The Hospitality PAY Advantage Better Payment at All Points of…

The Hospitality PAY Advantage




Better Payment at All Points of Service

                                Revolutionary solutions

                                at all points of service

                                will transform payment

                                acceptance in the

                                hospitality industry. The

                                latest handheld payment

                                systems make card

                                payment cost-effective at

                                the point of service, at

                                the table and at the car.
Introduction
         Restaurants and other hospitality businesses were among the
     earliest adopters of standard forms of credit card payment. Now, other
     industries -- such as quick serve restaurants, grocery stores and even
     convenience stores -- have leaped ahead with adoption of new card
     acceptance systems and processes that are more adaptable to changing
     consumer needs. Today's hospitality businesses typically utilize a cash
     register or standalone POS terminal that sits in a fixed location -- what
     VeriFone calls CounterPAY. This is a payment methodology that is well
     suited to takeout counters and cashier-centric points of service.
     However, it does not accommodate new demands where payment needs
     to take place in non-fixed locations, such as at the table and for carside
     pickup. In the fixed POS model, every card transaction requires multiple
     steps for the guest and staff to complete. It begins with customers
     waiting to receive their check, handing over a card, waiting for it to be
     taken to a counter or backroom, and finally being handed a receipt so
     they can add the tip, calculate the new total and sign, which the server
     later adjusts on their POS system.


         With recent advances in technology and the development of
     innovative integrated solutions, card payment acceptance can now occur
     at the point of service even in full-service restaurants, without making
     trips to a remote POS system or payment device. This white paper
     examines how these new payment systems and processes will
     revolutionize speed of service, improve guest experience, and open up
     new revenue possibilities.


The Changing Face of Payment
         Consumers continue to shift away from cash to electronic payments
     at a rapid pace. In recent years they have also shifted most transactions
     to debit cards, and they are increasingly comfortable using PIN debit
     across many different industries, from the gas pump, to grocery store,
     convenience store, and even high-end specialty retailers.


         Large merchants and consumer and privacy advocates are also
     encouraging the shift to PIN-based debit in the belief that not only is it
     less costly to the merchant than credit and "signature debit" cards, but


                                                     Hospitality PAY White Paper May 2006 Page 2
     that it also is safer and presents less opportunity for fraud. According to
     a recent study by Moore & Symons, Inc., 60% of consumers are
     concerned about safety of the current card payment process in table
     service restaurants. Identity theft fears are paramount among consumers
     and in 2005 they represented 37% of all complaints to the Federal Trade
     Commission, which says that credit card fraud and bank fraud accounted
     for 43% of the instances in which those consumers' identity was
     misused.


         Financial Insights, a market research firm, predicts the number of
     PIN debit card transactions will overtake signature debit cards by the end
     of 2009. Visa International reported that cardholders made more than
     half of their Christmas 2005 holiday season transactions -- 57 percent
     -- using debit, compared to 54 percent of transactions in 2004.
     Regardless of the escalating volumes and clear benefits, many full-
     service restaurants are unprepared to accommodate a shift to PIN debit
     and are also unable to capitalize on the lower transaction costs due to
     the current payment infrastructure. In a 40-table setting, for example, if
     the proprietor can shift 30% of his 240 daily table turns to PIN debit, he
     could save $36,000 in interchange fees annually.


Multiple Points of Service
         Full-service restaurants, with traditional stationary POS systems,
     have been unable to experience the benefit of reduced interchange rates
     for PIN debit since their POS equipment does not meet the needs for
     PIN entry at the table and carside drive-up.


         As consumers grow increasingly weary about card security, full-
     service restaurants are looking for ways to securely accept payment at
     the point of service. New secure portable payment solutions break
     through this barrier, increasing speed of payment settlement, improving
     customer service, and eliminating the possibility of card skimming -- a
     growing crime in which information is captured (or "skimmed") from a
     credit card's magnetic stripe by running it through a small capture device.


