A low-key announcement two weeks ago by Mondex USA and Burger King may have begun to awaken bankers to a killer app for smart cards.

Perhaps more than any other industry, fast food is ready and eager to automate cash. This may be where the sponsors of the new payment technology can find the help they need to bring it to a mass market.

McDonald's, Burger King, and others of their ilk-some prefer to call themselves quick-service restaurants-have reacted favorably to tests of Mondex and Visa Cash that they have participated in, both in the United States and abroad.

For example, fast-food locations are hooked in to the joint Mondex-Visa trial in New York and to the Mondex Canada showcase demonstration in Guelph, Ontario.

The Mondex-Burger King deal, of which only sketchy details have been disclosed, takes cooperation between the card and fast-food industries to a new level. They will be working together outside the geographical confines of a market trial.

With permission from her partners at Miami-based Burger King, Mondex USA president Janet Crane made their cooperation public in a speech to a conference in Phoenix sponsored by the newsletter publisher Faulkner & Gray.

Beginning in the second quarter, she said, a small but unspecified number of Burger King outlets in New York's Long Island suburbs would both dispense and accept Mondex cards.

Customers could use the value stored in the cards' computer chips to pay for their meals. They would also be able to add to or replenish the stored value, presumably using special automated teller machines or telephone connections to a bank. Mondex USA co-owner Chase Manhattan Bank, one of the principals in the New York pilot, will do the processing.

"This is the next step in establishing the strong consumer proposition we have been talking about," Ms. Crane said in an interview.

She said she was especially pleased to be working with Burger King, the source of a recent surge in marketing creativity-such as a free french- fries promotion-as it tries to take market share away from McDonald's.

"In our pilot years, we are looking for different organizations to work with and different players in the value chain," said Ms. Crane, who is based in San Francisco. Burger King was "the first merchant that has come forward (with Mondex USA) to see the potential in this."

She said Burger King is keen to understand how an electronic cash brand like Mondex might attract customers and encourage loyalty to the store.

"It is a unique opportunity for Burger King," said Kim Miller, a spokeswoman for the No. 2 fast-food retailer. It will "examine the effectiveness of the convenience and loyalty in the pilot with an eye to a full rollout."

That is all Ms. Miller would say. More details will emerge as the Long Island experiment draws nearer. The companies want the suspense to build for a while.

To people in the know, there is no mystery in the smart card's appeal to the fast-food market.

Back in June 1996, at the Visa International joint board meetings in Montreal, John Cook, a Burger King regional general manager, told of the first phase of what has grown into an extensive Visa Cash program in Argentina and other Latin American countries.

By the time just a few thousand cards had been issued in Argentina, the Burger King franchisees had confirmed others' claims that the average chip transaction was greater than a cash transaction, and the use of smart cards reduced cash-handling expenses. Eliminating security guards alone, Mr. Cook said, could save a store $10,200 a year, about 20% of its cash-handling overhead.

Extrapolating the total cost-reduction opportunity, he said, Burger King worldwide could save $307 million, and the entire fast-food industry 10 times that amount, by converting to electronic cash.

"From a merchant's perspective, Visa Cash is an outstanding product with tremendous potential for the fast-food industry," Mr. Cook said.

"I'd like to think this will be one of the many killer apps" for smart cards, said Robert Selander, president of MasterCard International, the parent of Mondex. "The name of the business-fast-says it wants to get customers in and out," a requirement served by secure and reliable electronic cash.

"But they don't just want customers coming through the door," Mr. Selander said. "They want to keep them coming." Retaining customers is crucial, and restaurants can use the chip to track loyalty points and understand individual preferences, just as airlines and hotels do with frequent traveler programs.

"Fast food has got a lot of sizzle to it," said James Shanahan, a partner in Nyack, N.Y.-based Business Dynamics Consulting, which has done studies of U.S. chip card trials. "It is more attuned to a promotional environment than to a greengrocer, newsstand, or dry cleaner.

"The Holy Grail of smart cards is to have a relationship function on the card," Mr. Shanahan added.

Fast-food merchants often try to generate traffic with sports and entertainment tie-ins. Customers can get merchandise or limited-edition memorabilia with certain purchases.

The restaurants also bring in families that like the card payment option.

"A family of four will spend $15 to $20 at a fast-food establishment and at that point it becomes viable for a customer to use a smart card or a credit card," said Fred Sampson, executive vice president of the New York State Restaurant Association.

"The process of the transaction is so quick that restaurants will not lose any speed in serving customers," he said.

Business Dynamics and Brittain Associates Inc. of Atlanta, in their study of the Visa Cash program during the 1996 Summer Olympic Games, found that fast-food restaurants were the fourth-most-popular category for consumers to use the cards.

Of the Alantans and visitors polled, 48% "intended to use their Visa cash cards at fast-food restaurants," Mr. Shanahan said. Gas stations, convenience stores, and movie theaters got higher response rates.

Mr. Sampson said he believes smart cards in restaurants will catch on quickly.

"Competition is a great driving force," Mr. Sampson said. "When restaurants see that people are probably going to other restaurants because they accept smart cards, they will soon get in line."

Rotisseries St.-Hubert, a Canadian restaurant chain, is trying smart cards with a different twist. Since December its 83 locations have been selling gift certificates in this form.

Cyberpro Technologies Inc. supplied 50,000 Schlumberger chip cards, in $20 and $50 denominations, for the program. Each restaurant was equipped with two Schlumberger Magic 9000 terminals.

Electronic gift certificates "are more convenient since they provide customers with exact change on small transactions, instead of requiring a new credit slip each time they spend part of a certificate's value," said Daniel Tardif, president of Cyberpro. He said the store gets the benefit of electronic tracking, and it does not have to process paper certificates and credit slips.

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