As Retailers Move from Dialup to Broadband, ISPs Move With Them

It's not just the big companies. Even local retail and fast food businesses are moving up from dialup to broadband, driven by the most basic retail need of all: credit card payment processing.

by Alex Goldman ISP-Planet Managing Editor [June 30, 2006]

We're on the phone with Vancouver, Wash.-based New Edge Networks and payment processing partner Dallas, Tex.-based Chase Paymentech to learn a little about credit card processing, a key skill for any ISP interested in serving business customers.

New Edge Networks (now a wholly owned subsidiary of EarthLink) focuses on small business customers, and Chase Paymentech helps New Edge serve those customers. Greg Griffiths, vice president of marketing for New Edge, says that payment processing has evolved over time, with a new emphasis on WANs for multi-location business. "Merchants want connectivity between stores. Merchants use connectivity for payroll, inventory, HR, PR."

Merchants also use the network for payment processing. "The dilemma was that with a private network [VPN] solution, we would typically have to send the data back to corporate and then out to the payment processor."

So New Edge built what it calls direct connections to payment processors. The first such connection was to Chase Paymentech, in March of 2005.

The point of the sale
Changes to the network are driven by changes at the point of sale, where the merchant records each transaction. Kevin Gallagher, senior vice president of corporate alliances for Chase Paymentech, provides a brief overview of recent technological change.

"In the beginning, it was a very manual environment," says Gallagher. "The merchant would basically take what we call a knuckleduster and run a device over a card to make an imprint. The merchant would then call an 800 number to get authorization for the payment. The merchant would take the sales slips, mail them to the payment processor, and get funding, typically five or six days later."

"The next evolution was the invention of the credit card processing terminal, the black boxes we see in retail today. The black box reduces the time of the transaction from a few minutes to the few seconds it takes to swipe the card or type in the number. The merchant receives the authorization much faster and writes down the authorization code on the sales slips."

Today, however, credit card authorization is moving from dialup to broadband. "There are many ways to accept a card now," says Gallagher. "You can use a cash register, a PC, over the internet, over IVR, and over the phone. You can process the charge electronically and do direct deposit. When all of this was done in a dialup environment, the transaction would take 12 to 20 seconds, a lot of which was just the modems talking to each other. Migrating from dialup to high speed allows the merchant to take the transaction down to two or three seconds."

Security
ISPs have to be comply with the PCI Data Security Standard [.pdf] jointly developed by VISA and Mastercard. Griffiths says that New Edge Newtorks maintains redundant data centers so that traffic can switch from one to another if there is a problem.

The company finds that smaller retailers do not have the technology expertise to maintain their own networks, so New Edge is often contracted to maintain it for them.

In a franchise industry, selling one customer often leads to referrals. Griffiths says that companies that manage the back end for franchises can provide very good leads.

If you're new to payment processing
We point out that ISPs are accustomed to dealing with issues that frustrate newcomers, and ask if there's a problem that payment processors deal with that's as significant as interference for WISPs.

Griffiths says that retail stores and restaurants and fast food chains present "challenges associated with installation. The inside wiring is not designed for IP-based services."

New Edge Networks therefore works with cablers. "We have a premium install product," says Griffiths. "This is not the typical telco mindset. We have installers across the U.S., and we coordinate the installation with corporate IT resources. Before we started offering the product, they had to coordinate with us and with a vendor for payment terminals and with another vendor for inside wiring."

It's all part of a big plan that New Edge Networks calls ARNie, for America's Retail Network information exchange. It's good to have big plans in telecom; it's absolutely vital that an ISP's goals are determined by the changing needs of its customers.

— End