Taco Bell, Hortons join 'contactless' payment card trials, rollouts

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Moved by the potential to trim transaction times while fattening average tickets, Taco Bell and Tim Hortons are among the latest batch of quick-service chains testing or deploying technology that supports so-called "contactless" payment cards.

 

Such cards are being issued in growing numbers by credit and debit card organizations but still represent a very small portion of the total payment card universe. They enable consumers to settle their tabs by merely waving their plastic near a specialized reader that wirelessly receives data transmitted by in-card chips. Eliminating the need to properly align the magnetic stripe on the back of a conventional credit or debit card with the mag-stripe reader on standard card terminals can shave seconds off of transaction times while maintaining the ticket lift often associated with credit transactions, some supporters of the technology maintain.

 

 

Irvine, Calif. -based Taco Bell has said that by the fourth quarter 100 of its Mexican-food restaurants should have in place terminals supporting contactless payment cards as well as conventional mag-stripe cards. The move makes 5,800-unit Taco Bell one of a growing number of quick-service brands to test or roll out the technology during the past two years.

 

 

Tim Hortons, the Oakville, Ontario-based chain specializing in coffee, baked goods, sandwiches and other foods, may have contactless technology in some of its Canadian restaurants by this summer, according to UBS Canada research analyst Peter Rozenberg, who said he based his position on observations, industry trends and recent conference call comments by Tim Hortons executives, among other things.

 

 

"We think Tim's could be a leader in contactless payment and Canadian acceptance of this technology, as Tim's has a large network of 2,711 stores in Canada, a very loyal customer base, where 46 percent of its customers visit its stores four or more times a week, and [it] executes a very significant 1.7 billion payment transactions in Canada per year," Rozenberg said in a recent note to clients.

 

 

The use of contactless cards at Hortons could shave 5 to 10 seconds off the time it takes to complete transactions, all but a relatively small number of which in Canada now involve cash, according to the analyst. He said higher customer throughput tied to contactless payment technology, along with the 10-percent to 20-percent rise in the average ticket that often accompanies credit-card usage, might boost Hortons' sales by an incremental 2.5 percent by 2009, should the use of wave-and-go cards catch on, as some experts predict.

 

 

Asked during a Feb. 7 conference call if Tim Hortons was going to "do contactless" as part of an electronic-payments initiative now under way in Canada, chairman and chief executive Paul House replied, "That's going to be a component of it, yes." House did not specify a timeline for deploying technology supporting contactless payments, but officials of the chain have said that credit-acceptance technology of some sort should be in place in Canadian restaurants during the first half of this year. The chain's U.S. restaurants, now numbering more than 336, have been accepting credit cards since 2004.

 

 

Officials at Taco Bell said the 2007 contactless payment test may lead to a rollout to about 1,300 company restaurants and participating franchised units of the technology supporting MasterCard's "PayPass" cards and other devices, such as chip-embedded key-chain fobs.

 

 

Visa USA said its contactless card also will be tested by Taco Bell during the fourth quarter.

 

 

"As a quick-service restaurant, we understand the importance of our customers' time, and accepting MasterCard PayPass provides an obvious benefit to them," said Taco Bell Corp. president Greg Creed. "PayPass gives Taco Bell customers the opportunity to order their food, pay for it, grab it and run without having to search for cash."

 

 

American Express, as well as MasterCard and Visa, has a contactless payment instrument. The card terminals supporting contactless payments began popping up with growing frequency in quick-service chains in 2005, though some pilot tests preceded that by almost two years.

 

 

Oak Brook, Ill.-based McDonald's was among the earliest foodservice adopters, as was multiunit Arby's franchisee The Bailey Co. of Golden, Colo. Jack in the Box of San Diego in December finished rolling out such technology to all of its approximately 1,500 company restaurants and at about 600 additional franchised units.

 

 

Arby's Restaurant Group Inc. of Atlanta, parent of the Arby's quick-service chain with about 3,500 restaurants worldwide, in 2006 deployed technology supporting contactless American Express ExpressPay-capable cards and fobs inside all approximately 1,000-company-owned restaurants. Gavin Waugh, ARG's senior director of treasury, said that about 80 percent of the company restaurants also support contactless payment in the drive-thru, with the remainder to be added going forward.

 

 

According to Visa USA, the 276-unit Braum's Ice Cream & Dairy Stores quick-service chain out of Oklahoma City, Okla., among other businesses, now accepts that card brand's contactless payment instruments.

 

 

The 7-Eleven, Sheetz and Wawa convenience-store chains have adopted contactless payment technology, as have some movie-theater chains.

 

 

However, the new technology has not been a great fit for all the chains exploring its use. Atlanta-based Church's Chicken recently ended a pilot test of contactless readers at three Texas restaurants because of "a lack of usage by our customer base," according to chief information officer Alan Stukalsky.

 

 

Restaurant companies supporting contactless payments have been reluctant to share usage trends, citing either the short time the technology has been in place or a desire not to provide competitors with potentially useful information.

 

 

Payment card organizations would like to see the speed, convenience and flexibility to pay later represented by the new-technology cards prompt American consumers to whip out those cards in situations where they traditionally use cash, such as at quick-service restaurants. Some estimates suggest there is $1.4 trillion in annual U.S. consumer cash purchases up for grabs, and card groups are motivated by the potential to rake in fees by converting some or all of those purchases to credit transactions.

 

 

Some contactless payment card activity has been inspired by the popularity of the ExxonMobil Speedpass system used at the pump or cash register for a decade by customers of the Mobil gas station-convenience store chain and, later, a combined ExxonMobil system. Speedpass fobs are tied to a user's ExxonMobil credit account or personal credit or debit card. More than 6 million of the chip-centered devices have been issued since 1997, according to ExxonMobil representatives.