The rate of change that merchants face in payment acceptance is faster and farther-reaching than ever before. Of course, this creates infrastructure and operational challenges for merchants. The ISOs and acquirers that best demonstrate an understanding and a solutions-based approach to this mounting pressure that merchants are under, have the most to gain.
   Here's a not too unusual scenario that illustrates the merchant's challenge today. The manager of a small chain of shoe stores just lost another sale because he does not accept debit. You see, he serves a younger demographic that doesn't want to have to go to the ATM every day for cash, isn't a heavy credit card user and most of the chains that also serve his target market have trained their staff to accept PIN debit. The manager has a store in a mall where a competitor has a gift and loyalty program that offers real-time redemptions. The competitor also uses wireless terminals to make the most of "sidewalk sale days". The chain has a 20% turnover in staff and 50% of staff are part-time. The manager shudders at the training challenges of adopting all this POS technology. Furthermore, the manager hasn't heard from his acquirer or ISO since offline debit was a big thing. Where should he turn for these new solutions?
   The answer, of course, is that he will turn to the provider that best demonstrates an understanding of his business challenges and that best presents a solution. Changes in consumers' expectations about payment acceptance create business development opportunities for ISOs and acquirers.
   In March 2003, the Canadian division of Moneris Solutions (headquartered in Toronto, Ontario) issued its inaugural Report to Merchants, a comprehensive study that explored factors at point-of-sale that impact customer behavior and loyalty. The Report to Merchants was based on an in-depth study by Decima Research Inc., conducted with more than 2,000 adults across Canada 18 years of age or over between March 13 and March 23, 2003.
   We chose to conduct the study in the Canadian market only because we believe that it provides valuable insights for both our Canadian and US merchant acquiring businesses. Canada is a retail check-less society and the number of online PIN debit transactions (Canada has a single national debit network called Interac�) exceeds the number of credit transactions. In fact, 46 per cent of Canadians chose online debit as their preferred method of payment, followed by cash at 27 per cent, credit card at 25 per cent and check at just 1 per cent. Canada is a bell-weather of sorts of the US payments market. Considering some recent US events, such as major consolidation in the online debit networks, and the Wal-Mart lawsuit activities, US online debit will see an acceleration in growth.
   Once Canada hit the online debit growth rate that the US is now experiencing, it only took a few years for online debit acceptance to come very close to matching credit acceptance. Think about all of the sales opportunities that creates for the ISO/acquirer that is ready with the right empathy and solutions.
   The results of our study were quite surprising and produced a very clear theme: Payment offerings and point-of-sale management have a direct impact on customer behavior and loyalty.
   Among the key findings of the consumer research:

• Almost half of Canadians (48%) agreed that a store's acceptance of a particular form of payment has a "big impact" on whether they will shop there regularly;
• Almost one-third of Canadian consumers (31%) have decided not to purchase a product or service because the merchant did not accept the consumer's preferred form of payment. In 82% of those cases, it was a debit or credit card payment format that was not accepted;
• Two-thirds (66%) of consumers have walked away from a potential purchase because a store's checkout was too crowded or too slow.

   For many merchant organizations, the traditional focus has been on getting consumers into the store and to the product. But in a traditional retail environment, consumers are less concerned about the product and more focused on the overall shopping "experience". When a customer enters a store, by and large it's safe to assume they have a general sense of what they're looking for, and hence the shopping "experience" begins.
   Most consumers are happy to go about their business, whether it's browsing or buying (unless, of course, they need assistance and they can't find a salesperson or the staff are too busy). It's the latter part of the shopping experience, the "purchasing" or checkout stage where the customer can encounter frustration and general confusion. The data produced by the research study underscores that the payment processing stage is a key point of business vulnerability.
   Factor in long lines, not having enough registers (or only having two staff members to run the dozen registers you do have), and poorly trained staff that don't know how to quickly and efficiently process card payments, and you can see how point-of-sale management does infringe on the customer's overall shopping experience. Most merchants do a great job of managing both the shopping and the purchasing aspects, but as the study has shown, there is room for improvement. The research reinforces the long-standing belief that in addition to managing a smooth and hassle free point-of-sale, merchants should offer the full range of payment options, particularly debit and credit, which combined, are far preferred over cash and check by Canadian consumers.
   We wanted to measure the level of impact loyalty programs had on customers. A store-specific loyalty program (such as points collection or clubs) impacts more than half (54%) of consumers. Fifteen percent said it made a "big impact" on their store loyalty. We also asked whether loyalty programs that are attached to either credit or debit cards prompted the consumer to select that payment method more often when shopping.
   Not surprisingly, 35% said yes (and this is one number that I personally think will continue to climb). The intro-duction of a loyalty/gift card program means a significant change to merchants' POS systems, staff training and accounting.
   The cost to merchants of all this change is high. For-tunately, the cost of lost sales is higher. The ISOs/acquirers that will enjoy the most success will be those who are best at helping merchants understand how to meet consumers' expectations with the next generation of POS solutions.
   Gearing up for success means investing or partnering to have the right solutions. It is our innovative drive that created this wave of change. Hence, the "solutions-competency" is fairly well spread across the industry today. The deciding factor may be in the customer intimacy, sales training and communication materials that demonstrate the empathy that merchants are looking for in their next supplier.
   A merchant's point-of-sale is the final operational hurdle and it is critical to process sales efficiently. To lose a customer because you're unable to process a transaction efficiently is incredibly frustrating and preventable. The point-of-sale is where the last impression of the merchant is made.
   All consumers want a hassle-free shopping experience, one that offers efficient point-of-sale management and full acceptance of all payment methods. And if the checkout is too crowded and they can't use their debit card or other preferred payment card, the consumer will walk away from the purchase. Merchants have traditionally done an excellent job handling both the shopping and purchasing experience, but as evident from the survey results, there's definitely room for improvement. With minor adjustments such as full acceptance of all payment methods and efficient point-of-sale management, merchants can make major improvements to their operations thus solidifying the positive image and relationship they have with their customers.
   Online debit is roaring through the U.S. just as it did through Canada. We are now clearing the tracks for EMV chip card acceptance � the next phase of evolution. We can see the headlights on that train and it is moving fast. With chip cards will come new applications, new consumer demands on merchants and more opportunities for ISOs/acquirers to differentiate themselves based on their understanding of the challenges and opportunities that merchants face at the point-of-sale.