Q: As
the owner of a midsized retail store, I offer my customers several
types of payment options, including credit and debit cards and
checks. However, I've been reading a lot lately about the
devices that beam credit card information to infrared readers (IRs)
and radio frequency identification (RFID) fobs. Are these viable
options for my business?
A: The
options you mention are known as quick payment services (QPSs) and
electronic payment systems (EPSs), and they are steadily gaining
popularity among convenience stores, gas stations and fast-food
restaurants because of the speed and convenience they offer
merchants and customers. They're also called point-and-pay
systems because customers direct a key fob, a plastic card or a PDA
at a terminal reader to perform the transaction.
There are two QPS and EPS systems currently in use: infrared
technology, which serves fast-food retailers and other businesses
that deliver goods quickly, and RFID technology, employed by
businesses that use wireless technology for their transactions (at
gas pumps, for example).
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IR devices, such as PDAs, store customers' account and
credit card information. When they sign up for the technology,
usually in person at the retailer's location or online, they
provide their account information and select a PIN. When
they're ready to buy at the point of purchase, customers point
the PDA at the IR reader and enter their PIN code. The PDA then
beams the encrypted information to the terminal, which then
forwards information about the transaction quickly and safely to
the customer's account.
The customer receives both digital and hard-copy receipts from
the IR device. The digital receipt can be downloaded into an
expense report, a relief for any business traveler who has to keep
track of his or her paper receipts. Installation is relatively
inexpensive for the merchant--about $100 for an infrared
transceiver. Customers must first purchase a PDA with the
appropriate software, but benefits include the convenience of
making a purchase with the same device with which they conduct
business and store their personal information--no searching for
credit cards.
RFID, the technology used in MobilExxon's SpeedPass, embeds
an antenna and a computer chip into plastic smart cards and key
fobs to replace credit and debit cards. Fobs function very
much like an automobile's remote entry, which also uses a radio
signal from the key fob. It is a much less expensive and less
complex technology than IR, because RFID does not require the
customer to create a PIN or purchase a PDA. And fobs can be
activated from as far away as 30 feet. At a cost of $2 to $3 each,
fobs are the least expensive part of the RFID system. Installation
and reader hardware will cost merchants between $6,500 and
$15,000.
To use RFID, a customer registers with the retailer and receives
a key fob. At the point of purchase, the customer swipes or points
the key fob at an RFID transponder, which forwards encrypted data
or the customer ID for a match. The customer's information is
verified safely, and his or her account is charged. There is no
exchange of credit card or check information, which could result in
unauthorized use.
Several bankcard issuers, terminal manufacturers and even a
watch manufacturer have made recent forays into this contactless
technology. For example:
- Visa International is testing contactless card technology,
which uses a chip embedded into a plastic card or electronic
wireless device. The bankcard issuer is working with several
companies to develop these systems.
- MasterCard is currently testing its new PayPass system, based
on RFID technology. The PayPass card, which resembles a standard
MasterCard, has an embedded computer chip and antenna. Payment data
is encrypted into the card's magnetic stripe, allowing the
cardholder to use it as both a conventional credit card or as a
contactless card.
- SpeedPass-enabled Timex watches come in a variety of styles for
men and women. A built-in transponder submits purchases with the
flick of a wrist. The watches, which can be obtained online at
www.timex.com/speedpass, activate purchases at Exxon
and Mobil gas stations, Chicago-area McDonald's restaurants and
East Coast-based Ahold Stop and Shop stores.
- Point-of-sale terminal manufacturer Hypercom developed the
HyperPASS technology embedded into a key fob to work with its
Hypercom ICE 5500Plus or ICE 5700Plus terminals. Customers can
obtain a HyperPASS key fob at a participating retailer. Using
HyperPASS is easy--the retailer swipes a customer's credit card
on the ICE terminal and then activates a fob, which he gives to the
customer, often for free.
- Verifone's VeriPASS contactless system works with the Ruby
SuperSystem at the gas pump. The system reader offers customers
choices for printing receipts, car wash menus and payment methods.
It can also be used as a pre-paid card or to store loyalty program
information. Consumers can request the key fob at a participating
gas station or convenience store. The fobs, which contain the
consumer's credit card information, are used with VeriPASS
terminals and PIN pads at the store.
QRS and EPS key fobs are a great option for retailers that need
to conduct business quickly. In the future, contactless cards, such
as MasterCard's PayPass, will make it unnecessary to carry
multiple fobs and credit cards. And business travelers will find it
convenient to use their PDAs as a purchasing device.
In addition, consumers enjoy control over their purchase
information because the card or key fob never leaves their
possession. Transactions are several seconds faster than
traditional methods, since the data goes directly to the sales
terminal and then to the customer's account, where the purchase
is charged to a designated credit card or debited from a checking
account. And when customers have only a short wait to complete
their purchase, they have more time to continue shopping. Best of
all, key fobs are an inexpensive way for merchants to brand their
business and keep their name in front of customers.
Cardservice International Senior Vice President of
Sales John Burtzloff is in charge of sales strategy and
execution and thus is responsible for managing all aspects of the
company's marketing, communications, telesales, check
guarantee, new accounts and sales support activities.
The opinions expressed in this column are those
of the author, not of Entrepreneur.com. All answers are intended to
be general in nature, without regard to specific geographical areas
or circumstances, and should only be relied upon after consulting
an appropriate expert, such as an attorney or
accountant.