Accelitec Looks to Rising Interchange to Help Sell New RFID System

A Seattle-based startup that has been quietly testing a contactless payment system intended to be branded and controlled by merchants is now marketing the system as a way for retailers to control rising card-acceptance costs. Accelitec Inc. says its PayPilot system, which includes token dispensers, tokens equipped with chip-and-transmitter inlays, and point-of-sale readers, can cut merchants' overall payments cost by allowing customers to pay through their checking accounts or from prepaid accounts. Transactions are debited via the automated clearing house at a fraction of the cost of card interchange. The radio-frequency-identification systems now available from MasterCard International, American Express Co., and Visa U.S.A. are based on credit and signature-debit cards and don't carry interchange incentives for merchants. “We've talked to grocers and petroleum entities, and they say they don't know that they want to get more married to this credit card bucket,” says Tom Bartz, chief executive at Accelitec and a former petroleum-industry executive. Bartz says PayPilot, which the 3-year-old Accelitec has been testing since last year with an unnamed gasoline marketer, is designed to be “agnostic and bolt-on” with respect to merchants' existing POS systems. “You can be up and running in a matter of hours,” he says. It also can be branded by the merchant, which can influence customer payment choice through the system, for example, by offering special discounts or other inducements to use the ACH-based transponders. “'We're willing to cut a deal with our customers,' is what we hear from retailers,” says Bartz. Indeed, Bartz is counting on steadily increasing interchange costs?and the recent publicity surrounding a string of lawsuits filed by merchants over the card fees?to help sell PayPilot, though he refuses to make transaction projections for the coming year. “You're not going to see this massive shift to e-check [the ACH designation for payments at the point of sale, on the Web, and elsewhere], but if you can shift 10% of your customer transactions to e-check, it's a win-win,” he says. PayPilot will appeal to consumers, he says, for the same reason the bank card networks and AmEx say consumers like their contactless technology: it speeds up tender time, since consumers need only wave the token at a reader to initiate a transaction. Accelitec, whose network sends transactions to merchants' acquirers once they've been captured at the RFID readers, charges merchants anywhere from 2 cents to 20 cents per transaction, Bartz says, depending on volume. The token dispensers, which can come in ATM-like sizes, run anywhere from $1,500 to $9,500 each while the token themselves cost from $1 to $3.25 each, depending on quantity and memory capacity. The countertop devices, which are linked to printers but are not equipped with mag-stripe readers, run less than $100 each. These devices will also accept contactless cards from AmEx, MasterCard, and Visa, since PayPilot operates on the same standard.