CHICAGO — If you don't yet accept cashless payments (debit, credit or stored-value cards) at your pizzeria, you're not alone.

But you may be sooner than you think.

According to Brian Baker, vice president of Global Growth Group (a.k.a. g3), a research firm in Sylvania, Ohio, close to half of all quick-service restaurant operators surveyed accept cashless payments. That number, he said, will continue rising as the balance of customer payment preferences shifts away from greenbacks.

"In 2000, about 8

Ian Drysdale, Brian Baker, Sherri Daye Scott, Laura Stanton and Julian Gomez made up the panel during the discussion, "Going Cashless in Quick-Service."

percent of the QSRs we visited accepted cashless payments," Baker told an audience at the National Restaurant Association Show on May 24. He was one of four panelists in a discussion titled, "Going Cashless in Quick-Service." "In the May-June (2004) time period, about 42 percent of the locations we surveyed accept some form of cashless payment."

Why accept cashless payment, when it costs operators money to do so? Simple, said Baker: It brings in more money than it takes out. Plus, customers want it, will demand it increasingly and they spend more when using cards.

"Most of the data we've looked at says there's an increase of 20 to 30 percent per check," said Baker. Sure, it costs to add a card reader and/or upgrade a POS system to accept cards, but not adding cashless payment options could cost even more, he added. "You could lose your customer to the brand across the street, and you may never get him or her back."

Knowing more of its customers wanted a cashless option, Burger King began testing card acceptance at some of its stores nearly three years ago. According to Julian Gomez, BK's director of operations and strategic planning, the chain's operators were wary of non-cash payment because of the costs involved. But in the end, results from the trial run were too positive to ignore.

"The tests showed that offering credit and debit drove guest satisfaction," said Gomez, whose company is based in Miami. "We did a lot of analysis to determine the impact on profitability. What it showed was that the check sizes were larger and that incremental sales increases offset the incremental costs of card acceptance."

Still, BK operators were rightly concerned cashless payments would slow operational throughput. In the early going, cashless transaction times averaged 25 seconds per customer, a full 11 seconds longer than cash exchanges. By working with its transaction processor, however, the company assembled a more reliable dial-up program that lowered transaction times to a range of 10 seconds to 13 seconds. The impact to operations was eliminated, he said, and the test was widened to include more stores.

Ian Drysdale, vice president of enterprise customer development for electronic transaction processor First Data Corporation, said transaction speed has always been an issue for operators who

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accept cashless payment. Technology, however, has all but eliminated concerns over speed as broadband Internet access has become plentiful and less costly.

"When I began my career 10 years ago at First Data, the average transaction was 30 seconds," said Drysdale, whose firm is in Coral Springs, Fla. "The latest solutions we use with our key customers take about 10 seconds for dial and 2 seconds for IP (Internet protocol). IP is really the wave of the future, and QSRs are putting in DSL, cable modems and satellite right into their stores. That allows them to get that 2 to 3 second 'Wal-Mart' speed authorization that the consumer expects."

Drive-time rush

Dunkin' Brands marketing director, Laura Stanton, said that even when customers aren't spending a lot — such as when seeking a morning donut and coffee fix — they still want speedy service. That's why every Dunkin Donuts store will eventually be broadband equipped for rapid transaction times.

"We will be rolling out soon a high-speed standalone card reader," said Stanton, whose company is in Canton, Mass. The goal, she added, is to drop transaction times to around 4 seconds, which, at Dunkin Donuts, is "definitely faster than cash."

She also said Dunkin Donuts operators worried that costs tied to cashless payments would chew up already thin margins. But as the company conducted a successful market test in Portland, Maine, two years ago, added costs concerns disappeared.

"We were able to demonstrate that increased sales were able to cover the costs associated with the investment and the ongoing fees," she said. Better yet, stores saw "an increase in average checks, an increase in frequency and an increase in the usage of the Dunkin Donuts stored-value card."

Customers who might have been regular two-donut-and-a-coffee buyers were becoming occasional buyers of boxes of donuts for the office staff or the ball team. "What we see them doing now is coming in at different times of day and for different occasions outside of their routine visit. We see them creating new occasions" because of cashless payment options.

Not only do customers appreciate the speed and convenience of cashless payment, panelists said they're finding customers also like their added security.

"Credit card processing is growing at 8 to 10 percent (per year) right now, but debit card processing is growing north of 20 percent," Drysdale said. "And PIN-secured debit payment is the fastest growing payment type in the nation. The consumer has a lot of concerns about identity theft,

start quoteWe were able to demonstrate that increased sales were able to cover the costs associated with the investment and the ongoing fees. (We saw) an increase in average checks, an increase in frequency and an increase in the usage of the Dunkin Donuts stored-value card.end quote

— Laura Stanton,
Dunkin' Brands

and they're much more comfortable with PIN-secured debit."

g3's Baker said operators have gasoline stations to thank for customers' willingness to swipe their own cards; pay-at-the-pump convenience has readied them to do the same at a pizzeria.

Letting customers swipe their own cards also increases speed of service (since the card isn't handed to a cashier) and reduces labor, since the customer handles the transaction.

"What we're seeing is a transfer of labor onto the consumer," Baker said. "It's also a matter of security, which is good, because a lot of people are apprehensive about handing that card over. So if it's going to translate into increased transactions and lessen anxiety for consumers, why not do it?"

Though Drysdale sees PIN-secured debit as the strongest cashless payment trend, the pace of payment technology likely won't leave well enough alone. The future, he said, is radio frequency identification payment, known better as RFID.

"All they do is wave a wand in front of a reader and the transaction is done," he said, adding that successful, but unheralded, RFID tests have been run in QSR. "There will come a day when consumers simply wave their cards and won't have to swipe it."

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