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Despite the sour economy, several North American restaurant operators are making a fresh run at testing wireless pay-at-table terminals that enable on-the-spot acceptance of diners' debit or credit cards.
Besides improved efficiency and the ability to prevent card skimming that can occur when handing a card to a waiter, pay-at-table devices offer restaurants the allure of incremental cost savings. By enabling customers to enter their personal identification numbers at the table, restaurants could for the first time shift some transactions from signature-debit and credit cards to PIN-debit transactions, which cost less to accept, observers say.
Pay-at-table technology in the U.S. has been languishing without much growth for the last few years, while it has become well-established in parts of Europe and Latin America. But the possibility of capturing more PIN-debit transactions recently has sparked more interest from U.S. restaurants.
Debit is the fastest-growing payment method in the U.S., according to MasterCard Worldwide and Visa Inc., and consumers using debit cards carrying those card-network brands can use either a signature or a PIN. Merchants can configure their terminals to prompt for a PIN when consumers swipe a debit card, says Red Gillen, senior analyst with U.S.-based Celent LLC.
"Merely by providing a PIN pad-equipped terminal, restaurants would be taking the first step toward capturing more PIN-debit transactions because sit-down restaurants do not typically provide that payment option," he says.
The U.S. has approximately 414,000 restaurants, according to a recent report by U.S.-based research firm GfK Retail & Technology, and the traditional-restaurant sector has grown by 10% in the last five years.
Full-service casual-dining chains, including Claim Jumper, Carrabba's and others such as Canada-based Cara Operations Ltd.'s Swiss Chalet Restaurants are testing or have fully deployed VeriFone Holding Inc.'s TablePay (
France-based Groupe Ingenico this fall also is launching new efforts to get its Pay@Table system off the ground at several North American restaurants. And U.S.-based Hypercom Corp. recently announced the availability of a device designed for pay-at-table use in the U.S., where it foresees potentially strong growth for the service in the casual-dining sector within the next few years. Hypercom would not disclose details of any pilots.
"We will eventually see widespread adoption of pay-at-table technology in North America, and although it is progressing very slowly, the benefits for restaurants are increasing," says Rajiv Shah, vice president of financial practices in the New York office of consulting firm A.T. Kearney.
Over the past year, the cost to install terminals has dropped to below $1,000 per terminal, while integration of the technology into existing software systems has eased. Moreover, increased publicity about card fraud has heightened restaurants' need to shore up card security, Shah says.
"The business case for pay-at-table has improved," he says.
But adoption still remains slow. "Restaurants that actually try pay-at-the-table love it, but the industry is slower than molasses when it comes to change," says Curt Waite, president of U.S.-based Equity Commerce LP, an independent sales organization that has persuaded several small and independent restaurant operators to use Ingenico's Pay@Table devices.
The hand-held terminals enable processing of diners' debit or credit cards at their tables, and restaurants usually integrate them with their point-of-sale software systems. Payment information is sent wirelessly to a central communications base within the restaurant, which transmits the information to the restaurant's tranaction processor. VeriFone's system transmits information via an encrypted Wi-Fi connection, while Ingenico's system uses an encrypted Bluetooth wireless connection.
Both systems are effective in any restaurant size, but Bluetooth-enabled pay-at-table often is easier for small restaurants to implement, observers say.
Customers can swipe their cards through the terminal themselves and opt to enter their PINs if selecting PIN debit as their payment option.
Because cards never leave diners' sight, pay-at-table devices can cut the risk of dishonest waiters illegally capturing data off of cards' magnetic stripes using hand-held skimming devices. Restaurants are a major source of card-skimming crimes, according to research by TransUnion LLC, a U.S.-based credit bureau.
More Turnover
Pay-at-table devices offer restaurants other benefits, such as eliminating time-consuming steps in the card-payment process and enabling them to serve more customers in peak periods by turning tables more quickly. Most pay-at-table devices are configurable so customers can select from a menu of tip options, including predetermined percentages, eliminating the need for customers to perform their own calculations.
Consumers seem to welcome the devices. A survey conducted last year by the U.S.-based National Restaurant Association found that 53% of consumers would like to use pay-at-table devices if they were made available, but only 1% of restaurants currently offer them.
Pay-at-table devices also are proving useful for restaurants eager to meet another trend: payment for vehicle-bound customers' takeout meal orders from chains that do not support fast-food offerings.
Technomic Inc., a U.S.-based restaurant-consulting firm, recently reported that curbside delivery of takeout food from casual eateries is one of the restaurant industry's fastest-growing channels. Pay-at-table devices enable faster turnover of curbside orders because servers can deliver food to customers and accept payment in one step while customers idle in dedicated food-pickup parking spots.
VeriFone acknowledges that the economic downturn has slowed some restaurants' planned tests of the technology, but the company is optimistic about the potential for pay-at-table market growth over the next year.
