The Perspective 
Monday, 27 August 2007
Concern over high credit card fees paid by merchants is not a new issue, particularly for those in the convenience store and petroleum retail space. But now that you can use your credit or debit card to purchase a pack of chewing gum, a newspaper from a vending machine and rent a movie from a kiosk, retailers are increasingly paying attention to how credit card transaction fees can take a large bite out of the profit on small transactions.
The term “micropayment” originated with e-commerce and meant payments for items less than one cent as content providers were looking for a way to charge for page views rather than accept advertising. More recently, the term has been used to mean small transactions, typically a dollar or less.
iTunes, which charges between 99 cents and $1.29 for songs, bills customers on a weekly basis, presumably to aggregate charges and minimize interchange fees.
The brouhaha around small or micro payments has been the interchange fees, which is the fees charged by card issuers like MasterCard or Visa on each transaction. Interchange fee structures can be complicated, with a flat fee plus a percentage of the transaction based on several different factors. For small payments, the percentage is not the issue, the flat fee is.
Recently I spoke with Eric Hoersten, vice president of information technology for redbox, which rents DVDs through a kiosk for $1 per night at various grocery store and McDonalds locations throughout the U.S. He explained to me the challenge of a fee structure that does not lend itself to lower ticket items.
For example, if the fixed fee is 15 cents per transaction, it’s 15% of a $1 transaction versus .005% of a $30 transaction. And that’s not counting the percentage of the transaction, which can be an additional two to three percent. This can make charging for low cost items prohibitive.
Hoersten believes that more retailers would leverage a cashless transaction if the fees weren’t so steep. This is ironic considering that the major card providers are pushing for more of a cashless society. The move to contactless cards is one more way to make it easier to pay with cards instead of cash. Hoersten thinks that retailers want to go more cashless since handling cash has challenges of its own and in redbox’s case, they need that credit card number in case the DVD is not returned.
I asked Hoersten if he had any tips for other kiosk deployers who accept credit cards for small payments. He said that how you are classified by the card issuer is important since some categories have lower fees than others.
Other advice:
  • Pay attention to the fees that are assessed
  • Look at how these fees are applied
  • Different types of processors can have different fees so search for one that has the best fee
  • Have a comprehensive view of the situation before entering that market
  • Interchange fees are “the deciding factor” for the category you’re in
He also pointed out that new technology and market conditions have lowered the cost. For example:
  • New communication options exist, such as cellular or IP/internet-based connections, instead of the traditional costly and slow land line.
  • Terminals and leased lines are cheaper than they used to be.
  • There is a greater ability for companies to accept credit cards and set up a merchant account.
Hoersten says that the self-service industry needs to join in the fight to lobby for fees that are not as prohibitive. He holds out hope that interchange fees will go down or that card issuers will release a rate structure that is more accommodating.
“In the micropayments space,” he says, “every penny makes a big difference.”
Posted by: David Drain AT 12:08 pm   |  Permalink   |  0 Comments  |  
Monday, 20 August 2007
Self-service. The term carries a connotation of sterile efficiency, of buying a product or service with little or no human interaction. Unfortunately, with self-service, customer service sometimes gets left out of the equation.
But gaming giant Harrah’s Entertainment Inc. has found that self-service actually is helping it improve customer service.
When the Las Vegas-based casino operator first ventured into self-service technology in the 1990s, the company had its eye on reducing labor costs. The company introduced ticket-based slot machines, where winnings were dispensed by way of a printed ticket rather than a stream of quarters.
When players were ready to cash out, they simply walked up to a payment kiosk, inserted their ticket, and walked away with their winnings.
“We didn’t need as many people to run around and fill machine with coins and so forth, and when we put the kiosks in, there was less of a need for cage cashiers because most of that became self-service,” said Tim Stanley, Harrah’s chief information officer. “The tradeoff was that the floor became very vacant of employees because you didn’t need all those transactional people, and it became a bit boring.”
Harrah’s invested some of the savings it gained through the new technology and created a new position in the operation, that of customer service ambassador.
“Even though we had a lot more people on the floor before self-service, they weren’t actually being friendly and talking to the customer; they were just trying to get through the transaction,” Stanley said. “We were able to create a warmer and more engaging environment, and we ended up getting better customer service and satisfaction scores as a result.”
Slots drive self-service
Harrah’s Entertainment is the largest gaming company in the world, with more than 80,000 employees and, in 2006, revenue of about $7.1 billion. The company, which merged with rival Caesars Entertainment in 2005, operates more than 40 casinos around the world, along with an assortment of hotels and golf courses.
Slot machines, long recognized as one of the most profitable areas of a casino operation, became an early target for self-service technology at Harrah’s.
