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Scuttle those restaurant skimmers

By Gary Fravel

Card skimming in restaurants is starting to hit the national consciousness. In recent months we've heard of rings busted in the Los Angeles and Washington, D.C., metropolitan areas. Big news in those communities for sure, though hardly front page fodder for USA Today or The Wall Street Journal ...yet.

But if restaurant card skimming can be a key story line in a popular TV series, as it was in a recent episode of "The Sopranos," how long before such incidents undermine the confidence of consumers?

Consumers sound off

It seems consumers are already well-attuned to the dangers of handing over their bankcards to strangers. That sensitivity was evident several months ago when VeriFone commissioned an "intercept" survey of consumers at a shopping mall. It was an effort to gauge their issues and concerns regarding card payment practices at table service restaurants.

Respondents were not led down a specific line of questioning. Most did not have strong negative, or positive, reactions to the current system of paying for meals in sit-down restaurants, although most said they could do without the wait time required to process their checks.

However, respondents expressed anxiety regarding the security of payment transactions. Nearly 60% indicated a high level of concern regarding potentially fraudulent use of their credit cards with existing payment systems.

That may be a huge problem for the card payment industry when restaurant card skimming becomes more widely publicized. Given the ease with which crooks can heist consumers' cards, that day is likely just around the corner.

Table-service restaurants are a huge industry, with sales forecast at $190 billion in 2006 from some 370,000 operations in the United States.

An ever increasing amount of that revenue is dependent on plastic. (When was the last time you handed over cash in a full-service restaurant?)

When asked how they pay for their meals, 23% of respondents in our mall survey indicated they use credit or debit sometimes; 59% said they use credit or debit most times; and 18% said they use credit or debit every time they eat at a restaurant.

Pay-at-the-table rocks

So, what is a restaurant to do about skimming?

There's an easy answer: Keep the card in the customers' hands. Table-service restaurants almost invariably use stationary POS card-reading systems. Typically, the customer receives a check, hands over a card, and watches the server wander off into a back room or to a counter located across a cavernous room.

Pay-at-the-table technology can keep cards in consumers' hands and provide ISOs and merchant level salespeople with a strong sales opportunity.

Our mall survey was conducted to gauge consumer acceptance of our new Vx 670 TablePAY system and the pay-at-the-table concept. After hearing a description and seeing the device, most respondents thought its primary advantages were speed and security.

Over two-thirds of those surveyed indicated they would have a high degree of comfort in using the device at the table. Imagine if ATMs had achieved that degree of instant acceptance when first introduced.

Speaking of ATMs, many restaurants may not yet realize how quickly consumers have shifted their preference to debit cards. In 2004, according to industry reports, the number of transactions made using debit cards exceeded that of credit cards for the first time. By 2009, debit cards will account for 57.9% of all card-based purchase transactions.

Just over two-thirds of our respondents said it is important that a restaurant payment device accept debit cards, versus 12% who felt debit acceptance is of little or no importance.

Opportunity knocks

The selling opportunity for you is to educate restaurant operators on three key points:

  1. Consumers are fearful of card skimming in restaurants.
  2. Patrons want to be able to use PIN debit cards.
  3. Pay-at-the-table can speed throughput.

While skimming may grab the headlines, it's the second and third points that will likely revolutionize the restaurant industry.

PIN debit saves the merchant from $0.23 to $0.38 on a $40 transaction, according to a Federal Reserve report. For an $80 transaction, the savings are $0.50 to $0.89. For a busy restaurant with 240 or so payment transactions in a day, a 30% shift to PIN debit could add up to savings of $36,000 in interchange fees annually. That's a pretty decent incentive for an industry with low profit margins.

The throughput issue is even more compelling once the ramifications are fully understood. In the typical restaurant payment process, there are eight discrete steps from start to finish, most of which include using valuable server time for walking back and forth to a fixed POS terminal.

With pay-at-the-table, this can be reduced to just three steps. That means shorter lines for consumers, reduced waiting time for tables and payment, and additional seating capacity for proprietors.

So let's sum up the advantages for today's restaurants employing pay-at-the-table solutions:

  • Customers are more secure in using their credit and debit cards, and once they are done with their meal, they can pay and scoot. That means a happier clientele.
  • Restaurant operators save money on interchange rates by accepting PIN debit. They enjoy faster table turnover; not to mention servers spend more time focusing on customers than running back and forth to the POS terminal.

Bon appétit.

Gary Fravel is a Global Marketing Manager with VeriFone. He can be reached at

Article published in issue number 060801

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