‘Bullish’ on RFID, Arthur Blank Projects 1 Million Cards in a Year

Arthur Blank & Co. Inc., a Boston-based maker of plastic payment and loyalty cards, is getting into the market for cards equipped with radio-frequency-identification technology, with ambitions particularly for cards supporting loyalty programs and payments in the quick-service retail market. “We as a company are very bullish [on RFID],” says Jake Jacobs, senior vice president of sales at Arthur Blank. So much so, he projects the company will have a million RFID-equipped cards in distribution a year from now in markets ranging from quick-service outlets to sports arenas and the airlines. The company has begun making RFID cards?which come equipped with a so-called inlay that includes a chip and transmitting antenna?for its first customer, Midnight Auto Franchise Corp., a Troy, Mich.-based auto-repair and ?service chain that will use the cards to track customers' service visits. But the company sees the highest near-term potential for RFID payments among fast-food chains, which it argues would see a benefit in using contactless technology for faster tender times, transaction-cost savings, and the ability to reach customers who don't carry credit and debit cards. The three largest fast-food chains, McDonald's Corp., Burger King Corp., and Wendy's International Inc., have all within the past seven months announced plans for a major expansion of credit and debit card acceptance. “A lot of Burger King and McDonald's customers may not even qualify for a Visa or MasterCard,” says Jacobs. He argues RFID cards could access prepaid accounts customers would set up at cash-accepting kiosks that would be deployed at fast-food stores. The accounts would be maintained by third-party processors. For each transaction customers performed on the RFID cards, the chain would save credit and debit card interchange costs, Jacobs argues, which is especially appealing to restaurants selling largely low-end goods. “Are the McDonald's and Burger Kings of the world willing to pay a 3-cent transaction fee for a kid going up to buy another 89-cent Coke?” he asks. Data collected at enrollment at the kiosks could be linked to the accounts to support loyalty and reward promotions, he adds. He admits there are implementation details that need to be worked out. “We're not walking, we're barely crawling,” he says. Cost is another issue. While the costs of RFID cards have come down, they still are still priced in the $2 to $2.50 range in the smaller quantities ordered for tests, Jacobs estimates, with the inlay accounting for nearly half of that. “This [inlay] will never be a 10-cent product,” he says. “Will it be a 50-cent product? Possibly [with mass production].” The costs of receivers and software are also a stumbling block to widespread merchant acceptance. With RFID cards, customers wave the card near a receiver to transmit payment data rather than swipe it or insert it in a reader. Industry estimates are that receivers run about $100 each, while systems programming could reach tens of thousands of dollars with the need to support loyalty programs. But Jacobs is convinced he can build a business case for merchants that will show a reasonable payback on the investment based on savings on credit and debit card acceptance fees. He is somewhat frustrated, he says, that many merchants are concentrating on investments for RFID technology for supply-chain management rather than the point of sale. “It's not going into customers coming through the door,” he says. In a major setback for the fledgling technology, McDonald's this spring discontinued a 440-store RFID pilot in the Chicago area that involved ExxonMobil Corp.'s Speedpass device, announcing it intended to concentrate on a new chainwide program to accept credit and debit cards. But both MasterCard International and American Express Co. have run RFID pilots, and TransCore, the company that built the nation's first RFID-based tollway system, has begun migrating the technology to the point of sale in Texas, including several McDonald's locations (Digital Transactions News, May 14). Integrated Business Systems & Services Inc., Columbia, S.C., is providing the software for the Midnight Auto program, which is scheduled to begin operations in the fall.