         TablePAY ­ VeriFone's pay-at- the-table service now offers
     restaurant operators the ability to revolutionize restaurant operations by:
             ·   Improving customer service through reduced wait time for
                 tables and check payment



                                                    Hospitality PAY White Paper May 2006 Page 3
          ·   Increasing table turns, increasing capacity and ultimately
              increasing restaurant profits
          ·   Offering multiple payment options including PIN debit
          ·   Reducing fraud and alleviating consumer fears of identity
              theft


    Today, in a table service setting, there typically are eight steps
required to handle a credit card transaction:
    1. Customer asks for check
    2. Server brings check and leaves
    3. Server comes back to table to pick up credit card
    4. Server takes card back to POS system for initial transaction --
         without tip
    5. Server returns to table with check and card
    6. Customer calculates tip amount, then adds up total, and signs
         receipt
    7. Server returns to table to pick up check
    8. Server or manager edits tip in the POS system


    Putting payment at the table reduces that process to three steps:
    1. Customer asks for check. Server asks if they will be paying with
         plastic
    2. Server brings payment system to the table logs in to pull up the
         correct guest check, and leaves it with the customer to complete
         the payment transaction, including automated tip calculation
         options, and automatic receipt printing
    3. Server picks up terminal and receipt


    The productivity savings are tremendous. In the table service
setting, wait time to finalize the payment process is reduced, and table
turns are increased, resulting in greater customer satisfaction and
improved profitability. For the consumer, the fact that their card never
leaves their site, or even their own hand, alleviates fears about identity
theft.


    CarsidePAY -- Many full-service restaurant operators have reported
that takeout represents an increasing proportion of their total sales
compared to two years ago. In fact, according to the National Restaurant
Association, 44 percent of table service-restaurant operators anticipate
that takeout will represent a larger proportion of their total sales in 2006,



                                                   Hospitality PAY White Paper May 2006 Page 4
     and 34 percent of adults say purchasing takeout food is essential to the
     way they live.


         Restaurants have responded with a new form of takeout service --
     carside pickup, and VeriFone has responded with CarsidePAY, in which
     payment systems are carried to the consumer's car door along with the
     food order. According to the National Restaurant Association, more than
     half of all adults surveyed -- and more than 70% of those aged 18 to 34
     -- said they would likely use carside pickup if their favorite full-service
     restaurant offered the option.


         Speeding-up takeout orders increases customer satisfaction and
     restaurant revenue, but the reliance on fixed POS systems has slowed
     efficiency. Cutting the reliance on hard-wired POS systems for payment
     authorizations by using Wi-Fi and even cellular enabled payment
     systems makes it possible for servers to bring out the food, present the
     check and process the payment all in one trip. That speeds up payment,
     reduces wait time and reduces curbside carside traffic congestion during
     peak periods.


         By bringing payment to the point of service with both TablePay and
     CarsidePAY, restaurants can take full advantage of PIN debit
     interchange rates to increase their profitability. A Federal Reserve report
     noted that a PIN debit card transaction of $40 generates an interchange
     fee of $0.34, compared to $0.57 for signature debit and $0.72 for credit
     cards. On an $80 purchase the PIN-based debit fee is just $0.44, while
     that for signature debit soars to about $0.99 and credit card to $1.33.


Purpose Inspired Design
         When there's no apparent business case for investing in a new
     market, solution providers will try to meet early demand by retrofitting
     existing products. Thus, the first wireless POS terminals were adapted
     from existing fixed terminal designs and retrofitted with wireless modems
     and batteries. Those types of systems are not well suited for restaurant
     use, where servers need to be able to keep their hands free to hold
     plates and trays and want to be able to move nimbly without heavy, bulky
     equipment slowing them down. The software interfaces on these
     devices are merchant-focused and not attuned to the consumer, who is
     an occasional user and can't be expected to "learn" how to manipulate a



                                                     Hospitality PAY White Paper May 2006 Page 5
payment device every time he or she goes out to dinner. Therefore, the
software interface has to be completely intuitive because consumers
cannot be expected to learn complex processes and software prompts.


