Have Wireless Terminals Finally Found Their Niche?

  About four years ago, Wes Marco, director of information services at Hooters of America Inc., noticed a significant increase in customers paying with debit cards. But as the number of debit transactions rose, so did customers' complaints about what they thought were overcharges for their meals.
  Hooters, like many casual-dining restaurants, preauthorized credit, debit or gift cards before knowing what the customer planned to tip the waiter, typically for up to 20% more than the bill amount. When that amount exceeded the final transaction total billed to the card, it reduced the amount of funds accessible in debit cardholders' accounts until the transaction cleared a few days later.
  "No one likes to upset their guests, so we discontinued the padding," Marco recalls. "But that put us at risk because there was no authorization to cover the tip charge."
  The situation posed a major challenge to Marco and his information-technology team. "We needed to find a way to capture what the customer was going to leave as a tip while leaving them the autonomy to leave the tip," Marco says.
  The solution was clear, he says, once he discovered Ingenico's PayTable portable-payment terminal. Servers present the device to customers after keying in the bill's amount. The terminal enables customers to pay with credit, debit or gift cards at their tables, so their cards never leave their hands.
  The terminal-and similar ones like it manufactured by such competitors as VeriFone, Hypercom and Way Systems-captures the customer's final charge, thereby eliminating the need for padding while also deterring identity and credit card theft, says Don Sellazzo, Ingenico account manager.
  Moreover, since the terminals allow customers to pay with a PIN-debit card, they also can lower restaurants' interchange costs. Marco believes PIN-debit acceptance will enable Hooters to secure a return on its investment in the technology within two years. Restaurants traditionally have found PIN-debit acceptance problematic because the cardholder would have to leave his table and follow the waiter to the payment terminal to key in his PIN.
  While restaurants may find enabling consumers to pay at the table advantageous, will their customers similarly embrace it?
  Definitely, says Wayne Steiger, president and CEO of CTS Consulting Group, a Denver-based firm that has examined both consumer and wait-staff reaction to pay-at-the-table terminals. He believes the ability to pay at the table soon will "become matter-of-fact." Moreover, Steiger says, the timing is right because more customers are paying their restaurant bills with debit cards, and manufacturers are introducing new terminals specifically tailored to restaurants' needs.
  USE SPREADING?
  Indeed, the use of wireless payment terminals soon may spread to a number of other chain restaurants, says Rob Regan, VeriFone vice president of hospitality systems. He predicts that 2007 will be the year where the technology takes off.
  In November, Hooters announced that in January 2007 it would start rolling out Ingenico's PayTable wireless terminals at its 118 corporate-owned locations. Legal Sea Foods, a sea-food chain based in Boston, also plans to roll out VeriFone's Vx670 TablePay terminal at approximately 30 restaurants this month.
  Each of the major terminal manufacturers says it has more pilots planned. And with more than 925,000 restaurants in the United States, almost half of which are full-service eateries, many restaurant owners may find wireless terminals palatable.
  Reduced interchange made possible with PIN-debit acceptance may be the key selling point. An $80 tab, for example, would cost the restaurant about $1.25 in credit card interchange versus about 60 cents for a PIN-debit purchase. The difference becomes greater the higher the sale because PIN-debit networks cap their interchange fees, typically between 45 cents and 65 cents.
  And as debit cards continue to gain market penetration, the savings could quickly add up, says Terry McLoughlin, Ingenico director of business development in North America.
  Ken Chaisson, Legal Sea Foods vice president of information technology, says enabling customers to pay at the table also can increase table turnover. "Typically when you finish your last bite of food, your waiter comes over, asks if you would like your check, wanders off and comes back 3 to 5 minutes later," he says. "Then you look at the check, put your card in, your waiter gets it, goes back, rings in more pieces of paper. Now you have three papers in front of you, you have to manually calculate the tip and leave it on the table. And all of that can take place 7 to 15 minutes after you were ready to leave the restaurant. If you shave off two-thirds of the time [with pay-at-the-table devices], you're turning tables much faster. And the guest is no worse for wear."
  In fact, Chaisson adds, many customers prefer the new customer-friendly methods, especially since the device's display allows diners to enter their own tip percentage or select a preconfigured percentage. "It makes the whole experience easier," he says.
  Yet perhaps the biggest benefit stems from customers' concerns over identity theft. One common method of card fraud involves waiters who use a hand-held "skimming" device that captures information off the magnetic stripe of a payment card for use in making counterfeit cards.
  FRAUD REDUCTION
  "Consumers don't want someone to take their card and walk out of sight," says Regan. "[Restaurants] are the only places we do that anymore. ... People dine out all the time and use debit cards often, and if that card number is skimmed, it's a world of hurt to rebuild your account with your bank."
  Even though Hooters and Legal Sea Foods both claim to have never had identity-theft issues arise from their employees, they view the ability to eliminate the possibility of fraud as a key incentive to make the switch.
  "Every business deals with a foundation of trust with the customer," says Steiger. "That's not to say that everyone is a bad person, but there are enough bad people out there that fraud is taking place. Businesses should deliberately take steps to remedy the problem."
  The key determinants to whether restaurants embrace wireless terminals for pay at the table, says Steiger, are size and affordability.
  As such, each of the manufacturers is trying to fit its product to the restaurant niche.
  VeriFone configured its Vx670 specifically for paying at the table. Weighing less than a pound and having an integrated receipt printer, the terminal communicates either via cellular networks or Wi-Fi.
  Hypercom's Optimum M4100 weighs about 14 ounces with its detachable printer module. Like the Vx670, it also can communicate via Wi-Fi or cell-phone networks. Ingenico's 7780 portable terminals weigh about two pounds with a printer and batteries. Way System's Wireless 1500 and 1510 terminals weigh about 13 ounces with the printer module.
  And although ISOs currently report mixed results selling portable terminals-which range in price from about $550 to $1,400-few doubt that the demand soon will arrive. For instance, Mercator Advisory Group estimates that pay-at-table applications will represent 41% of the market for wireless point-of-sale devices.
  WAITER ADOPTION
  Regardless of which device a restaurant chooses to pilot or fully deploy, getting waiters to adapt to the new devices can prove difficult, says Chaisson. However, he says those obstacles can be worked out through training and a clear demonstration of their justification for the change.
  "Once they adopt the devices and find that they're turning tables faster with no negative impact ... and are making more money," they generally brush aside their concerns, Chaisson says.
  Ed Mastrangelo, Hypercom's director of wireless products, agrees. "Anytime that you can speed the check out, that means faster turnover and a more-pleasant experience, which brings added value to the experience," he says.
  If Hooters and Legal Sea Foods continue to find and make use of the added value that the wireless terminals bring, other restaurants could follow suit. Yet no restaurants are alike, so proponents will have to sell each on the value the devices bring to their business.
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