The Tender Trap

Convenience stores are the pit stops of America's highways. In and out. A good customer experience is measured in seconds. At Holiday Stationstores, that experience can't include any down time for the shopper.

"Customer's don't consider tender time to be part of a pleasurable experience," says Frank Garofolo, CIO of the 250-store chain that also has 37 franchises in the Northern Tier of the Mid-west, spreading from Kentucky to the state of Washington. "The payment system has to be reliable and speed is very important." To get there, Holiday Stationstores has done a lot of groundwork, creating its own store credit card, its own payment system and harnessing the Electronic Payment Controller from Radiant Systems which is integrated with the chain's Radiant fully POS.

Integration is a keystone of performance at retailers regardless of size. Stores as big as The Limited have revamped payment processing in the past two years. Earlier this year, GERS Retail Systems announced that Super Stores of America and Miskelly Furniture were going to integrate electronic payment processing on GERS's CreditConnect application.

Furniture Store Saves

"Before implementing CreditConnect, our credit associates entered a customer's credit application into a special terminal, waited for several minutes to find out whether that customer was approved or denied, then communicated the response to the sales associate," says Sue Gainey, accounting manager of Miskelly Furniture, the two-store Mississippi-based chain. "Now, we can enter the customer's credit application directly into the point of sale and get approval in just a matter of seconds." GERS CreditConnect's online credit application and authorization triggers rapid electronic processing of private label transactions from most major credit providers, including American General, Conseco, GECC, GE Monogram, HRSI, and Wells Fargo.

"For us, the biggest advantage of CreditConnect is the faster turnaround on deposits," said Brian Semingson, systems administrator for Super Stores of America. "One-step settlement processing means that we get paid sooner. And by reducing the paperwork we had to FedEx to our credit providers, we estimate that we will save $50,000 in FedEx charges each year."

Stationstores' CRM At Holiday Stationstores, the Radiant Electronic Payment Controller provides a self-contained interface between in-store point-of-sale systems and electronic payment networks. It has an Ethernet port to connect to store systems and a separate Ethernet post for connection to wide area networks. This helps speed return to service, includes fault tolerance for high system availability and has an on-board modem for dial- up connections.

Garofolo, a veteran of 22 years with Holiday Stationstores, says the company decided on the Radiant controller when it updated its POS systems about a year and a half ago. "We wanted tight integration and the controller was a good fit," Garofolo explains. Prior to that installation, the chain had some locations where the credit authorization process was integrated into the POS. But most stores in the chain used what any number of convenience stores use -- a separate device that sat on the counter. At Holiday Stationstores they didn't think that was convenient enough.

"That sort of thing slows the process down and makes room for mistakes," Garofolo says. Another good reason to upgrade the payment part of the system was the uptime features of the Radiant controller. A customer could pay at the pump even when the POS system crashed. "We also have some stores where you can pay at the pump after the store closes."

Holiday Stationstores are unique in several ways with respect to payment systems. The company has its own credit card and operates its own switch for credit card authorization. There is a unique secure server that handles transactions as they go out to the specific card issuers for authorization. Garofolo says the company is happy with the system in its present state. "Payment systems are very reliable today," he says, adding that in the future they will have to become more cost-effective. "We will eventually see authorizers adding more functions on their own or through the issuing banks."

Holiday Stationstores sees payment processing as a customer service. By doing its own payment processing, the chain retains more margin, with a surprisingly spare requirement for system administration. Of the 15 development staffers working under Garofolo, no more than three are working on the payment system at any given time, and they are not dedicated to the payment system.

Other retailers have developed their own payment systems and credit cards. At one time J.C. Penney not only ran its own credit operations, but also ran the operations of numerous convenience chains. That changed over the years as the retailer saw decreasing value in also playing the role of a financial services outsourcer. But Holiday Stationstores serves only its own customers and does not sell its service to other retailers.

Franchisers can choose to go with the system or buy their own.


At PETCO, the mega-chain that is focused on local store community service, the solution was Hypercom's Interactive Consumer Environment (ICE). ICE is used to give each store flexibility in payment operations. The choice of payment systems, PETCO's IT VP Fred Major says, is centered on customer services. "Hypercom's ICE consumer interactive, touch screen terminals and electronic receipt capture applications are directly in line with that objective," he says. The ICE terminals capture receipts electronically and take credit, debit, smart and loyalty cards. Recently Hypercom has added functions such as e-mail, touch screen advertising for self-service and interactive electronic coupons. PETCO has integrated the system with its JDA in-store systems so the POS, payments and merchandising are tightly integrated.

