[Dave Birch] I saw a chap from McDonalds in the UK talking about their experiences with the introduction of contactless payments. Unfortunately, I didn’t get the chance to ask him why all the POS terminals are configured in such an odd way (if you want to pay by card the terminals don’t light up automatically, you have to ask the server to let you pay by card and then they have to press a button on the till – why they can’t they just light up the contactless interface automatically?), but I did very much enjoy listening to a well-informed retailer perspective on the transition to contactless payments.

In McDonalds, the average transaction value is less than a fiver, so they are a perfect location for contactless, and they wanted to try out the technology predominantly because contactless transactions are faster than either cash with change or chip and PIN. A saving of five to six seconds per customer doesn’t sound like much, but it equates to thirty or forty additional restaurants worth of capacity in the UK market! I guess for retailers who deal in such volumes, every second literally does count.

For example, every additional second it takes customers to pay at its U.S. stores costs Wal-Mart an average of $12 million in cashier wages, CFO Charles Holley said last month while announcing that Wal-Mart would introduce more self-checkout lanes where shoppers scan their own items.

[From The Most Powerful Man in Payments – Technology Review]

Once McDonalds had decided to go to contactless, it took nine months to develop the new POS software and a month to distribute it. It took three months to deploy the new PIN pads with the contactless interfaces. The system went live in May 2011 and so they’ve now had almost a year of live operation. Because of this I found their reflection very valuable.

The first thing I picked up was that free wifi led to an increase in business “overnight”. This wasn’t true for contactless. While 90% of their UK restaurants see at least one contactless transaction per day and contactless now accounts for 3% of their non-cash transactions, the technology clearly hasn’t revolutionised the fast-food experience.

I was fascinated by what he said about the business case, which included a line item that I had never considered. Across MacDonalds in the UK, more than 1000 PIN pads fail each year and have to be replaced. One of the reasons for trying to drive people to contactless is to reduce wear and tear on these PIN pads. The chap also explained that there are “emotional” reasons to implement contactless in their environment: an image of modernity. It’s important to them to be seen as innovating and keeping up with the latest technology, and contactless is a very visible way of doing this.

But the main thing I wanted to pick up was the relationship between contactless and mobile. McDonalds want to appeal to “connected consumers” and they clearly see the transition to mobile as one the main reasons for investing in contactless at this time. I have a feeling that reconfiguring POS so that the contactless terminal lights up by default might be the way to do that, although I suspect (like most retailers) it’s really phones that will excite people. I’ve pointed at McDonalds in Japan once or twice as an example of how a retailer can exploit the non-payment aspects of contactless POS to deliver an integrated mobile proposition that really works.

In Europe and America we won’t develop our mobile payment markets along the same trajectory as Japan, but we will — I hope — learn from Japan. So what kind of lessons: well, for one, it’s clear that it is not retail payments that drive the adoption of mobile proximity but transit and value-added services (loyalty and couponing).

[From Digital Money: Lolly Dolly]

I’m really looking forward to seeing McDonalds’ in the UK launch the same kind of mobile applications that they have in Japan. Yes, we use different payment instruments but British consumers would I’m sure take to the coupon, promotion and loyalty offers just as enthusiastically.

P.S. The last two times I paid in MacDonalds I paid with a phone and a watch. I think using contactless cards is old-fashioned…

 

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers

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