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New Payment Services Offer Speed and Convenience

For you, that means happier customers--and beefier sales.

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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).

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, 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 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.

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