|
No-contact purchase slowly catching on
(Omaha World-Herald (NE) (KRT) Via Thomson Dialog NewsEdge) Aug. 24--The cash register's "ka-ching" is long gone. The "beep" of the digital cash machine may fade. Even the quiet swipe of a card with a magnetic strip is destined to disappear.
In its place, a consumer will wave a plastic card or a key chain fob over a receiver to complete a "contactless" purchase, a system predicted to take over the world of retail sales.
And close behind that technology is the electronic wallet, imbedded in your cell phone and eliminating the need for carrying cards -- and cash -- almost completely.
Banks, merchants and technology companies are introducing customers to the latest, coolest payment methods, hoping to build brand loyalty among consumers and to save time in the checkout line.
Progress is slow so far.
A clerk at the McDonald's restaurant at 40th and Dodge Streets in Omaha didn't realize a customer could use a contactless card to buy a sandwich.
"I've never noticed that," she said, peering curiously at the contactless-purchase logo printed on a red semicircle next to the swipe keypad facing customers.
Walls Fargo Bank lists McDonald's restaurants in Scottsbluff and Gering, Neb., as among the first locations that can accept purchases using about 400,000 contactless cards that the San Francisco-based bank plans to send to customers by the end of this year.
Alan Hoal of Sterling, Colo., who has the franchise for the stores, said contactless sales are rare: "Most people, even if they have credit cards with that system, are still just swiping their cards."
Some experts estimate that fewer than 50,000 merchants nationwide -- out of tens of millions -- have the right equipment for the contactless cards. The number is growing, said Peter Ho, who manages the new product for Wells Fargo's credit card division.
"The merchant penetration for this new technology has been spectacular, considering the amount of time we've had it in the marketplace," Ho said, who is based in San Francisco. Wells Fargo held test trials just last spring.
Merchants like the fact that the contactless equipment, which Ho said generally costs between $75 and $150 per unit, requires no expensive computer changes and can speed customer traffic and reduce the amount of coins and currency that a store handles.
Wells Fargo is issuing the cards upon request or as customers' old cards expire. The new cards also can be swiped like the old cards.
"We are interested in offering new technology that'll help our customers' financial lives," Ho said. "It's still in its infancy in terms of the acceptance rate. It's faster than usual, but by no means is it mainstream."
Other banks, including Chase Manhattan of New York City and Key Bank of Cleveland already are in the market. And American Express recently rolled out its "ExpressPay" program in Phoenix, using a key chain fob rather than a plastic card.
Fast-food restaurants, supermarkets, drugstores and gas stations are among the first retailers accepting the contactless devices, which use a technology called radio frequency identification, or RFID.
Some systems are connected to credit cards, adding purchases to account balances. Some work like gift cards, with specific amounts loaded into each card or key fob. Some are reloadable, carrying a value that can be replenished as it is used up.
RFID technology is used mostly in the warehouse and distribution industry to track goods. The same RFID technology has other uses, such as in automobiles that can be started only with a key containing an RFID chip.
Dave Kudrna, vice president of business development at Dataflo Consulting of Omaha, said security is one of the important concerns. The wave-card method may embolden thieves because they don't have to hand a stolen card to a cashier or even show it. The card works from inside a wallet or purse, too.
"They get braver," Kudrna said. "You walk up and it never leaves your hand. You wave a false ID and you're done."
Banks say their security measures prevent thefts and reassure customers that they aren't responsible for unauthorized purchases. The cards transmit only a few inches, and the data is scrambled to prevent theft.
Despite security questions, Kudrna said, "it's inevitable. It will be interesting, and you're going to see it happening quick."
Adoption of the new card is slow, said Steve Campisi, president of Digital Defense Group of Omaha, because gaining a few seconds in a checkout lane isn't a true value to a consumer, and merchants don't like the extra cost.
"Where's the big deal? Oh, it's wireless? What does that do for me? Where's the value?" he said.
Campisi's company produces a card that stresses security by reading the user's fingerprint with each transaction, ensuring that only the owner is using the card. Eliminating fraud and identity theft would add value for customers, merchants and banks and speed the spread of contactless cards, he said.
Digital Defense, a part of Gabriel Technologies Corp., is selling its biometric security cards to businesses that need protected access to buildings and computers. The company still is pitching the cards to financial institutions, he said.
Among the companies handling the new system is First Data Corp., which has operations in Omaha that process card transactions for merchants and banks. Doug Dwyre, a senior vice president, said contactless cards have been on the market for 18 months and should replace other cards in the next five years.
Banks like the new cards' ability to rise "to the top of the wallet" rather than staying buried with other cards and rarely used.
In March, First Data began testing contactless, reloadable key fobs with the Denver stores of Smoothie King, a New Orleans-based franchise with 380 smoothie bars and health food restaurants.
Kenny Tuohy, a spokesman for Smoothie King, said the stores using the key fobs have had good results, and the company is analyzing data to decide whether to offer the fobs to all its stores.
"There's a cool factor. There's a wow factor. There's a speed of service factor," he said. "At some point, the bean counters get involved in it and want to understand whether the franchises can look at this as a worthwhile investment."
"It's more valuable to a merchant when it's enhancing their brand loyalty, making that person come more frequently, making them advocate or evangelize your brand," he said.
Some franchise owners -- the "early adopters" who like technology -- are asking about the program, but Smoothie King hasn't quoted an entry price yet. Tuohy said it might cost about $2,000 per location, including equipment, promotion and other costs.
Dwyre, the First Data executive, said contactless cards may become the standard within two years, a rapid transition compared with the decades it took for nearly all the nation's millions of merchants to adopt electronic payment processing.
But by the end of this year some manufacturers plan to issue purchase-capable cell phones, Dwyre said.
"The contactless card will be around for a while but eventually will migrate into mobile payment via cell phone."
Copyright (c) 2006, Omaha World-Herald, Neb.
Distributed by McClatchy-Tribune Business News.
For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
[ Back To TMCnet.com's Homepage ]
|
Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 16-18, 2008. Los Angeles, California.
