Many hospitality operators are implementing contactless payment options at thousands of their locations including both quick-service restaurants and convenience stores. For example, nearly all of McDonald's (www.mcdonalds.com
) 14,000 locations in the U.S. have contactless payment options. Dairy Queen (www.dairyqueen.com
) now has contactless payment solutions at 2,000 U.S. locations, while Whataburger (www.whataburger.com
) announced the roll-out of 500 locations accepting MasterCard PayPass. This technology not only increases transaction speed (eliminating the need to sign for purchases under $25) but also tends to yield higher revenues per transaction.
Stickers are another option for contactless payment. Sheetz (www.sheetz.com
), a family-owned convenience store chain, uses the GO-Tag payment technology system from First Data (www.firstdata.com
). Customers purchase a prepaid, reloadable payment sticker that can be placed on anything they routinely carry, such as employee IDs or other personal items. Customers tap their sticker on a contactless reader wherever the VISA payWave is accepted rather than carrying cash for items.
Chris Schwanz, payment systems program manager at International Dairy Queen, believes the contactless payment technology is a great fit with quick-service restaurants and in other places with high volumes of quick, low ticket transactions. Dairy Queen added ViVOtech's (www.vivotech.com
) contactless payment solution in late 2007 and throughout 2008. Although Dairy Queen is not seeing throngs of people coming in with contactless cards, Schwanz reveals that those customers who do have contactless cards appreciate that Dairy Queen has installed the readers.
"Consumers seem to be very aware of the risk of credit card fraud and therefore like to keep their cards in hand," Schwanz says.
Tim Collins, senior director of IT at Taco Bueno (www.tacobueno.com
), sees virtually all of the big players adopting contactless technology. Every new restaurant he goes to now seems to have contactless payment as a part of the package. Collins believes that contactless payment is catching on in hospitality IT and operations; he's just not sure how many customers are using it. As a somewhat early adopter, Taco Bueno installed ViVOtech readers in summer 2007 while it was refreshing hardware with new POS terminals.
Not without challenges
Several factors present challenges as the hospitality industry continues to add more contactless payment options. To begin with, Schwanz says most people are just not familiar with it because it is a budding technology. Cashiers need to be trained on how to process transactions and spot chip-enabled cards, while consumers need to learn which of their credit cards have contactless capabilities. Collins at Taco Bueno, agrees. He believes one of the biggest challenges is educating customers who don't know if they have a contactless payment card.
Dailey considers security as one of the looming challenges associated with contactless payment. The idea of "skimming information" from contactless transactions is certainly relevant and one the industry needs to address.
The next phase
The outlook for contactless payment offers a number of technological advancements in the future. The general wisdom in the industry, according to Dailey, is that the next evolution of contactless payment is in chip and PIN solutions; that is, standard RFID technology that requires users to enter a 4-digit PIN after the card is tapped. Dailey believes this will make transactions more secure and massively help with credit card fraud.
Contactless-driven loyalty and incentive programs are what Schwanz sees as the next phase of contactless payment. GO-Tags from First Data, for example, are an RFID-enabled form factor for pre-paid gift cards. While Dairy Queen has used this internally for employees, the company is looking at expanding it to members of its Blizzard Fan Club.
"Ten years from now, contactless may be the primary way you access your credit card versus the plastic you [use] today," predicts Dailey.