    VeriFone set out to design a customer-facing portable payment
solution driven by the needs of the hospitality market. This "Purpose
Inspired Design" effort started with a rigorous investigation into usage
scenarios to determine what the hospitality market needs to make
portable payment work. VeriFone consulted in different geographies with
numerous design partners and utilized workflow analysis and focus
groups to design a fully-functional payment system that wait staff will
want to use, merchants will be eager to exploit, and consumers will
embrace.


        In reviewing the research, it became clear that a payment
system designed for hospitality environments use would have to meet
the following requirements:


        ·   Environmental robustness ­ In the hectic environment of
            table food service and carside take-out, handheld devices
            will be dropped, spilled upon, and heavily used. Therefore,
            they need to withstand the impact and recover gracefully;
            they also need to be resistant to moisture from food and
            beverage spills.


        ·   Ergonomic ­ The device must be very small, extremely
            light, comfortable to hold and use, and easily placed into a
            holster and charging base so that servers have their hands
            free to wait on tables.


        ·   Consumer friendly ­ In the past, payment systems were
            always merchant activated. That's no longer the case.
            Consumers are increasingly paying with PIN debit cards and
            gift cards, and using payment systems where they swipe
            their own card, enter PINs, and sign on electronic displays.
            This requires a large screen that is easy to read and a
            simple application flow that is easy for the consumer to
            follow, but with enough detail to guide them effortlessly
            through the transaction.




                                               Hospitality PAY White Paper May 2006 Page 6
             ·    Security and privacy ­ Consumers are also becoming
                  increasingly wary about the possibility of account theft, or
                  "card-skimming" when handing over plastic to a stranger,
                  particularly in a restaurant environment where the card often
                  leaves their sight for several minutes.


             ·    Workflow efficient ­ The payment system for pay at the
                  table needs to be easily located for sharing, easy to carry
                  and present, reliably slip into a charging base without
                  attaching cables, and must have an integrated printer to
                  minimize the number of steps required to complete a
                  payment transaction.


MAXui Design for Extreme Usability
         VeriFone's research into purpose driven usability prompted creation
     of a new development process known as MAXui, which maximizes the
     user interface over the given surface of the product, while hiding areas
     which do not contribute to the frequent experience of the device. The
     MAXui effort focused not only on making a table server's job more
     efficient, but on being intuitively useful to consumers who can readily
     swipe or insert their own cards, enter PINs, and even add tip amounts to
     complete the transaction. The result was VeriFone's Vx 670 -- the
     smallest and lightest fully integrated handheld payment device in the
     industry, weighing less than 1lb and measuring just 168mm by 78mm but
     providing a larger screen -- 128 by 128 pixels -- that allows more
     consumer-driven functions to be displayed and eliminates scrolling.


         High "viewability" and high usability were primary design
     requirements. In addition to a high-contrast, white backlit display, the
     large, ATM-style keyboard was designed with a blue backlight that
     shines through each key to ensure ease of viewing and operation in
     subdued lighting conditions. The keys utilize the same technology as
     cell phones to provide a tactile response with which consumers will be
     very familiar.


         The rugged Vx 670 is ideal for virtually any mobile payment
     application and is highly suited for any environment, with a rugged case
     that is impact-resistant and spill-resistant to endure the most demanding
     conditions. Featuring a tapered design and ergonomically balanced



                                                    Hospitality PAY White Paper May 2006 Page 7
     midpoint, the Vx 670 is easy to use while in hand or on the table, and it
     fits into a holster for easy transport from base station to the point of
     service.


          The MAXui design includes a rear-loading printer that tucks neatly
     and efficiently underneath the display, maximizing the user interface so
     operators and consumers see only the uncluttered display and keypad.
     The quiet, fast thermal printer accommodates a large 38 mm diameter
     paper roll with trouble-free, drop-in clam shell loading, rear paper exit
     that provides excellent spill protection, and a dual-tear bar so receipts
     can be ripped in either direction.


