Leveraging a Secure IP-Based Payment Connection Network to Reduce Costs and Increase Customer Satisfaction

Merchants can reduce payment network access costs, while enhancing customer satisfaction, increasing security and lowering other expenses with the next-generation Internet protocol (IP) network solutions. In spite of the many advantages of using IP technology at the point of sale (POS), millions of merchants still rely on dial-up technology to access payment networks. Leveraging a secure IP-based payment connection network enhances speed, reliability, cost savings and security.

The ubiquitous card swipe has been a familiar feature of commerce for decades. For consumers, it’s a daily activity that’s become part of our modern culture and shopping routine. According to a 2008 study by Hitachi Consulting and BAI, payment card transactions now comprise over 63 percent of in-store purchases—a figure that has risen steadily over the past decade and is expected to continue to increase. Whether we are swiping our card at a gas station, grocery store or specialty retailer, we take this frequent and consistent activity for granted.

Merchants look at it differently, though. For them, the card swipe kicks off a burst of activities and processes that eventually result in cash flow, but can also lead to unnecessary expenses and fraud. While consumers take the safety and consistency of card swipes for granted, savvy businesses are constantly looking for ways to protect these transactions and make them faster, less expensive and more secure. What they’ve found is that the Internet is not only the most cost-effective method for transporting payment card transaction data, but can also be the safest when combined with solutions from industry-leading service providers.

IP technology has been around for years. It is used extensively for most forms of digital communications, ranging from sophisticated high-definition cable television and videoconferencing applications to Web browsing and E-mail. Yet, only in the last few years has it become practical for merchants to use IP functionality at the point of sale as a way to access payment networks for transporting payment card data.

Most of the largest merchants made the switch from legacy dial-up POS systems to IP years ago. This initial migration occurred relatively rapidly because the “benefits of IP in terms of speed and integration to the cash register and back-end systems” were simply too compelling to ignore, according to Mercator Advisory Group. IP adoption at the point of sale among the 6 million small- to medium-U.S. retailers has been considerably slower, however. As of January 2009, over 60 percent of the POS terminals in the United States still accessed payment networks using a dial-up modem.   According to industry journal The Green Sheet , the reluctance to make the switch stems largely from inertia: dial-up technology is familiar, reliable and already in place—so why change anything?

Many merchants are also hesitant to make the investment in upgraded POS equipment needed to support IP transport. Merchants may also be apprehensive about the shared nature of the Internet, which “invokes the specter of bandwidth hogs, hackers, fraud risk and non-compliant behavior regarding PCI.”

A new generation of IP transport solutions may change these merchants’ minds—and may also prove appealing to merchants that have already switched from dial-up to a conventional IP network solution. Next-generation IP solutions offer significant advantages over dial-up POS network connectivity, while addressing the inherent issues with transmitting data over the public Internet. With the proliferation of inexpensive broadband connectivity, most retailers already have Internet access connections on premise. These DSL, cable modem or T1 broadband connections can be used to simultaneously carry payment processing data. So businesses can now access IP payment networks at little or no incremental cost, and may even save money by terminating their dedicated POS dial-up modem lines. This paper discusses the benefits of migrating to a proven next-generation, secure IP-based payment connection network for transporting transaction data, and explains why merchants cannot afford to wait any longer to adopt this cost-effective, secure and reliable Internet technology.