From restaurants to big-box retailers to independent contractors, new technologies that include mobile-payment terminals, contactless cards and pay-at-the-table are becoming part of the payments scene.
Their use is expected to increase as consumers and vendors become more comfortable with the technology, according to independent sales organizations and manufacturers, alike. In most cases, these technologies speed up transactions and increase security for both merchant and consumer, backers assert.
Merchant Card International, a Sarasota, Fla.-based ISO, is embracing the new technology, says Lee Davis, president.
"We are definitely all over this," Davis says. "We had a conference call with our offices across the country explaining the newer technology."
"In today's world, it's hard enough to get business, [and] it's worse not to give customer service to your customers," Davis says. "You need to allow them to pay with the most ease there is."
Offering technologies such as pay-at-the-table or mobile terminals that ease consumers' and merchants' lives makes good business sense, agrees Peter Constantino, sales manager for Tallahassee, Fla.-based Florida Retail Federation Services, an ISO. "Right now, we're getting calls from restaurants so you have to be prepared to stay on top," Constantino adds.
The introduction of mobile terminals, contactless cards and pay-at-the table technology has changed business for ISOs, Davis says.
"It's no longer about free terminals or leasing equipment," he says. "It's about providing full service to your customer base and building a long-lasting relationship."
Offering these technologies gives ISOs an advantage, says Mohammed Khan, president and founder of Santa Clara, Calif.-based Vivotech Inc.
"Offering contactless technologies allows ISOs to offer better services to their customers, especially when there is so much competition out there," he says.
Going Wireless
To remain competitive, merchants are asking for wireless technology. As a result, the demand for mobile terminals is growing dramatically, says Tim McWeeney, vice president of strategic accounts for Woburn, Mass.-based Way Systems Inc.
"This is a developing market," he says. "Our sales quadrupled this year over last year. Any ISO who is not already thinking wireless needs to."
Merchants are demanding mobile terminals, which offer lower transaction fees than more established types of credit card transactions, McWeeney says. With mobile terminals, transaction costs are reduced to a few cents, and the potential for chargebacks is limited, he adds. Mobile merchants can receive credit card approval directly at the site rather than having to call information into an office for later approval.
The palm-sized devices are easy to operate and extremely portable, says McWeeney.
"The positives far outweigh the potential negatives," he says. "Cost is substantially less for the merchant."
For instance, many vendors that exhibit at conferences or arts-and-crafts shows rely on mobile terminals. "Nontraditional" mobile merchants also increasingly are using the readers, McWeeney says. Those uses include furniture delivery, carpet installation and visits by independent contractors such as electricians and plumbers. Taxis and airport shuttle drivers also depend on the wireless technology.
"These are all markets that traditionally accepted credit cards," McWeeney says. However, the previous method required vendors to take a card imprint and key the information in later. This presented problems for both the vendor and the consumer, McWeeney says.
For instance, the vendor did not receive authorization until after the service was performed, meaning the company took a risk the card brand would not approve the transaction. Consumers faced a security risk with contractors writing down card numbers on receipts, a violation of Visa and MasterCard policies, says Davis of Merchant Card International.
With mobile technology, if no signal is available, the terminal stores transaction information offline. When the signal is detected, transaction information is uploaded and automatically processed, McWeeney says. That simplifies the process for both the merchant and the consumer.
Limiting Contact
Like wireless card readers, contactless cards also are growing in popularity.
"Contactless payment technology is not only a driving force for the merchant but also a much better environment for the merchant and bank," Khan says.
Vivotech offers both contactless technology and Near Field Communication-enabled phones. As of December, VIVOPay, a contactless card and mobile card reader , had shipped 330,000 units, Khan says. Of those, 90% are installed in the United States and Canada, he says.
Contactless terminals require simple installation through a point-of-sale terminal, usually via USB cable. The terminals can read the contactless cards, which are embedded with a chip that stores customers' account information.
At McDonald's fast-food restaurants and at gasoline stations, customers wave a contactless card in front of the terminal to pay for their purchases, Khan says. As long as the purchase is less than $25, a signature is not required.
"Customers never have to give up their card to the cashier," he says. "It's more hygienic and secure."
There is no chance that germs from a cashiers' cold can touch the card or that the card information can be skimmed, Khan says.
It is faster, too. Transactions are processed in two to four seconds, Khan says. Because cash is not required, customers may spend more, resulting in increased sales. "Customers aren't limited to the amount of cash they have in their wallet or purse," he adds.
Card readers also make sense at convenience stores, vending machines and taxi cabs, Khan says.
"These can be used at all places where cash has been dominant," he says. "You can replace cash with electronic payments."
The use of the technology is growing, agrees Davis. Rather than customers in a checkout lane fiddling with card readers that require them to enter a personal identification number, the contactless card allows customers to hold the magnetic strip to the machine.
"It speeds up transactions and gives customers convenience," Davis says. "Contactless cards really could be used in any retail or unattended location, like parking garages."
Many major credit card issuers, such as Wells Fargo, JPMorgan Chase and Bank of America, offer them, Khan says, adding that 30 million contactless cards are in circulation in the United States.
As credit cards expire, many issuing banks are replacing them with contactless cards, he says.
Paying By Cell Phone
NFC cell phones take contactless payments one step farther, Khan says. These mobile phones are embedded with a smart chip that can store debit and credit card information. When making a purchase, the customer holds the phone up to the contactless reader to pay. More than 80,000 merchant locations in the United States take NFC payments, Khan adds.
Setting up the phone is easy. Customers download card information using application software installed on the phone. The software is preloaded on the phone and contacts the consumers' credit card issuers through a secure wireless data network. After answering several security questions, the users' card information is installed in the phones' mobile wallets.
