Magazine Article | June 1, 2003

May I Help The Next Customer?

Source: Innovative Retail Technologies

By replacing its stand-alone, dial-up credit transaction units with integrated payment processing solutions, McDonald's Canada reduced payment-processing costs and improved its speed of service from 30 seconds to 8 seconds.

Integrated Solutions For Retailers, June 2003

While many businesses can talk about the fast pace of a typical workday and how they are striving to streamline their processes, few can compare with the pace and efficiency of McDonald's. On any given day in Canada, McDonald's Restaurants of Canada Limited (Toronto, ON) will serve 3 million people among its 1,320 restaurants. That works out to an average of 2,273 customers served per store per day. And, that's just the average - it certainly doesn't reflect a typical McDonald's experience from 11:00 a.m. to 1:00 p.m.

Fries Were Ready ... But Payment Authorization Wasn't
One process that wasn't living up to McDonald's standards, however, was its payment processing solution. The fast food retailer was using stand-alone dial-up units that required order takers to step away from the register, manually enter the dollar amount of the transaction, swipe the debit or credit card, and wait ... and wait ... and wait. Assuming everything worked properly, which wasn't always the case, the transaction would take 30 seconds to complete. In many retail environments a 30-second wait can be a nuisance - at a McDonald's it's nearly as bad as running out of french fries or milk shakes. Besides the waiting, the retailer's payment processing units had other issues. "Because the units weren't integrated with our POS system, there was a chance that double-entry data errors could occur, which made end-of-day register reconciliation more labor intensive," recalls Lou Stea, national operations technology manager at McDonald's Restaurants of Canada Limited. "Additionally, with our stand-alone units we were paying higher transaction fees for both debit and credit transactions."

A Payment Processing Upgrade
Early in 2002, McDonald's research and data analysis revealed that a significant number of customers were paying with debit cards. Its research also showed that credit transactions weren't far behind debit transaction statistics. This information confirmed that the retailer needed to upgrade its legacy payment processing units. In the process of researching various solutions, McDonald's chose AJB Software Design Inc.'s (Toronto, ON) RTS (retail transaction switch) and FIPay payment processing application as part of its new solution. "We chose several pilot restaurants to try out the new solution, which comprised the RTS, the FIPay software, and a high-speed communications connection," says Stea. "We integrated the RTS with our Compris POS platform using Compris' generic interface layers."

The new solution provided an immediate transaction timesaving by being integrated with the cash registers and by eliminating double data entry.

Another improvement with the new solution came from the RTS - the switch that directs payment requests to the appropriate banks over encrypted T1 communication lines and verifies card authorization and PIN. The RTS is able to distinguish credit and debit transactions, which offers significant savings to the retailer.

The third part of McDonald's solution was an upgrade from a dial-up connection to a high-speed DSL (digital subscriber line) communications connection in its stores. Additionally, because the network design uses an Internet protocol, each of McDonald's POS registers can be connected to the payment processing solution and can simultaneously process multiple sessions of credit/debit transactions.

McDonald's ran the pilot tests for six months. During that time they noted that the entire payment process improved from 30 seconds (stand-alone units) to 8 seconds (integrated units).

Unlike the previous solution, the FIPay/RTS solution enables split tendering options. If a customer wants to pay $5 cash and the rest on debit/credit the solution can charge the remaining balance to a credit card or debit card.

Presently, McDonald's is finishing its pilot phase and will be rolling out the solution to the rest of its Canadian restaurants throughout the rest of 2003. In future phases, the retailer is looking into adding other cashless initiatives to its order-payment-processing repertoire, which could be integrated to its new POS payment processing solution. While it's too early to know for sure how things will play out with this idea, one thing that the retailer knows for sure: any new solution has to contribute to making customers happy - and it has to do it quickly.