This plus a smart phone or tablet is a card reader
Credit: SquareWe're starting to see a new generation of smart terminals in the US. A new thing, right? Of course they are! We haven't seen them before! On the other hand, maybe not so new.
Understanding how an apparently new thing like a smart charge terminal can also be an old thing is interesting, and the beginning of a subject that's deep and little studied -- a study that helps you predict the future with great certainty in fintech and other tech-based endeavors.
So what's a smart charge terminal? A great example is the one by Square, which originally started popping up with small merchants. Square started with a card swipe add-on to an iPad. You've seen them.
Now Clover's come along from First Data, and the private company Poynt has one. (Disclosure: my VC fund, Oak HC/FT, is an investor.)
The key things are that these amazing devices not only take card payments, but also ring up items just like a POS terminal and host endless numbers of third-party apps.
The smart terminal is a new thing, and the market is glad to have it, but it’s hardly a NEW new thing, or something where you’d knock your head and say “now who’d-a thought-a that!?”
It’s natural for consumers of technology to look at the new devices and appreciate them for what they are. That’s like being a tourist, driving on a road through the country-side, appreciating the nice new views. That’s nice for the tourist, but are there patterns here, patterns that would enable an educated person to expect something like a smart terminal to appear, and wondering when it would happen?
Yes there are. The main pattern at work here is the rate of change of the underlying hardware. Today’s hardware is something like 1,000 times faster than much larger, more expensive hardware at the turn of the last century, about 20 years ago. That number may not seem like much, but think of this: the average human walking speed is about 3 mph. The speed of a commercial jet while flying is less than 600 mph, about 200 times faster. Now imagine a human evolving so quickly that the human can walk at the speed of a jet -- the increase in computer speed is 5 times greater than that, in less than 20 years!
What’s the point? Here it is: there are underlying geology-like forces in the world of computing that make it highly likely that something very much like a smart charge terminal would be invented – though predicting who will do it and when they’ll do it is a whole other thing.
The first step in creating a technology solution to a problem is often building problem-specific hardware. Then the technology evolves, getting faster, cheaper and more capable. Then there’s a tipping point, at which the purpose-specific hardware is replaced by general-purpose hardware, and most of the specific features of the device are implemented in software that runs on the general-purpose hardware. Then a new era begins. The general pattern is that special-purpose devices are supplanted by general-purpose ones.
In the case of card processing technology, first we see imprints of cards made on paper, with the physical paper being sent to a central place for processing. Then the big jump to computer technology and networking: a series of increasingly-better charge terminals, specifically made for processing card charges. The terminals evolved from dial-up networking to the internet, and from stand-alone to connected to a point-of-sale system. Wonderful devices!
Now think about cell phones. If you’ve been around for a little while, you remember big phones getting better and smaller and finally evolving into flip phones. Great phones, … but they’re phones. Then came the big shift, to a next generation of phones that were really small, portable, general-purpose computers that can run a myriad of applications … with cell phone hardware and software built in. Yes, it’s a phone. But it runs Facebook, email, and any of thousands of applications available in the app store. It’s a “smart phone!”
You know this. The reason I’m reminding you of that history is that it’s exactly the transition that card-charging “terminals” are going through right now – as they become “smart terminals,” i.e., small, portable, general-purpose computers that can run a myriad of applications … with card charging hardware and software built in. Yes, it’s a terminal, but a smart one.
How often do you see “I’m just a phone” devices? Flip phones? Yup! The old card-charge terminal will become just as rare a sight in the next couple of years.
So are the new “smart terminals” new? Yes! But hardly unexpected, at least to those who see the clearly repeating patterns of the underlying technology.
