The next generation is growing up with a new baseline set of expectations about what the minimum standards of technology should be. Modern retailers have never known the excruciating anticipation of waiting for some incredibly basic report to load over a 56K bit connection. They are strangers to the hours of mind-numbing tedium spent surrounded by papers trying to get your books in order. There are a whole host of miserable experiences that the next generation of merchants will just never have to deal with. They too are entering the world of retail with a whole new set of expectations as to what the minimum standards should be.

That being said, here are five retail miseries that are now a thing of the past.

1. Man vs. Mother Nature
My disastrous old Windows POS system ran off a server kept in the basement. Prudence (and the insurance company) dictated that data from this server would backup at the end of each business day in case of fire or flood. This involved connecting a massive external hard-drive into the back of the computer and waiting whilst the data seemingly inched across the cable. It also involved carrying the hard-drive back home every day because, let’s face it, a backup is no use if it burns down in the same fire as the actual server.

How It Got Better: The cloud. With cloud-based servers data backup is automatic. Data is constantly synced and stored in the cloud, so Mother Nature can do her worst to the server, and crucial business data is always secure.

2. Man vs. Virus
Threat detected! Malware found! Critical vulnerabilities discovered! In the Land Before the iPad (LBtiP) the computer virus was a very real part of every retailer’s life. Thousands of dollars and hundreds of hours have been spent dealing with malfunctioning and infected PCs. And then, months were spent afterwards being a tyrant banning staff from using the computers to do anything other than ring up sales. Not exactly conducive to a fun working environment.

How It Got Better: The Mac and now the iPad have both proven themselves to be infinitely more robust in the face of hack attacks. So, now sales can be rung up in peace – and staff can play Angry Birds when things are quiet too.

3. Man vs. Data
The prohibitive expense of hardware meant most small businesses used only one machine for all the functions in the store. The same machine doubled as a POS unit and as a business computer to respond to email and run reports. In practice this meant running reports could only happen at the end of the business day. What’s more, even if there was an additional computer, someone still had to be physically located within the store and connected to the server to get access to the data. As a result, business decisions were often made on the fly and without consistent reference to real-time data.

How It Got Better: Cloud-based reporting has made it possible to access data anywhere. Something that was a complete headache previously is now as simple as opening an app and checking out real-time data on staffing, inventory, sales and more.

4. Man vs. Power
The power is out, you can’t take sales. The Internet is down, you can’t take sales. It’s a Tuesday, you can’t take sales. Considering the expense of the old Windows POS machines, they were often unreliable. After spending thousands of dollars on the machine itself, panic set in every time the power went out. And if the Internet went down for any reason, forget about taking any payments at all, hours were spent just trying to get someone on the phone.

How It Got Better: Mobile POS solutions rely on tablets that come with powerful, built-in batteries. Also, the top modern POS solutions allow for acceptance of payments even when Internet connectivity is down. The best part? The hardware to make this happen now costs about $500 instead of $5,000.

5. Man vs. Upgrade
I always thought that the great, cosmic joke of the old-fashioned POS system was that six months after you shelled out half of your life savings for some truck-sized Windows POS system, they would release hardware that was half the size and twice as fast – along with new software that contained lots of great new features. But it was too late to install that one, or you could but you’d have to pay for it all over again, including someone to install it. Then again to fix the viruses when it went wrong.

How It Got Better: The advent of the iPad has provided a touchscreen system that is getting better and better without raising the price point. What’s more, these updates get pushed out to the iPad from the App Store without ever having to do anything. The major POS providers now operate on a no-contract, monthly subscription model that means they are incentivized to constantly upgrade their service to remain competitive and retain their customers.

In short, there has never been a better time to be a retailer looking for technology.

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Cash—and even checks—may have come back into vogue since the Target security mess, but the example being set by small businesses like San Francisco sandwich shop Split Bread shows that some owners are positioning their registers straight ahead—straight to cashless.

From the low cashier stands placed in the middle of the restaurant to the metal-plated QR codes affixed to each table, the design of the rotisserie sandwich shop was wholly inspired by the owners’ desire for a no-cash customer payment system.

“As we were designing the space, we realized that we were designing it around a cash till,” said David Silverglide, co-founder of the 20-employee operation. “We stepped back and said, ‘Why are we doing this when 70 percent to 80 percent of customer transactions at our other seven [restaurants] are made with credit cards?'”

A customer pays at a register with a smartphone application in a Auchan supermarket in Faches-Thumesnil near Lille, northern France.

A customer pays at a register with a smartphone application in a Auchan supermarket in Faches-Thumesnil near Lille, northern France.

The harm, following the recent data heists at Target and Neiman Marcus—where millions of consumers’ personal information was stolen—is now readily apparent. However, experts say that costs for merchants who process credit cards will skyrocket, and that may be a greater pain than cashless solutions mitigate.

It may be too little too late, but the world’s largest credit card companies have set a deadline of next year to switch from traditional magnetic swipe cards to EMV—computer chips embedded into credit cards, which can offer an extra layer of security depending on the way they’re used—for point-of-sales transactions. It’s a timeline that existed before the Target data breach but has taken on some urgency since: Target this week presented an expedited timeline for its own $100 million investment in EMV during a Senate hearing.

