, reliability and cost advantages inherent in any IP solution. Most importantly, they allow the millions of dial terminals already in use across the U.S. to become part of a new IP solution.
    IP converters connect via the existing terminal’s dial port to Ethernet, making a dial terminal instantly IP capable. At a fraction of the cost of a new IP terminal, many observers believe these ‘black boxes’ are the best way to go to get the functionality of IP without the costs and headache. Greg Cohen of Global Payments stated in a recent article, “Making a heavy investment into a new IP terminal today may not seem prudent a few years from now. IP terminals are in their infancy. We have just seen the first generation and technology always moves forward quickly. Just like the first PCs were expensive and outdated quickly, so will first generation IP terminals. Furthermore, there are over 11 million dial terminals in the marketplace today and most of them work just fine. When a merchant decides to go IP, a “black box” extends the capital and training investment of the existing dial terminal(s) and provides time to wait for improvements in and cost reduction of IP terminals.”
    In order for ISOs to reap the greatest rewards from selling IP solutions, they must offer better value to the merchant than competitors. With broadband network access costs declining, and attractive bundling and discounting packages available, IP networking has never been more accessible. Add to this the savings generated by fast, simple installations, and a dial to IP migration begins to look like the most attractive option to reduce merchant attrition based on technology.

The Next Step in Deployment Simplicity: Network Configuration Managers

    While the black box solution may be the answer to the growing demand for IP at the countertop, a few innovative ISOs and merchants are taking the quest for simplicity a step further, testing new IP converters that are bundled with software that remotely configures, administers and detects problems on the network. These Network Configuration Managers (NCM) , who long for a mainstay of the telecommunications world where they have been used by network administrators to manage extensive networks of routers, gateways and other equipment, have moved into the retail payments industry to streamline deployment and diagnostics.
    These packages, when bundled with today’s increasingly featured rich black boxes, are changing the deployment landscape for ISOs.
    With a network configuration manager, the IP converter is installed onsite in minutes in a virtually plug and play operation, with the real set up carried out remotely by distant technical staff. Imagine a roll out of 50 stores going IP. With a network configuration manager, these devices, when plugged in, ‘call home’ to download a configuration file that will get them up and running in minutes. This device’s configuration can be set up remotely by staff across the country. The need for onsite technical staff is diminished, and the value equation for the ISO is enhanced.
    These products hold the promise of installations in minutes, not hours, dramatically reducing the cost and resources required for deployment, making the migration to IP an even more attractive option for ISOs and merchants. Jim Czekner, of Transaction Payment Systems, says “Network configuration management capabilities strengthen the sale for an ISO. The ability to trim deployment costs and time is critical to delivering a competitive IP migration strategy. This functionality will pave the road to IP for many merchants that were previously held back by the complexity and cost of deployment.”
    NCMs also offer an additional layer of security to merchants. It is well understood by experts that well configured devices are critical to network security. As David Schrodel of Voyence noted in a recent trade article, “There is a growing realization that properly configured devices are crucial to network security. There is also a growing awareness of the other benefits of configuration management, such as increased uptime, reduced administration costs, reduced total cost of ownership (TCO), and the ability to free up IT staff to spend more time on revenue generating activities.”
    Making the transition to IP doesn’t need to be rocket science. There are plenty of innovative merchants and ISOs that have paved the way for the better, easier payment processing options that are fast becoming available on the mass market. ISOs that stay abreast of these changing technologies will find that migrating to IP is not the costly, cumbersome exercise it once was. Instead, vendors are recognizing the hurdles ISOs face in implementing IP, and are devising tools to make this transition a winner for ISOs and their merchants.