"The whole process is done in about a minute," Khan says.
The technology is easy for merchants to install, Khan says. The readers cost $100 to $200 and require installation of POS software, he adds.
"The good news when you make a payment with a cell phone is you don't have to depend on a wireless network," Khan says.
Merchants also can use NFC for loyalty schemes. "It really enables a second generation of loyalty programs," Khan says.
For instance, when customers tap their phones to pay, they may receive coupons for free coffee, which they can redeem electronically, meaning they do not have to carry a paper copy, he says. "They can store their coupon or promotion in their phone."
The only potential problem is that the consumers' cell-phone battery may become depleted before he finishes shopping, Khan says.
"The good news is that when you're making a payment with your cell phone, you don't have to depend on a wireless network," he says. "The only drawback is if you run out of battery."
ExaDigm is working on technology to address battery issues, he notes. For the time being, customers are encouraged to carry one or two cards so they are available if needed. (For more information on NFC technology, see page 29.)
Paying At The Table
Similar to mobile terminals, pay-at-the-table technology relies on a handheld card reader and a wireless connection. Servers bring the reader to the table, and the consumer enters his credit or debit card information, including tip.
Restaurant managers are asking for pay-at-the-table technology, says Constantino of Florida Retail Federation Services. "They want to make it easier for the customer," he says. "We are starting to explore pay-at-the-table with two to three merchants."
Merchant Card International has decided to offer customers the Ingenico 7780, a WiFi terminal, after several merchants tested the technology for ease of use, WiFi range and terminal weight, Davis says.
The technology speeds up payments while increasing security, he says.
"Customers feel better not giving their checking or debit card to the server," he adds. "It builds security for the merchant as well because the wait staff is not going to be able to steal information."
The equipment is easy to use, and offers restaurants an economical way to process transactions, he says. "It gives merchants the ability to accept transactions at a lower charge using a PIN-based debit. We feel pretty good about this product. There have been no issues, no surprises, no concerns."
High-end restaurants, family dining establishments and mom-and-pop diners all can benefit from the new technology, provided they have wireless Internet capability, says Andrey Tikhonov, chief technology officer at Santa Ana, Calif.-based ExaDigm Inc., a mobile card reader and pay-at-the-table manufacturer.
"The technology is very attractive to restaurant owners," he says. "It reduces the time serving one table. There's a lot of room for growth with this technology."
While restaurants have been the primary market for pay-at-the table technology, Constantino says other markets can use the technology, such as carwashes, nightclubs or bars. "It can be used anywhere that offers a tip-based product," he adds.
ExaDigm has been testing the technology for stands where customers buy souvenirs or drinks at sporting events, Tikhonov says. The technology also appeals to hair and nail salons.
Another technological twist on pay-at-the-table lets the waiter use a wireless device to take and submit orders electronically, Tikhonov says. When the customer wishes to close his or her ticket, the waiter pulls the order details up and brings the card reader to the customer. "This technology is just being developed by terminal vendors," he adds.
At uWink, a themed entertainment restaurant in Santa Barbara, Calif., customers place their orders from touch-screen terminals at each table. When they are finished, they swipe their cards using the same terminal, says Nolan Bushnell, founder of uWink.
"We found that our customers are demanding the technology," he says. "Increasingly, they don't want to give up their credit card. People are afraid of identity theft."
Other restaurants have solicited uWink about their proprietary software, Bushnell says. Unlike wireless terminals, which require WiFi access, uWink's software simply requires an Internet connection, which can be hardwired, he adds.
No matter which technology an ISO is offering merchants, it needs to understand the technology's benefits for the merchants as well as how it meets the merchants' needs, Davis says.
When approaching merchants to use new technology, Davis says, his company analyzes the merchants' selling patterns to find pricing that works.
"You have to keep in mind that no two merchants are the same," he says. "We customize pricing, based on how they accept cards."
The End Of Biometrics?
While the demand for new payment technology such as contactless cards and pay-at-the-table is increasing, the opposite is true for the fingerprint-scan payment.
"The level of production for biometric technology remains limited," says Gwenn Bezard, research director with Boston-based Aite Group. "We haven't seen an increase in demand for biometric payment. Less than one-tenth of the population in the United States uses pay by touch [biometrics technology]."
And, he does not expect that figure to increase in the near future. Pay by Touch, based in San Francisco, recently filed for bankruptcy protection.
"I don't see [biometric payments] growing at this stage," Bezard says. "It depends on what Pay By Touch is going to do."
In tests, biometric payments has had little success, he says. When combined with customer loyalty programs, it has done a little better, but not that well.
"The product has not achieved what some may have hoped it would achieve," Bezard says. "It has not swayed customers away from using their debit or credit card."
Part of the problem is that biometric payments has not proved to consumers that it is that much faster than using a credit or debit card, Bezard says. For example, a customer may spend an hour shopping for groceries, but only a tenth of that time is spent actually paying.
"The rest of the time is spent grabbing stuff in aisles and queuing up," he says. "There's not a big enough value proposition."
Customers also have grown to expect rewards from their credit and debit card-issuing banks. The rewards make customers reluctant to stop using plastic, Bezard says.
While the future for biometric payments remains unclear, Bezard says he anticipates that contactless and mobile technologies will continue to find their way into the marketplace.
Tikhonov agrees, adding that he expects consumers to ask for them as the increased security becomes apparent.
"The acceptance of plastic was not embraced initially," he says. "Acceptance of contactless cards will continue to increase as consumers see them as a more secure, faster form of payment."