“Everything around the slot experience lends itself [to self-service] and is desirable because there are a lot of them. It is a fairly interactive activity and the guests are kind of on their own and spread out,” Stanley said. “We continue to try to allow the customer to do more with self-service, whether it is ticketing, ticket redemption kiosks, bonusing or downloadable credits.”
Much of Harrah’s work in the self-service arena revolves around Total Rewards, the company’s card-based loyalty program. Harrah’s, which first introduced the program in 1997, was the first company in the industry to adopt a loyalty program.
Customers receive Total Rewards credit for the type of game they play, the average bet and length of play. Credits are then redeemable for everything from free meals at the buffet to complementary rooms and free airfare to visit a Harrah’s property.
“We were an early adopter of kiosks in the late 1990s when we first rolled out Total Gold, which eventually became Total Rewards,” Stanley said. “You would use the Total Gold card where you play, then go to a kiosk and put your card in and see the points you earned, and it would print out a coupon or a receipt that you would then be able to use at the restaurant or elsewhere in the casino.”
A bright future
Over time, many of those reward functions moved to the game itself, Stanley said. Guests now can view their Total Rewards information on the slot machine display.
The printed ticket also is falling by the wayside, Stanley said. Restaurants and shops on the casino property now have card readers so guests can swipe their cards directly.
“We’ve now taken those kiosks out for that purpose, but they are making their way back in for other reasons.” Stanley said. “We’ve begun using kiosk and self-service technology for restaurants, particularly the high-volume restaurants — buffets and the like.”
In May, the company began deploying Microsoft Surface computers in its Las Vegas properties. Initially, the coffee table-shaped computers will be used to guide guests around various Harrah’s properties, but Stanley already is planning a host of other applications for the machines.
Anything that keeps the guest from doing what they really came there to do has become a target for self-service, he said.
“We are enabling interactive displays on the games themselves, and through that you can do some basic stuff such as check your reward-card balance and the like,” he said.
“We are also adding features enabling you to request a beverage, ask for help, listen to music, watch TV, all sorts of interesting stuff, and the technology remembers your favorites and makes them available to you at whatever slot you happen to be at,” he said. “That is the evolution of where we are going now.”
Posted by: Richard Slawsky AT 12:13 pm   |  Permalink   |  0 Comments  |  
Friday, 03 August 2007
Rufus Connell is research director of information technology for business research and consulting firm Frost & Sullivan.
In recent discussions with key hardware and software vendors on the state of self-service technologies, I’ve heard the same question repeated: Why are kiosks hot in some markets, but cold in others?
In my observation, perhaps the most consistent factor for success is that a kiosk delivers one primary function for the end-user. For example, air travelers are trying to get on planes; airline self-check-in works. Photographers are trying to buy prints; photo kiosks work. Shoppers are trying to buy groceries, self-checkout works. Conversely, I’ve seen numerous kiosks deployed with an if-you-build-it-they-will-come mentality that never got out of trial, or if they did, never got much use.
Another factor that seems to make successful kiosk programs is a strong up-front commitment by senior executives. Kiosks are a complicated solution; they require coordination with an organization’s IT staff, marketing staff, on-site staff and more. Missing any one of these can be a deal breaker.
Solution providers tell me that one of the most common killers of a trial is that “Mr. Kiosk” leaves the client organization, and the replacement just can’t keep the key stakeholders together. When the C-Suite decides it wants kiosks, the rest of the stakeholders seem to fall in line.
I think the previous point is related closely to the biggest kiosk project deal breaker, which is that many organizations just are not set up for a successful kiosk program.
Kiosks are known to be good at linebusting, but how does one account for the employees that currently service the line? For example, we’ve seen growing penetration of kiosks in the hospitality industry, but it has been well below expectations of kiosk vendors. The problem in this application is that major hotels, where linebusting is appealing, often have unionized employees, and those unions are fighting technologies that might displace workers.
Large deployments of kiosks need to have a strong impact on the business. This usually will mean that the business must be willing to re-architect some of its business practices, including renegotiating contracts with suppliers, unions and more.
While many organizations have evaluated some sort of linebusting solution and have made the hard changes to make the process work, others are looking at kiosks to be force multipliers. They are asking kiosks to provide answers to customers that a store associate just can’t answer. But the problem here is one of data and partnerships. Where does a retailer or kiosk vendor get the data to empower the kiosk? A small handful of retailers seem to have found an answer: They are deploying kiosks and requiring their suppliers to provide content to the network.
So, what does all of this mean? If you want a successful kiosk program, ask these questions:
1. Is your application something customers already come to the store to do?
2. Can you get the right internal stakeholders on board?
3. Can your business process accommodate kiosks today, or do you need to make changes?
4. Do you have the content required to make your kiosk work, and can you keep it fresh?
Posted by: Rufus Connell AT 12:21 pm   |  Permalink   |  0 Comments  |  
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