(Read more: The dysfunctional state of America’s credit cards)

For thousands of small businesses, that means paying hundreds to thousands of dollars to swap out old terminals for hardware and software that can handle the new credit cards. Given the way these cards are processed—consumers must pause to enter a pin after their card is read—it also means a slowdown in transaction time, which for quick-serve service businesses equals more money lost.

“For the small merchants, it’s not really fair—they’re asked to pay the cost to upgrade, but they’re not really at a huge risk, because of the [relatively small] amount of card information that they have,” said Jeff Shanahan, president of payment technology firm CardConnect. “They have to buy into the fact that this is for the greater good of the industry.”

Freeing itself from cash can help solve this retail cost/benefit imbalance. Investing in a cloud-based point-of-sales system allows Split Bread to more easily adapt to changes in the marketplace, like capturing sales from the increasing number of American consumers embracing tap-and-pay smartphone apps or complying with new security standards set by the credit card industry.

“We can scale as all these new technologies emerge,” said Silverglide. “Cash was the limiting factor.”

Building a better credit card trap
Split Bread is well ahead of many of the nation’s small businesses, just over half of which still only accept cash or checks. But as more small merchants make the investment to switch to cashless payments systems, Split Bread’s payment model—a blend of wireless and traditional payment processing—offers a more cost-effective way to navigate the waters of a historically complicated and expensive market.

 

Target CFO 'deeply sorry' about breach

 

Accepting credit cards has never been cheap or easy for small businesses. Besides the initial cash outlay of a few hundred dollars for hardware, merchants must pay a fee of 2 percent to 3 percent per card swipe, plus a laundry list of monthly and annual costs that banks, credit card companies and merchant service providers tack on.

“They send us the most complicated, hard-to-understand statement ever,” said Ben Van Leeuwen of Van Leeuwen Artisan Ice Cream, a 60-employee Brooklyn firm with six ice cream trucks and three retail locations. The company, founded in 2008, started accepting credit cards a year and a half ago. “I can’t really spend the hours and months trying to figure out what it means,” he said. According to the National Retail Federation, merchants pay about $30 billion each year for debit and credit card purchases, most of which goes to the banks issuing the cards.

Merchants who have invested in cloud-based point-of-sales systems that support swiping credit cards via smartphones or iPads are finding their way around some of the more exorbitant upgrade costs. “New hardware will be needed; that’s an undeniable truth about EMV,” said John Berkley, vice president of product at Mercury Payment Systems, a payment solutions company based in Durango, Colo. “If you have a piece of hardware that only accepts magstripes, the smaller it is to replace, the better,” he said. “When it’s a software system with a peripheral attached to it that can easily be swapped out, that’s an easier way to make [the upgrade] happen.”

(Read more: Time to put chips in U.S. cards: MasterCard)

The costs to switch to EMV will likely be lower for users of Intuit’s GoPayment and Square, wireless payment technologies featuring card readers and software that integrate with smartphones and tablets. Both companies already support chip card requirements in Canada (Square) and the U.K. (Intuit).

Fraud magnets
But even as these new technologies, like chip cards and wireless payment, promise a higher level of security with continually evolving encryption measures—for example, like many of its competitors, the GoPayment card reader encrypts credit card numbers and then decrypts them on Intuit’s servers so no personal data is ever captured in the software hosted on a merchant’s phone—fraudsters will likely find a way to hack into them.

“In other countries where they have required chip-and-pin in brick-and-mortar shops, the fraud risks have moved online,” said Jason Richelson, founder of ShopKeep POS, a purveyor of cloud-based point-of-sale software.

Or as Bob Sullivan, fraud expert and contributor to Credit.com, put it: “Here’s the thing about crime: It’s all a matter of odds. There’s no way to prevent it.”

Small merchants face a double-edged sword when it comes to fraud protection: They are less at risk than a major national chain like Target, but they also have a known tendency to spend less than their bigger counterparts to protect digital information, making them more susceptible to attacks.

The first defense against risks associated with wireless—things like malware targeted at mobile devices and the lack of time-tested fraud controls configured specifically for mobile—is education. “Most merchants don’t spend the time or effort to get educated, and that’s to their detriment,” said Steve Casco, founder and CEO of Cardnotpresent.com, an online publication that covers issues in the e-commerce and mobile payments industries. “We’re trying to bring our readers into the 20th century, let alone the 21st.”

The majority of small firms rely on their vendors for infrastructure security updates, and partnering with a well-known tech company can help ease client worries about security weaknesses with new technologies. “That’s one of the reasons why we wanted to go with a company like PayPal,” said Justin Joseph, a partner and CFO of EJ Blooms, a start-up floral design firm in Manhattan that only accepts plastic via PayPal Here to serve clients, including Viacom and the New York Historical Society. “Most people will have heard of it and know they can trust [the system].”

When Silverglide first deliberated on the decision to go straight to cashless, he asked himself, “What’s the harm of getting rid of cash already and see what it does for our operation?”

It did quite a bit. Despite the occasional customer grumbling about not being able to use cash, Split Bread has seen well over double-digit sales growth month over month since opening a year and a half ago. Silverglide attributes some of that growth to fostering an electronic payments–only business, which allows for quicker customer throughput—if they don’t want to stand in line and swipe their credit card to pay, customers can seat themselves at a table, scan the QR code with their smartphone and order without having to interact with staff—and less time and labor wasted with counting, watching over and depositing cash.

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