The ICE 6000 comes equipped with a variety of communications options, including Ethernet TCP/IP, and can quickly interface with virtually any point-of-sale (POS) register system. It also incorporates a firewall-protected multi-application operating system, EMV chip card capability, secure PIN pad, and built-in HTML/HTTP Web browser.

One retail services company, the 7,000-store H&R Block recently upgraded its payment systems to increase the number of services it provides to its seasonal customers at tax time. H&R Block deployed the VeriFone Omni 3200 terminal integrated with the CR 600 MICR check reader and processing services from NPC and eFunds. The focus of the integration project was check conversion. H&R Block provides a suite of tax, mortgage and investment services to more than 19 million clients annually.

Taxes and Clothes

"Our selection of a payment solutions provider was dependent upon their ability to offer credit and check conversion terminals with a proven track record for quality and reliability," says Frank Cotroneo, senior vice president and chief financial officer for H&R Block. "By implementing check verification and conversion services that convert paper checks to electronic ACH transactions, H&R Block gains faster access to funds and achieves efficiencies in the field offices with the consolidation of cash and check management functions."

Clothier The Men's Wearhouse went a step further when it designed the POS system that is now called RPOS sold by Retek. RPOS is designed to integrate all aspects of payment into the POS and merchandising systems while offering store associates multi-currency support. Stores in high tourist travel areas are able to convert currency on the spot.

"We're running 500 stores with real time links to our home office applications," says Jeff Marshall, CIO of TMW. "By hosting more data and business logic centrally, we continue to leverage our investment in IT infrastructure."

Another RPOS customer, Mark's Work Wearhouse, calls the RPOS approach perfect for payment system integration. "We have successfully completed the first and one of the more significant tests by configuring and testing the credit authorization process," says Robin Lynas, CIO. "At this rate, we expect to be live with a pilot by early July and have 70 stores running by September as part of our aggressive roll-out schedule."

The RPOS applications offer the advantage of multi-mode launches with a variety of thin client offerings. Best Buy and Eckerd are among the stores that have opted for RPOS this year.

Checks and Balances

One of the key areas of evolving payment systems is check cashing. Again, the problem for retailers is getting the customer out the door quickly. But the challenge here is not getting fleeced in the process.

The business continues to present major opportunities and challenges to retailers despite the growing popularity of debit cards and other non-paper payment methods. According to the American Banking Association, 90 percent of all consumers have a checking account - the largest number in history. But most of those accounts are driven by debit card use, as evidenced by an annual decline in check clearances (the ABA says check writing is slowing at the rate of five percent per year, but more than 50 billion checks were written in 2001, representing about 70 percent of all non-cash transactions).

Although the number of check clearances is in decline, the fraud associated with check cashing is on the rise, and payment systems must take that into account.

"More than 500 million checks are forged every year and fraud continues to grow at a yearly rate of 2.5 percent," said Tim Robinson, president, BioPay, a provider of check verification services.

Staples, which takes a higher number of checks than other retailers because of its extensive catalog and MRO business, recently signed on with Certegy of Alphatetta, GA, to get its risk management and loss-prevention services. This is essentially a function of who has the best database and intelligence tools.

"Staples chose Certegy for its credibility and reputation in the industry as the premier provider of check risk management services as well as their extensive data intelligence database," explains Bob Breen, vice president of financial services for Staples. "We are very pleased with the comprehensive menu of payment solutions that Certegy was able to provide us with in order to provide superior service and safeguards for our customers.

Many vendors, including Visa and Mastercard, have fraud insurance guarantees that cover some amount of the losses retailers endure in the check process. Some smaller vendors have made even stronger assurances. BioPay, for instance, guarantees grocers the face value of all checks cashed using their biometric ID system.

"Check cashing is an ideal way for grocers to distinguish themselves from competitors. For it to be a profitable customer service, grocers need to be assured they will be paid on the checks they cash," said Tim Robinson, president, BioPay. "Our check guarantee program gives them that confidence."

Are you seeking a check cashing system? Send your specs to [email protected] and we'll provide a list of vendors.

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