Serving Up POS to Consumers
         The American consumer increasingly demands more control over the
     payment process. This partly reflects concerns over card security and a
     change in mindset that is particularly evident with the proliferation of self-
     checkout lanes at grocery stores and home improvement stores.


         To leverage this momentum behind self-pay models, the user
     experience must be pleasant and effortless to ensure that the transaction
     can be completed with little to no intervention by the clerk in the shortest
     period of time. To accomplish, this application User Interface (UI) must
     be designed in a manner that takes a holistic view of the dining
     experience, blended with knowledge of the consumer's mindset and level
     of technical expertise.


         Current restaurant payment solutions are designed with a UI
     targeted for a merchant-facing audience. The prompting sequence is
     more suitable for someone who utilizes the payment terminal routinely,
     not necessarily the casual customer. Consumers, on the other hand,
     have less experience with such devices and a cumbersome interface
     would only serve to confuse them resulting in a poor dining experience.


         Building on years of experience with customer-activated payment
     solutions, VeriFone designed a restaurant payment application to use
     only the most necessary menu items to prompt the payment and to allow
     plain language prompts. The goal was to create a user interface that is
     both easy to understand for the consumer, and quick for the server to
     navigate. The key design attributes were for an application with a



                                                     Hospitality PAY White Paper May 2006 Page 8
     continuous flow designed to accomplish completion of the payment
     transaction easily, simply and quickly.


         VeriFone's ServPOS solution is focused on delivering the simplicity
     the consumer requires with enough detail to guide them effortlessly
     through the transaction. These very aspects will improve the level of
     service, while providing a sense of time management to the consumer
     and also increasing the merchant's table turns.


         The ServPOS solution is comprised of two components: a terminal
     application and a middleware translation layer.


         The ServPOS application is solely focused on providing a simplified
     and efficient user interface for the pay-at-the-table environment.
     ServPOS is designed in such a manner that does not assume whether
     the wait staff or customer will complete a majority of the transactions.
     There is only one interface and it will be equally efficient for all parties.


         The ServPOS middleware acts as an API translation tool between
     the UI and payment engine. This facilitates simple integration to any
     payment engine without requiring modifications to the payment UI.


Payment Engine Integration
         The payment engine serves as the authorization/settlement manager
     between payment entry (via ServPOS application) and the payment
     processor. The type of payment engine is determined by the market to
     be addressed and can be hosted or integrated.


         A hosted solution utilizing VeriFone's IPCharge managed payment
     service gateway is stand-alone in nature since it does not require a
     restaurant management system. It does, however, provide the merchant
     with some functionality formerly only obtainable in a much higher end
     system. The transaction information is stored on an IP gateway removed
     from the merchant's location; therefore any terminal in the merchant
     facility can initiate or complete a transaction. And reporting functions for
     the entire enterprise can be completed from any terminal, and
     transaction history with a full suite of reporting functionalities can be
     reviewed from any PC with Internet access. Batch close can be pre-
     programmed on the gateway, which provides the merchant the capability



                                                      Hospitality PAY White Paper May 2006 Page 9
     to make transaction adjustments and also provides the appearance of a
     host-capture system.


         Integrated solutions are targeted for organizations requiring a more
     complex enterprise restaurant management system that provides table
     seating and ordering management in addition to back office management
     tools. ServPOS seamlessly integrates into this environment by serving
     as an additional peripheral attached to the ordering/payment system.
     ServPOS allows for retrieval and printing of line item ticket reports, which
     provide the consumer the capability to match the details of their order
     with the total bill. The ServPOS UI provides quick confirmation to the
     consumer as to the correct check number and total amount of the
     transaction.


The Usability and Security Equation
         In this day and age, style and functionality will only go so far. When
     it comes to electronic payment, security and confidence are essential --
     both from businesses deploying the systems and services, and
     consumers who are handing over their cards.


