It took some time for the technology to catch on in Canada but vendors of cashless payment systems appear to have discovered that the best way to a Canadian consumer’s pocket is through his stomach.
Encouraged by the positive experience with cashless payment systems of McDonalds Restaurants in the U.S., the Canadian arm of the popular hamburger franchise recently announced plans to deploy the technology.
McDonald’s Restaurants of Canada Ltd. said Tuesday it will begin installing MasterCard’s PayPass readers and chip card terminals in some of its 1,400 restaurants across the country beginning next year.
Not to be outdone, Canadian icon Tim Horton’srestaurant chain, which currently does not allow debit card transaction in its store, announced yesterday that it will begin testing the PayPass system this week.
Both companies, however, trail behind Rabba Fine Food a neighbourhood grocery chain which deployed PayPass readers last year.
PayPass devices, also known as contactless or “tap and go,” feature a computer chip and radio frequency (RF) antennae embedded into plastic card or key fob. The product enables users to forego swiping cards through a reader or punching pin numbers. Transactions can be completed by merely tapping or waving the PayPass card or fob on an RF terminal. Account information and payment details are communicated to the reader and processed through MasterCard’s networks similar to other credit card transactions.
The devices are ideal for low-value purchases in high-traffic environments. MasterCard says there are an estimated 11 million PayPass cards and devices in circulation worldwide.
The system is touted by proponents as a faster and more convenient alternative to cards using magnetic stripes. Speed and convenience is a big selling point of the PayPass system, according to Ron Christianson, Toronto-based director of communication, for McDonald’s Canada.
“Our customers’ busier and a faster lifestyle demand an equally agile payment system,” he said.
With the cashless tap and go technology, Christianson envisions faster customer turn around at the till as less people fumble for change, sign credit card receipts of punch in personal identification numbers (PIN).
The PayPass system first entered the golden arches in the U.S. in 2004, a year after MasterCard released survey results bolstering the idea of cashless or contactless transactions. The poll indicated that 49 per cent of consumers carried US$20 or less in their wallets and about 86 per cent preferred to use less cash than they currently do.
The Canadian roll out is partly inspired by the success of the PayPass deployment south of the border, according to Nagesh Devata, vice-president of commercialization for MasterCard Canada.
The U.S. chain found PayPass especially ideal at the drive thru where the act of swiping cards and punching PIN required some contortionist skills especially for motorists driving SUVs.
“The adoption is driven by speed, convenience and throughput,” Devata said.
On average, credit card transactions take 15 to 20 seconds, debit cards take about the same time but could experience some delays due to PIN errors or when systems are back-up. Paying by cash is highly variable.
By contrast PayPass transactions generally eat up 10 seconds of less, said Devata. “It’s very effortless for the consumer and restaurants are able to move customers faster.”
McDonald’s customers have two PayPass options. One terminal will allow a customer to swipe their own chip-enabled card enter their PIN to complete a transaction. Another terminal will allow the tap and go transaction.
Tim Horton’s, which is set to announce its PayPass trial at an Oakville, Ont store on Friday, will be employing basically the same system, said Devata.
The MasterCard executive also stressed that data transmitted via PayPass system “are safe and travel the same network infrastructure” used by regular credit cards.
He said data contained in the PayPass cards also benefit from a more “robust encryption” system.
Contactless payment systems were first introduced in 2002 but adoption in Canada began only about a year and a half ago. Canadian businesses that have deployed PayPass include petroleum company PetroCanada and movie house chain Cineplex and a number of smaller retail stores. Over the next two years, a large number of merchants are expected to switch over from current point-of-sale terminals to chip-enabled terminals.
The growth of a “cashless society”, however, makes it harder to protect individual personal information, according to an Ottawa-based privacy advocacy group.
The worry is that RFID technology poses a threat to individual privacy because the devices allow people to be identified and tracked as the leave a trail of “digital bread crumbs.”
“It is increasingly difficult for individuals not to leave a data trail which could be used to track consumers through their purchases,” said Rebecca Johnston of The Privacy Network.
While cashless payment systems provide convenience for consumers “it is primarily the retailers and card companies that benefit from the increase in transaction values, speed and operating costs.”
The use of RFID-based payment systems “opens up new avenues of privacy invasion which could lead to identity or financial fraud,” Johnston said.
To help protect consumers, she said, technical design and legislative oversight must be built-into the system to prevent the development of an “active surveillance structure.”