By Dale S. Laszig
DSL Direct LLC
A friend who specializes in telecommunications recently referred to a countertop POS terminal as a PIN pad. I was about to correct him when I realized that he had a point. After all, what's the definition of a PIN pad? It's a peripheral device that accepts and encrypts a personal identification number (PIN) during a transaction when additional verification is required.
Today fewer debit and credit transactions require PIN entry. Many transactions are automatically encrypted when a card is inserted or swiped. Signature debit and [smart card] chip and signature have bypassed PIN entirely. And yet the PIN pad lives on.
As PIN pads get larger and terminals get smaller, it's becoming difficult to tell them apart. Next generation hybrid devices can be used as PIN pads or terminals according to a merchant's needs. For example, a credit card terminal could be considered a PIN pad when its display screen, card reader, and modem are used by a cash register. A tablet could be considered a PIN pad when its customer-facing display connects to a clerk-facing terminal or POS system.
Multipurpose devices are a liberating concept for original equipment manufacuters; they can build an entire product family out of one small mold. A handheld device can be a PIN pad, a standalone terminal with internal PIN pads, or a thin client solution that draws its intelligence from The Cloud. Many next-generation tablets that interface with larger intelligent systems could be considered peripherals.
Payments industry professionals have noted changing trends on the merchant countertop, including the increasing popularity of customer-facing POS in the small to midsize business (SMB) space. NCMIC Product Specialist Scott Grunert said, "We have several merchants who not only like PIN-debit, but they really love the customer-facing aspect of some of the new [PIN pads]. How many times have you talked to a small merchant who wants the same equipment your local big-box store has?"
He added that providing the merchant with a customer-facing PIN pad gives them the same major retail solution for a fraction of the price. "Even if they don't take PIN-debit, we have merchants asking for these PIN pads," he said.
Next-generation tablet devices with capacitive screens are showing up in high-end retail settings as well as SMBs, replacing bulky old POS monitors and analog countertop terminals.
Generally speaking, older legacy systems don't immediately disappear when new hardware comes out. It's more of a slow fade, led by early adopters, then early majority, followed by late majority, and finally the laggards who reluctantly upgrade, sometimes long after their old equipment has been "EOL'd" (end-of-lifed) by a product manufacturer or becomes noncompliant with the Payment Card Industry Data Security Standard.
Leading retailers can also be a major influence in mass adoption of new hardware, according to Matt Bruno, Vice President of Sales at Payment Logistics. "Once a few big box retailers like Wal-Mart say 'EMV only' or have more EMV only checkout lanes than MSR acceptable checkout lanes, consumers will start demanding it," Bruno said. "The big question in my mind is when will these retailers make that change?
"With the terminals going EOL around that time, with all the agents who are or have been pushing 'EMV-ready terminals' with the threat of the liability shift, and the real potential of fraudsters finding non-EMV merchants to use fraudulent cards – I'm saying definitely less than seven years to see a wide-scale adoption."
Adding an EMV PIN pad to a countertop terminal was once considered the best option for merchants who wanted a simple and easy way to become EMV compliant. But as many of us now realize, you can't just slap an EMV PIN pad onto a countertop terminal and say, "Done."
Andrey Tikhonov, Chief Technology Officer at Dejavoo Systems, views EMV peripherals as a subset of the larger EMV ecosystem. "With approaching deadlines for transition to EMV technology in the U.S., all parties involved in the migration process (issuers, acquirers, vendors, technology providers) recognize that there's a lot more involved to upgrading the merchant's equipment than simply adding an EMV-capable PIN pad to an existing POS terminal," Tikhonov said.
He added that most of the time, the upgrade cannot be done without reprogramming the system (POS terminal, integrated POS system, etc.) to which the EMV PIN pad is connected.
"In many cases, these legacy systems have insufficient memory to manage the additional code to integrate an EMV PIN pad and EMV-specific logic necessary to communicate with a payment processing host according to EMV requirements," he said. "Understanding such limitations may help all players to design cost-effective upgrade programs for their merchants.
"Making merchants aware of such issues is also necessary to develop merchants' acceptance of upcoming upgrades, especially if such awareness is supported with relevant information outlining the benefits of EMV technology."
The future of PIN pads and smaller countertop POS devices will ultimately be determined by their enduring interoperability in a macro system loosely called the Internet of Things (IoT). In this brave new world of interconnected devices, peripherals can be anything from wearable technology to Internet-capable appliances.
Smart watches paired with smartphones, and refrigerators that announce the approaching expiration date on a carton of milk, are peripherals connected to larger intelligent systems.
Bill Perry is Chief Executive Officer of Global Performance Solutions, a New Jersey-based consulting firm focused on business development and systems integration for technology companies. "The Internet of Things is growing exponentially," Perry said. "By 2020, it is estimated that over 3 billion people and over 30 billion things will be connected to the Internet. Many of the things are instrumented with sensors, activators or GPS, and they are interconnected."
Perry pointed out that technologies such as radio frequency identification, near field communication, bar codes, quick response codes and digital watermarking allow us to interact efficiently with the things attached to the Internet and to automate transactions and logistics. "Adding analytics allows us to monitor and control the vast network of things and make them intelligent while gaining insights that are not obvious from the underlying data," he said.
We've only begun to tap the vast opportunities associated with Big Data, which is being collected by machine intelligence. As we become more proficient at capturing consumer buying habits, preferences and geo-location, we'll be able to help merchants get closer to their customers through enlightened use of data analytics.
While the exact nature and configuration of future credit card devices remains to be seen, the POS transaction itself is fast becoming a footnote embedded in a larger conversation taking place between consumers and brands, merchants and customers, and you and me. So the next time you're asked, "Is that a terminal or a PIN pad?" you might just say, "What would you like it to be?"
Dale S. Laszig manages business development and strategic initiatives at DSL Direct LLC, a payments consulting company that helps clients promote, design, and deliver secure, leading-edge technology solutions. Her clients include software integrators, manufacturers, retailers, and value-added service providers. She can be reached at 973-930-0331 or firstname.lastname@example.org.
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