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About 400 customers at KFC and Taco Bell restaurants in the Raleigh-Durham, N.C., area are testing an m-commerce system created by 2Scoot, based in Kingston, N.Y. In July 2Scoot signed a deal with Nokia to bring cashless payments to the lunch counter at the Finnish cell-phone giant's U.S. headquarters in Irving, Texas.
Canteen Vending, based in Charlotte, N.C., is busy retrofitting 50,000 machines nationwide to take payment from FreedomPay wands by the end of 2002. FORTUNE 500 companies such as Prudential Insurance and GM already have vending machines that accept payment by wand. And Yale students will get similar machines in their cafeterias next year.
The little RFID (short for radio-frequency identification) wands are proving far more popular and practical than the much promoted use of cell phones to shop on the Net. Only 6% of all mobile-phone owners use theirs to purchase stock, transmit payments, make travel arrangements or buy small items, according to the Personal Communications Industry Association. More Americans may soon be able to use their cell phones in conjunction with the RFID tags. The key, says Nokia m-commerce expert Tom Zalewski, will be enabling retailers to reach out to phone users with short messages when they are within, say, a mile or two of a store. Then users can pull in and pay with their Nokia phones, which will be hiding an RFID tag inside their SmartCover. "The next round of pilots will test alerts from stores like Blockbuster, Starbucks or the Gap telling you about specials," says Zalewski. "Or maybe a theater will message you with a coupon for a free movie on a slow day."
The m-commerce chips, when scanned by a reader, transmit a unique code, your ID, which zips down the Internet to an account sitting in a computer at a transaction-processing company. No credit-card information is transmitted between the reader and the tag, so that information cannot be hijacked. 2Scoot bills your credit card of choice, while FreedomPay uses a debit system that deducts money from an "electronic purse" set up in advance using either cash or a credit card.
If you lose your wand or RFID cell phone, you just report it stolen or missing, and FreedomPay or 2Scoot will deactivate it and issue a new one with a new code. And those who use the electronic-purse system usually keep only two-figure sums of money in them. "It's not like you're gonna buy a 1948 roadster with a $99 account," says Jim Forbes, an analyst for consulting firm IDG, based in San Mateo, Calif.
Fast-food restaurateurs are especially excited by m-commerce, which promises to inject more "fast" into their business while helping reduce employee theft and errors in making change. End-of-shift reconciliation is automatic, so there's no clumsy comparing of credit-card receipts with the register. "People can't sift through the trash and find your credit-card number," points out Joe Ely, technical officer for 2Scoot. "And they can't ring up $7 on the register, put $27 on the credit-card machine and pocket the $20." Installation of an RFID reader costs about $300--about half the cost of a reader for credit cards. And customers get the wands or tags free.