Internet-connected point of sale terminals have not been the must-have Beanie Babies their manufacturers had hoped, but a deal this month by First Data Corp. to buy 50,000 of them suggests that the day for this technology may be arriving.
Hypercom Corp., which won the contract from Atlanta-based First Data, has been struggling to sell its Internet-enabled line, known as ePic ICE touch-screen card payment terminals. Jairo E. Gonzalez, president of Hypercom's transaction systems group, said the order from First Data represents a fifth of the 250,000 Internet terminals that the company has sold worldwide in its one year of trying.
"Maybe we all got caught up in dot-com frenzy," Mr. Gonzalez said. "We have had some ups and downs, because it went too far out into the future. Merchants were skeptical of how the Internet structure would help them."
First Data has agreed to pay $14 million for the terminals, which will be used by two subsidiaries: Western Union and First Data Merchant Services Corp. Some of the terminals will be installed in some of Western Union's 94,000 agent locations.
Neither First Data nor Hypercom, of Phoenix, would say how many Western Union offices would be outfitted with the terminals, but Mr. Gonzalez said the order could be expanded later.
When Hypercom first introduced the ePic ICE terminals, in 1999, its executives tried to sell a vision of efficiency and heightened e-commerce: shop owners checking package shipments online, customers ordering out-of-stock goods from specialized Web sites; faster turnover at the old-fashioned point of sale. Hypercom thought it could use these appealing notions to sell not only the hardware, but also the software, Internet connections, and Web site management that merchants would need to make it all come true, which would in turn open up a vast new revenue stream for Hypercom.
As it turned out, merchants were unimpressed by having the Internet at their checkout counters. Evidence suggested that retailers did not like the idea of clerks surfing the Web instead of working, even though Hypercom insisted that the terminals could block all extraneous Web sites.
Mr. Gonzalez said the contract with First Data reflects a new approach at Hypercom. Instead of trying to sell merchants on Internet-enabled futures, it will focus on features that merchants seem more enthused about, mainly electronic receipt capture and electronic account statements, features only available on the ICE family of terminals. Hypercom, or its reseller partners, will still be able to collect fees for the service, and merchants may be more willing to pay for a service they will immediately use.
"We don't need to make a revolution at the countertop," Mr. Gonzalez said. Electronic receipt capture and electronic statements "are part of Hypercom's refocusing on new strategy."
Electronic receipt capture and statement review have great appeal for merchants, said Paul Martaus, president of Martaus & Associates, an electronic payments consultancy in Mountain Home, Ark.
"Say you buy something, and you forget you bought it," Mr. Martaus said. "When it shows up on your bill, you call the issuer. The merchant has to stop its daily activities to prove to the issuer that you bought a hat."
Because current systems for matching up records and signatures are cumbersome, merchants sometimes will allow challenges to stand rather than dig through boxes of signed receipts to find proof of a purchase.
But even with the benefits of electronic receipt storage, terminal sales have been slow the past year. Mr. Gonzalez said merchants have been reluctant to buy new terminals until they see whether smart cards will finally take hold in the United States. "Merchants say, 'Wait until they make up their minds - I am not swapping out my terminals,' " he said.
Mr. Martaus says merchant reluctance to buy new terminals goes even deeper than anxiety over a possible payment card switch to chip. "Replacing a terminal is not an easy thing. You have to re-certify, get all new reports, and train personnel," he said. "If what they are using works, why do they want to change that?"
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