Operators try swipe-free payment cards in quest for faster transactions

GOLDEN, COLO. -- Executives at a 67-unit Arby's franchisee, based here, expressed high hopes for a new twist on credit and debit cards with the potential to reduce further transaction times tied to increased consumer use of electronic payments at quick-service restaurants.

"We're excited," Rob Williams, controller for The Bailey Co. LLP, said of his organization's participation in the recent Colorado introduction of credit and debit cards bearing radio frequency identification, or RFID, chips.

Because the RFID chips on those cards broadcast cardholder information over very short distances, users need only tap them on or waive them near specialized readers linked to a merchant's point-of-sale system to complete a transaction. Williams said Bailey Co.'s limited experience with the RFID-capable cards indicated that they can "save from three to seven seconds" when transacting a sale compared with consumer use of conventional cards that must be handed to restaurant employees for swiping through a magnetic stripe reader.

Golden-based Bailey Co. is not alone in that exuberance, or at least in its willingness to give RFID-chip-studded cards a try. Units of the Carl's Jr., Cold Stone Creamery, McDonald's and Sheetz chains, among others, also now accept the cards, varieties of which are available from American Express, MasterCard International and Visa USA.

KFC, Pizza Hut and Taco Bell parent Yum! Brands Inc. of Louisville, Ky., "has partnered with Visa to explore contactless payment," Delaney Bellinger, Yum's chief information officer, recently noted.

The potential time savings from RFID-enhanced cards could help Bailey Co. increase throughput in the drive-thru lane as well as at the front counter, as 30 percent of the company's drive-thru business is transacted by consumers using cards, according to Williams. He said 45 Bailey Co. units now are accepting the RFID-chip-outfitted cards.

Ideally, credit card organizations would like to see the speed, convenience and flexibility to pay later represented by the new RFID cards spur American consumers to whip out those cards in situations where they traditionally use cash, such as at quick-service restaurants. Some estimates suggest there is $1.4 trillion in annual U.S. consumer cash purchases up for grabs, and card groups are motivated by the potential to rake in fees by converting some or all of those purchases to credit transactions.

Research by some credit card brands and reports by some operators in recent years indicated that credit transactions typically are significantly higher than cash purchases and can be completed in less time than it takes an employee to accept cash and make change. Among the developments that have shortened credit transaction times in recent years: better integration of card readers and point-of-sale systems and the rise of broadband, wide-area networks supporting speedy Internet Protocol, or IP, card processing.

Also helping to speed up cashless payments has been the practice among some processors of authorizing credit transactions below a certain threshold, say $25, without requiring the cardholder's signature.

Card usage by Bailey Co. customers "goes up every month over the previous year," Williams said. He added, "If the trend continues, by the end of next year we'll be at a point where 50 percent of our transactions will be by card."

He said that while card acceptance carries with it processing fees, it also helps his company realize a 25-percent boost in its average cash check of $8, to $10 for charged purchases, and has contributed to "noticeable decreases" in "cash shortages" and "transaction times."

Consumers feel more secure in using their RFID-capable cards, Williams indicated, because the card never leaves their hands, greatly reducing the possibility of fraud.

Little time or money was required to add RFID readers to the Verifone Omni 3750 card reader terminals used by his company, Williams said. The only workaround of note, he added, was the need to create a more rugged case for the RFID reader used at the drive-thru window.

The RFID-chip-laced cards being accepted by Bailey Co. were issued in June by Chase Bank U.S.A., which said it had sent its so-called "blink" cards to more than 500,000 Colorado consumers. It offers those cards in both Visa USA and MasterCard International varieties.

Williams of Bailey Co. said as of late July that he could not yet talk about the volume of RFID chip card purchases being transacted in his company's restaurants because the reporting systems needed to track that information had only recently been put in place.

Chase Bank is not alone among issuers in putting out RFID-chip-embedded cards.

After select market trials, some of which go back more than two years, American Express, MasterCard and Visa all recently began making cards with RFID chips available on a wider basis. Visa said its entire system has been retooled to support the use of such cards whenever and whatever merchants and consumers are ready.

American Express calls its RFID technology Express Pay and has added that capability to its Blue line of cards and to key-chain fobs. MasterCard calls its embedded-chip function PayPass. And Visa refers to its RFID-chip equipped products as "contactless" payment tools.

Sheetz, the 300-plus-unit, Altoona, Pa.-based convenience store chain that does a substantial prepared-foods business, has fully embraced RFID-powered card transactions. The chain has configured its payment terminals systemwide to accept ExpressPay, PayPass and Visa contactless cards.

"Sheetz prides itself on being a pioneer in the convenience-store industry and being the first retailer to put a contactless system into use across the entire chain," executive vice president of marketing Louie Sheetz said after the chain was ready to support Visa contactless payments. "The whole idea is to simply add another layer of convenience for our customers."

Moving beyond a pure convenience play for consumers and efficiency and check-building initiatives for store operations, Sheetz has teamed with Chase Bank to issue a Sheetz MasterCard. The affinity card not only features PayPass functionality but also incorporates a rewards program through which users can parlay all expenditures made with the card into free gasoline at Sheets locations.

"We have restaurants in several U.S. markets currently equipped to accept the PayPass card," McDonald's spokesman William Whitman said.

Dallas and the New York metropolitan area are believed to be two of those markets, according to statements issued earlier by Oak Brook, III.-based McDonald's.

A number of Carl's Jr. quick-service burger and sandwich restaurants in Arizona are accepting American Express cards and key-chain fobs with ExpressPay functionality, as are some Arizona branches of the Cold Stone Creamery treats chain. Some pilot tests of ExpressPay reportedly involved branches of Blimpie Subs & Salads, Dairy Queen and Schlotzsky's Deli.

Major convenience store operator and franchisor 7-Eleven Inc. of Dallas is testing acceptance of Chase Bank's blink Visa and MasterCard cards and ExpressPayenabled American Express cards at 170 units in Colorado. That chain is expanding aggressively its prepared-food line and increasingly is seen as a competitor by some quick-service operators.

"Contactless payment fits well with 7-Eleven's strategy of providing consumers convenient, quick service," said Rick Updyke, the chain's vice president of business development. "As such, we expect to roll out acceptance of these cards to our 5,300 U.S. 7-Eleven stores."

Restaurants equipped to accept American Express, MasterCard or Visa RFID cards have the capability to accept them all. That's because the cards all adhere to ISO14443, a standard adopted by the major payment brands to support contactless payments.

The potential appeal to operators and consumers of waive-to-pay, cashless transactions was recognized early on by third-party RFID-payment-card-services provider, FreedomPay, of Wayne, Pa. FreedomPay in recent years has made inroads in the on-site foodservice segment, among others.

COPYRIGHT 2005 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.
COPYRIGHT 2005 Gale Group