Signature CaptureContemporary Signature Capture Terminal - Ingenico

Signature capture achieved widespread adoption in the U.S. market in the late 1990s/early 2000s and is perhaps the last significantly new product concept to have achieved acceptance at the point of sale.  In fact, the only POS innovations highlighted by NCR on its corporate timeline since the invention of the electronic cash register are bar code scanning and signature capture.

The Problem

Unlike international markets which have aggressively pursued PIN (Personal Identification Number) and chip based payment technologies, the U.S. market has steadfastly held to a signature based model for credit card transactions.  A bi-product of this model is paper generation and costly behind-the-scenes receipt paper handling. NCR product management and engineers were introduced to the problem in a meeting with Sears, where they learned of the trucking of signed credit card receipts to warehouses for storage, and the labor intensive searching, copying and faxing of receipts to satisfy retrieval requests from credit card customers.  

Sears suggested a document scanner at the point of sale, so the receipt could be scanned immediately after signing.  The development team instead determined that the step of printing a receipt for signing could be removed altogether with the addition of a signature capture pad.  The other data on the receipt was already in electronic form, and could be retrieved along with the electronic signature to satisfy retrieval requests. NCR immediately filed for a patent on the concept.  In fact, during the next four years, another dozen or so patents were filed as NCR's engineers and product managers conceived of various solutions to the problems encountered while working with the technology.  The objective from the start was to develop a patent portfolio that would be formidable to competitors.

Feasibility - Concept Testing

Initial concerns with the product concept were 1) the legality of the re-created receipt with digital signature and 2) the willingness of customers to allow their signatures to be captured for electronic storage.  The NCR corporate law department issued a favorable opinion based on the precedent that faxed signatures have been held in court to be legally binding.  To answer the consumer acceptance question, NCR secured the agreement of Bloomingdales to allow testing of the concept at a checkout lane in their flagship New York City store.   A prototype unit was installed and NCR's Human Factors group set up video taping.  The results were exciting and better than expected.  During the three day test a few hundred consumers used the device and not one refused to sign.  In fact, only a few were curious enough to ask about the device.  Most just dutifully signed when told to do so.

Credit Card Companies

Another significant risk was acceptance by the credit card companies. NCR worked initially with American Express, whose Vice President had declared that he would purchase 100,000 units if NCR would develop the product.  While this endorsement was a positive factor in getting the program funded, NCR was unsuccessful in obtaining a purchase commitment from the credit card giant. This is likely due to American Express's small share of credit card transactions (at that time) in the target markets for signature capture - initially department stores, mass merchandisers, and specialty stores.  

NCR product management determined that American Express did not have the power to bring the targeted retailers to the table, and quickly turned its attention to Visa and Mastercard. The Visa meeting and product demonstration was particularly interesting as it was a high level meeting involving both the VP of NCR's Retail Business and Visa's VP of Technology.  Visa was impressed by the demonstration and understood the benefits for retailers.  While Visa could not endorse or promote the technology, the Visa executive was enthusiastic and assured that there was nothing in Visa's rules that would prohibit its use.  This was the green light that NCR needed to proceed.  The subsequent Mastercard meeting was at a lower level but with the same outcome.

Product Development and Redirection

While the development of the prototype for the Bloomingdales test and early demonstrations was done as skunkworks (without a budget), a business plan was completed and the 5990 signature capture development program was formally budgeted and staffed.  Midway through the development project, market research results forced a critical re-evaluation.  An ROI study performed by Carmody & Company, a market research firm, showed only 3 out of the 20 retailers surveyed would have an ROI high enough to support adoption.  An analysis of the results showed that ROI was highest for retailers that had a high percentage of credit card transactions, a high average sale value, high number of retrieval requests, high costs associated with transporting receipts, or had costs associated with imaging receipts (which could be eliminated with signature capture). Unfortunately the results showed that many retailers were not trucking receipts around, nor did they have as much cost associated in managing the operation as expected.  Soft benefits, such as a quicker transaction time, were not reflected in the study.

NCR 5990 Signature Capture Terminal

The redirection included 1) reducing the cost of the product though an ASIC (application specific integrated circuit) and other means, 2) reducing the size to occupy less counter space, 3) integrating a debit terminal functionality (Magnetic stripe reader and PIN entry capability) to create greater value and 4) greater emphasis on the scrolling customer item display (potentially eliminating a customer's need for a separate pole display) and the advertising usage opportunities of the integrated display. The 5990 would not move to hard tooling.  A maximum of 250 units would be made with soft tools.  These units would support POS application software development in advance of the 5991 availability.

