You can't beat the speed of RFID

June 23, 2005

How long does it take to buy a slice at Pizza Pizza?

About 2 seconds when done at one of the chain's 160 units equipped with cashless, radio frequency identification payment acceptors.

The process could hardly be simpler: The customer places an order and taps an RFID "fob" or "tag" on a reader, which deducts the cost of the transaction from a pre-set value stored on the tag.

"A receipt comes out and the transaction is done," said Pat Finelli, vice president of marketing for Pizza Pizza, a 500-unit chain based in Toronto. "People are always on the go and a lot of them like this form of (payment) because they don't have to carry $5 or $10 dollars on them. They can just carry the tag."

Pizza Pizza's

What's Important

Consumers clearly like cashless payment options, and the popularity of RFID is expected to grow.

Pizza Pizza has rolled out RFID readers at 160 of its 500 units. It expects to boost transaction averages with the quick-payment process.

Though advancing in Canada, few American merchants are accepting RFID payment. Many in foodservice resisted accepting cards, and they may be even slower to accept RFID.

rollout is the largest quick-service food segment application of RFID technology in North America, but it won't be the last. Where consumer throughput and transaction speed are a must, and modest ticket averages are common, RFID appears to be the wave of the payment future — a wave that could grab a large share of the market from comparably slower forms of cashless payment, such as credit and debit cards.

"When you look at a line at a McDonald's or Wendy's, that extra 2 to 3 seconds saved per customer is very important," said Paul Barron, editor of Louisville, Ky.-based "And even though credit card companies are going to no-signature-required transactions, I think RFID is going to be the natural evolution of cashless payment ... . It drives repeat visits and increases customer loyalty because people will go where it's fastest."

That also means RFID payment isn't for every operation. Customers who visit dine-in pizzerias aren't looking for a chomp-and-stomp experience, so cash and cards work fine.

"MasterCard PayPass is not targeting restaurants or retailers like Ann Taylor, because you're not in some huge hurry to get out of there," said Joe Biondi, vice president of sales over the multilane division of Hypercom, a Phoenix-based cashless payment reader manufacturer. "They're targeting places like theaters, where you get your popcorn, tap the card and go. The Philadelphia Eagles have a card, and guys who have them can go to their games and get in a special line to get a beer and some popcorn quickly. That's where this works really well."

Lightning fast, lower cost

In addition to speedy throughput times, RFID transactions cost less than half that of credit and debit card transactions. Though RFID readers cost around $500 (or can be leased for about $35 a month), a soda and a slice gets cheaper when customers tap rather than swipe.

"You can't justify a (credit card) merchant fee for a cup of coffee or a slice of pizza; it eats up profitability," said Renah Persofsky, chief executive officer of Dexit, a Toronto-based firm which provides RFID cards and accounts to customers. Even handling cash can be costly if done poorly. "You've got shrinkage and errors in counting cash, and it's time

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consuming to count money, give it to somebody and have them count it again."

For Dexit users, "recharging" a card can be done at any participating merchant terminal or through a Web account. Customers can place a maximum of $100 on the card, and when the value dips below $20, they get an e-mail notifying them it's low. Each recharge, which can be done in $20 increments, costs customers $1.50.

Persofsky claimed more than 350 different merchants are using Dexit tags, and she expects that to grow as the product becomes better known and more widely used. Pizza Pizza, she added, was its first customer to move the use of RFID payment from a "controlled launch to full-market penetration" status.

"You can use this at Pizza Pizza, and you can use it at any other merchant that accepts Dexit," Persofsky said. Unlike traditional stored-value cards that work only at issuing merchants' outlets, Dexit's reach is only limited by the merchants choosing to offer it. "We truly are creating a universal payment mechanism, something that can be used at a coffee establishment or a convenience store or a restaurant."

What's happening for RFID in Canada, however, isn't happening nearly as fast as in the United States. McDonald's PayPass RFID test, begun in 2004, is ongoing, and Sonic: America's Drive-In is testing it as well. Neither, however, has pushed toward a wide application.

It appears that non-food businesses in the States will lead the way for now; more than 300 Sheetz convenience stores accept RFID payment, and Biondi mentioned the CVS/Pharmacy chain's rollout of RFID terminals at 5,000 of its stores. "Most customers of that chain have just two or three items they want to get and then get out quickly. ... It's a small transaction in a hurry that (RFID tags) are good for."

Based on the slow rate of credit and debit card adoption by the quick-service restaurant market in the United States, QSR Magazine editor Sherri Daye Scott

"We truly are creating a universal payment mechanism, something that can be used at a coffee establishment or a convenience store or a restaurant."

Renah Persofsky
CEO of Dexit

said she doesn't expect anyone to go hurrying to adopt an RFID solution anytime soon. Operators have resisted the costs involved with cards, and thinking that a new technology is on the way — before even some of them have adopted the older technology — may seem overwhelming. "If you talk to a lot of smaller franchisees ... there's a frustration over the fact that they have to get into this (cashless) game because the consumer's driving it." Still, she thinks the tags will become popular as merchants begin using them. "It's a matter of more companies joining in."

Making it fun and useful

Pizza Pizza is promoting its Dexit program aggressively, both with advertising and potential to win thousands of prizes in the Dexit Tap & Win Contest. From now through Aug. 22, Dexit users can win Pizza Pizza food credits, cell phones and a 2005 Dodge SX 2.0.

After only 10 days into the Dexit launch, Finelli said no solid results are in, but he said he and Pizza Pizza operators are upbeat about the program. "So far, it's going well, and I'm optimistic it will grow as we roll it out to other stores."

Finelli also believes RFID use will grow as both users and merchants better understand their somewhat hidden benefits, such as data acquisition and spending control.

Every tap of the tag yields the user's name and e-mail address, teaching Pizza Pizza about that person's purchasing patterns and providing a direct e-mail marketing opportunity. It also provides opportunities for rewarding customers.

"If I want, I can say to a loyal customer, 'I'll automatically put $2 into your account for a free slice after you've bought 10 slices,'" Finelli said. "These are safer than carrying cash, too. Instead of giving cash to their kids, parents can load the tag with whatever amount they want and give it to them. Now they don't have to wonder where their kids are spending the cash they're giving them."

Topics: Marketing , POS

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