"We're still getting a lot of interest and activity in testing our latest generation of pay-at-table devices, and we haven't seen a dramatic drop in interest in TablePay," says Robbie Lopez, VeriFone senior vice president of software solutions. "In a tough environment like this, restaurants that can't push the top line on sales are looking at bottom-line improvements, and those that can convert a lot of transactions from signature cards to PIN-debit cards could see some real financial benefits from TablePay."
Equity Commerce's Waite says Ingenico's Pay@Table devices cost $650 each to purchase and install, and he estimates restaurants could save 0.5% to 1% of the sale by migrating customers from signature credit and debit to PIN-debit transactions. "That's $450 a month for a restaurant that does $100,000 in revenue per month, and many larger restaurants do around $1 million or more each month in revenues," Waite says.
"Customers love it," says a spokesperson at Bergie's restaurant in Santa Clarita, Calif., which reports positive results after using a single Pay@Table device in its 40-table restaurant for a year. "Diners swipe their cards, and if it's a debit card the device prompts them for a PIN number. Servers move the device pretty quickly from table to table, and the payment process is overall faster than with our previous system," says a Bergie's spokesperson. She would not disclose any savings the restaurant has captured from PIN-debit transactions.
Claim Jumper Restaurants LLC recently launched a test of VeriFone's CarsidePay system, which speeds the process of delivering takeout-food orders, says Ted Stathakis, Claim Jumper vice president of technology. Claim Jumper is conducting the test at its Laguna Hills, Calif., location, and this fall the company plans to expand CarsidePay to three other locations.
Later this fall, Claim Jumper plans to test VeriFone's TablePay technology at its Costa Mesa, Calif., location. If that test proves successful, the restaurant likely will expand it to all 45 of its locations in six western-U.S. states, Illinois and Wisconsin, Stathakis says. The only difference between TablePay and CarsidePay is how they are marketed, VeriFone says.
Stathakis would not say when the company hopes to roll out the technology nationally.
"This is a move to improve card security and convenience for consumers, but the linchpin will be increasing our PIN-debit transactions," he says.
Although Stathakis would not indicate the transaction-cost savings Claim Jumper hopes to capture, he claims customers are demanding PIN debit as a payment option.
"Our guests want to use PIN debit, and if our quick-service restaurant counterparts can make this option widely available, we want to offer the same convenience," Stathakis says.
Claim Jumper expects to spend about $1,000 per terminal for pay-at-table devices, and it has not yet determined how many devices will be necessary for each restaurant, Stathakis says.
"We want to find the right balance for the number of pay-at-table terminals we need so we can turn tables quickly during the lunch hour," Stathakis says.
VeriFone declined to discuss TablePay and CarsidePay experiences at other restaurant chains, as did the other restaurants involved.
Tabletop Assistance
To help single-unit restaurants steer customers to using PIN-debit cards with its Pay@Table tests, Ingenico provides tabletop cards explaining the enhanced card security PIN debit offers, says Grant Drummond, an Ingenico spokesperson. "In most cases, restaurants configure the device to prompt a PIN number if a customer swipes a debit card," he says.
International Merchant Services is planning its first serious foray into pay-at-table technology this fall. The independent sales organization is underwriting the cost of three pilots in hopes of determining a clear cost-versus-benefit equation for restaurants, says Bryce Gartner, the U.S.-based company's chief marketing officer.
The ISO will conduct the two-month test of pay-at-table terminals made by an undisclosed manufacturer at three restaurant locations yet to be selected. One will be owned by a single-unit operator, another will be owned by a regional restaurant group, and the other will be owned by a large national chain, Gartner says.
"We think restaurants can save a lot of money on transaction fees by paying less interchange on PIN-debit transactions, and our research so far shows better customer response," he says. "Customers can choose a preset tip percentage without having to figure out their own math. They can give 10%, 20% or no tip, and we find that they tend to give bigger tips. Customers like the faster turnaround, and they welcome the security of not letting go of their card."
U.S.-based Discover Financial Services also expects to see growth in the pay-at-table channel in the next year or two, says Farhan Ahmad, the company's director of emerging markets and new product development. "We see pay-at-table as an interesting area that will eventually catch on, primarily because of the convenience factor for consumers," he says, offering no estimate of how long it will be before pay-at-table becomes widespread.
Discover is tracking various tests of pay-at-table technology but is not directly involved in any, Ahmad says. "We see a lot of opportunity for hand-held payment terminals in other business channels including hotels, parking, and retail," he says.
Pay-at-table technology seems to offer a variety of benefits to the restaurant industry, especially at casual-dining chains where PIN-debit transactions may be relatively popular. But if adoption takes hold, it likely will continue to be at a very slow pace. CP