Early Success and the Chasm

NCR 5991 Signature Capture TerminalThe 5991 was introduced in 1992 and was quickly integrated into NCR's own POS applications. While units were made available to external retail software vendors as well, most of these vendors waited for a pull from their customers before beginning integration. The 5991 supported signature capture for credit transactions via use of an electrostatic stylus technology, and finger touch for PIN entry via a capacitive screen. With exclusive availability, NCR promoted signature capture through its direct sales force and at retail trade shows.  Early adoption took place in the electronics store market (high ticket value, large number of disputes/retrieval requests) and with selected specialty store accounts.  Electronics retailer P.C. Richards and The Container Store were two of the first customers to roll out the NCR 5991.

Much like bar code scanning and electronic debit before it, the signature capture market developed slowly. Early adopters with high ROI or those who wanted a technology image jumped on board.  The market was paced by the need to integrate the functionality of the 5991 into the customer's POS application and also develop their storage and retrieval system for the receipt data/signature images.  NCR efforts to work with major credit card processors for receipt storage as a service to their merchants had minimal success.  By the mid 1990s, NCR, then owned by AT&T, was suffering heavy financial losses and could no longer justify continued R&D investment relative to other pressing needs.  Although production of the 5991 had reached approximately 10,000 units per year, NCR began to cut back the development team and eventually, as a cost savings measure, disbanded the business unit that was focused solely on signature capture and electronic payment peripherals.

Ingenico - Crossing the Chasm

NCR's development manager for signature capture and at least one other developer left NCR and found their way to Ingenico, a nearby manufacturer of electronic payment terminals. While Ingenico made the same technology choices as NCR, they had difficulty in execution during the first few years.  However by the end of 2001, Ingenico had shipped 100,000 signature capture units (eNTouch 1000) and signed an OEM deal with NCR to supply their next generation signature capture product, the NCR 5992. With successful rollouts to Wal-Mart, Home Depot, Kmart, Toys-R-Us, Office Depot, The Gap and many other large retailers, Ingenico had crossed the chasm with 400,000 units in the field by mid 2004. By this time, the other major electronic payment vendors, Hypercom and Verifone, decided to enter the market with signature capture products using lower cost (pressure sensitive) technology to attempt a competitive advantage. Today, the primary vendors of signature capture products are Ingenico, Hypercom and Verifone with each vendor offering multiple models and feature configurations. NCR's original concept patent finally issued in early 2003. This patent, along with the other patents in the portfolio, has allowed NCR to negotiate royalty streams from the major vendors.

Analysis

NCR did several things right, including consumer testing, patent protection, gaining acceptance from the credit card companies and supporting retail software vendors on integration.  However, the ROI analysis and more thorough market research should have been done earlier in the process, which would have forced more rigor in the original 5990 definition. The 5991 was spot on and the development team did a superb job.  In fact, the 5991 was very similar to the Ingenico product that came later and broke open the market.  The primary difference was that Ingenico maintained an active team that could work on cost reductions and continuous improvement.  Ingenico also had a business management team and salespeople that were focused on the electronic payment/signature capture market segment, whereas NCR was selling the product as an add-on to a POS system sale and could not financially commit to a long term focus on the niche.  In addition, Ingenico eventually developed a storage and retrieval application for retailers to use, which helped to complete the "whole product solution" and ease integration.  

Had NCR committed to the business, it would still have had to deal with the same long term structural impediment that affects its bar code scanner business.  It is an issue that cuts both ways. Because NCR is a POS systems manufacturer, it has a tremendous advantage in capturing the peripherals business when selling its own retail systems. However, as a peripheral supplier attacking the balance of the market, NCR has no opportunity of partnering with the other POS system suppliers that it competes with (IBM, Fujitsu, HP, etc.) and must use less efficient sales strategies to identify and capture opportunities for payment terminals within these competitive POS systems.  

Ultimately, many factors came into play to cause the market expansion for signature capture, albeit over a 10 year period: a reliable and lower cost product, completion of integration into a multitude of POS applications, continued increases in labor/paper handling costs and continued decreases in electronic storage and communications costs. The increased speed of checkout (due to not needing to wait for the receipt to be printed for signing) proved to be an important factor in the adoption by major retail chains - even though the benefit was always difficult to quantify.


Contributed by: Michael Kapp

Role on Project: Director of Product Management / Business Unit Director

Note (1): The chasm is the gap in the Technology Adoption Life Cycle model between the early adopter and the high growth early majority stage.  For more information, refer to Geoffrey Moore's book, Crossing the Chasm.