October 18, 2004
Device Lets POS Units Handle Wireless Transactions
By Evan Schuman, eWEEK
With wireless uncertainty as its staunch ally, Vivotech on Monday will introduce a system to help retailers quickly convert existing POS units to accept wireless entries.
The reason some retailers may find this an attractive option is, ironically, because their interest in contactless payment approaches is lukewarm. If the interest was nil, then there would be no need to change. If the interest was extremely high, retailers would be more inclined to make permanent upgrades to their systems, buying POS (point of sale) units designed to handle contactless transactions.
But in the current environment where retailers are somewhat interested, a lower-cost allegedly easy-to-install system could find its niche quickly.
Vivotech's entry to this space is a $165 5-by-4.2-inch unit to be called the Vivopay 4000.
The small piece of hardware—there is no software to install, merely programming hardwired into the device—uses a dynamic strip to connect the retailer's existing POS device with the Vivopay 4000. It essentially tricks the existing POS unit into thinking that it's seeing a magstripe card swipe when it's actually receiving input from a key fob, a cell phone, an infrared device or an RF-enabled credit card.
Vivotech executives stress that changing an existing POS system is extremely cumbersome—with banks and credit card firms involved—so this technology may remove a point of resistance for retailers who want to experiment with contactless payments.
Vivotech President Mohammad Khan said the same circumstances hit merchants who were trying to push smart cards a few years ago. "This is the main reason the smart card was not successful in the U.S. It was because the smart card implementation required changing the point of sale, and merchants were not willing to make such a huge investment," he said.
Jupiter Research analyst Bruce Cundiff agreed with Khan that the large required investments to upgrade POS are causing quite a few retailers to hesitate. "I definitely agree with them providing this bridge. There certainly is a need for this," Cundiff said, adding that it's mostly because "the jury is still out on whether proximity payments will take off."
The contactless readers themselves are slow migrating to new areas, such as fast food, and they are starting to be well-ingrained in other areas, such as gas stations.
But for this device to sell, Khan has to become a salesperson for the contactless movement and make the business case to retailers that contactless will make them money. He argues, for example, that customers are statistically likely to spend 20 percent more money when using a contactless device.
Jupiter's Cundiff maintains the argument must be made because "you're going to have a tough time migrating the merchant infrastructure until you can make a very compelling business case. For a [larger] retailer, you're talking about millions of dollars of investment."