         In size and style, the Vx 670 is similar and only slightly larger than
     today's Personal Digital Assistants (PDAs). But that's where the
     comparison stops. While some restaurants have looked into using PDA-
     type solutions for remote order taking, these devices and their usage
     models fail to deliver on the key benefits of secure payment at the point
     of service. These were not designed to be used by customers or left at
     the table, and they do not have integrated support for PIN debit or receipt
     printing.


         Many restaurants will be using Wi-Fi networks to operate multiple
     types of electronic devices, such as hand-held order-entry systems. This
     requires an additional layer of security to ensure non-authorized device
     cannot access the network to intercept payment data from POS devices.


         The Vx 670 uses the Wi-Fi Protected Access (WPA), a standard
     created by The Wi-Fi Alliance to ensure secure network access. In
     addition, the Vx 670 is fully compliant with PCI standards, which among
     other safeguards ensures a tamper resistant design so that in the event
     a system was stolen the thief would not be able to access the WPA key.



                                                    Hospitality PAY White Paper May 2006 Page 10
      Due to their reliance on open system software and development tools,
      and lack of hardware-based security, today's PDA ordering devices are
      simply not capable of achieving the PCI Approval required by Visa and
      MasterCard.


          If the environment allows, VeriFone's commercial-strength SSL
      module can be leveraged to provide an end-to-end layer of security to
      the payment host. Furthermore, VeriFone employs its VeriShield
      architecture to ensure that rogue applications cannot be loaded onto the
      device.


Deployment Considerations
          Once a restaurant decides to adopt new wireless payment devices
      for payment at the table, the question becomes how many to deploy for
      maximum productivity and return on investment. Of course, every
      restaurant is going to be different, with varying rates of table turn and
      varying rates of normal and busy traffic, so VeriFone evaluated different
      usage models based on different restaurant types and system
      capabilities.


          As the devices will be left at the table for the consumer to complete
      the transaction, restaurants will need to ensure they have enough
      devices on hand to allow waiters to handle more than one table at a time.
      In some cases, restaurants may be able to accommodate two or three
      servers with one device based on light traffic flow. In others, restaurants
      with higher traffic may need as many as two devices per server to ensure
      maximum table turns. The following grid provides an initial guide for
      sizing up the needs of an establishment.



                                 Low Table Turn                 High Table Turn
                                 Device: Server Ratio           Device: Server Ratio
Low Table/Server Ratio           1:2 or 1:3                     1:1 or 1:2
                                 1:1 or 1:2                     1:1 or 3:2
High Table/Server Ratio          1:1 or 1:2                     1:1 or 3:2
                                 1:1 or 3:2                     3:2 or 2:1
Green = Normal Period
Red = Busy Period




                                                    Hospitality PAY White Paper May 2006 Page 11
             When managing multiple devices among multiple servers,
     restaurants need to ensure that a particular server can utilize different
     devices and different charging stations. VeriFone designed a charging
     base that provides a central station for such sharing and ensures
     continual charging while the device is docked. The base also functions
     as a convenient visual anchor point so the server staff can quickly see
     where to return a payment system.


         The wireless LAN and wireless cellular technologies used by
     VeriFone devices enable any system to use any base within a particular
     restaurant. Unlike systems that utilize Bluetooth radio frequencies and
     require a one-to-one relationship between a device and a base, VeriFone
     systems use either Wi-Fi to communicate to a shared access point, or
     cellular GPRS to communicate to a cellular transmitter. The Vx 670 base
     includes a charging port for an extra battery. Optional USB ports are
     also available on the base for connecting supported peripherals, along
     with a dial modem port.


The VeriFone Difference
         Bringing the PAY Anywhere philosophy to restaurants requires
     hardware and software that is specifically designed to do the job.
     VeriFone has harnessed the power of IP-based wireless technologies at
     the point of sale to ensure restaurant operators benefit from speedy and
     secure transactions. Whether your needs and preferences are wired or
     wireless, countertop or portable, there is an easy to use connectivity
     technology available to address every hospitality POS environment, from
     pay at the table to takeout to delivery.




                                                   Hospitality PAY White Paper May 2006 Page 12