September 19, 2002

Due to excessive fraud losses, a rule change by the major payments associations calls for online authorization even at quick-service locations that do not require a signature for a credit card transaction. In response, fast food restaurants have begun to deploy advanced technology at the drive-thru window, in order to accept card payments without skipping a beat.

In the low-margin, high-throughput world of fast food, seconds count. "It's a low-ticket business built on scale, very labor-intensive, very thin-margined, and very time-oriented," said O.B. Rawls IV, president of Hypercom, Phoenix, Ariz. "In the old model, payments would slow down activities at the point of sale."

Now, using payment terminals that accommodate the new rules, it's possible to keep payments from forming a bottleneck during the busiest times, for the lunch crowd between 11am and 2:30pm.

"It takes a little more than 90 seconds to take your order and to move forward to the pickup window," said Rawls. "During that time there's plenty of time to seek authorization for the credit card sale."

Even though the absence of signature might seem less secure, the switch to online authorization, instead of end-of-day batch authorization, should significantly reduce fraud. "By getting an authorization at the point-of-sale, the chance of that being a valid credit card is a lot better," said Rawls.

Along with the benefits from faster throughput and lower fraud rates, research indicates that card users tend to order more food. "With the use of credit cards, 'uplift' occurs," said Rawls. "The tickets become larger."

What's more, card usage at the point-of-sale opens up opportunities for the introduction of loyalty programs and other incentive schemes.

"It's just an exciting, revolutionary time in this business," said Rawls. "There's a huge frontier here, and there's a lot of market share to capture."

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