New Pay Options Give Retailers More Point-of-Sale Flexibility

Tracy Mayor -- Expert Business Source, 3/26/2007 7:06:00 AM

There’s a new way to serve your customers quickly and easily, increase your operational efficiency, and boost your revenue. And maybe best of all, it’s tailored not for the giants of the retail world, but to retailers who make their money a bit more humbly, one small transaction after another.

MasterCard and Visa are turning their attention to small-ticket purchases and, by doing so, they could revolutionize the way convenience stores, newsstands, parking lots and other companies do business.

Both financial services companies have rolled out “no-signature” programs that allow merchants in specific categories to skip the signature on credit card purchases or PIN entry for debit purchases for transactions of less than $25. And, taking the concept one step further, both companies are now aggressively promoting a new type of “contactless” card and terminal.

Rather than handing a card to a clerk or using a self-swipe terminal, consumers simply pass their credit, debit or prepaid card – or another device like a key tag or even a cell phone – embedded with an RFID (radio frequency identification) chip in front of a secure terminal. The terminal passes account information wirelessly to the merchant’s electronic cash register, and the shopper is on his way.

The goal of both programs is to increase use of cards among traditionally cash-centric merchants like coffee shops and fast-food outlets, where every second counts for both merchant and consumer.

With no swipe, no signature to collect or PIN to request, and no receipt to print out and hand over, merchants can complete their under-$25 transactions some 25 percent faster than when handling cash, says Elvira Swanson, director of corporate relations at Visa USA in San Francisco. That time savings has the potential to boost the coffers of retailers nationwide who account for $2 trillion annually in small-ticket purchases. “We’ve had convenience stores tell us that using contactless is like adding an extra parking space to their lot – people are in and out of there that quickly,” says Swanson.

According to MasterCard, merchants that adopt no-signature and contactless payment:

• are able to offer better and more efficient customer service
• gain a reliable, trusted payment method that’s faster and more secure than cash
• add an opportunity to attract new customers and build loyalty.

Merchants do have to qualify for these new programs. Visa, for example, currently offers the no-signature option to businesses in any of 17 categories, including parking lots, bus lines, drug stores, laundries, commuter transport, movie theaters, taxicabs and tolls and bridges.

For contactless transactions, retailers also will have to invest in wireless terminals, which cost around $150 apiece, or upgrade their existing card readers, which can cost some $350 per unit, estimates Visa’s Swanson.

Swanson acknowledges a bit of a chicken-and-egg challenge with bringing contactless transactions into the marketplace. Merchants need to have contactless readers and consumers need to have credit, debit or prepaid cards equipped with the contactless chip. For that reason, Visa chose to go deep rather than broad, concentrating early efforts on getting both cards and readers into markets in Denver, Atlanta and the New York tri-state area. It is now broadening the pool and promoting the program on a nationwide basis.

Swanson won’t go so far as to predict that all transactions will some day be contactless – there’s little need for such speed when buying, say, a $2,000 plasma television – but she’s confident that more and more retailers and their customers will be willing to forgo cash in favor of beep-and-go payments. That’s a prediction you can take to the bank. Or the coffee shop. Or the dry cleaner. Or the car wash…

Tracy Mayor is a freelance writer based in Hamilton, Mass.