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The restaurant industry is plagued with the highest incidence of credit card skimming, the unscrupulous practice of swiping a customer's card through a device, similar in size to a beeper, to record the magnetic strip data for the creation of fraudulent credit cards. In fact, 70 percent of all skimming occurs in the otherwise hospitable restaurant environment. One contributing factor is the accepted tradition of servers physically walking away with the customer's credit card in order to process the payment. Combine this practice with a higher number of transient employees, less-thorough background checks and unsuspecting guests, and it's an environment ripe for fraud.
Police recently uncovered an organized crime ring involving 40 restaurants in New York City. Servers were paid a flat rate per skimmed card resulting in the creation of counterfeit credit cards and over $3 million in fraudulent charges.
Tip boosting is another common crime that often goes undetected, unreported or both. Servers take advantage of a customer's scrawled tip amount and change the tip figure from $12 to $18 or more aggressively from $20 to $80. Depending on the extent of the discrepancy, these modifications may never even be questioned. If questioned, the problem is sure to be settled quietly. In an outlandish case involving restaurant owner, well-known celebrity chef and author David Ruggerio, $190,000 was stolen in just 26 instances. In one case, a $30,000 tip was added onto a $1,000 bill and the transaction was processed.
The best defence is a good offence
Recent advances in technology allow transactions to be settled securely at the table, in clear view of the customer. This new pay-at-the-table technology utilizes hand-held portable devices with cutting-edge security features and customer-friendly screen prompts. The screen prompts walk the customer through the process while offering convenient features such as an automatic tip calculator and tab-splitting. Depending on the establishment's unique circumstances, the technology can operate on a local area network, a wide area network or a cellular network. In many cases, the system can be fully integrated with an existing POS system or simply used on a standalone basis.
In addition to the benefit of preventing credit card fraud, pay-at-the-table technology offers further advantages. From a business perspective, allowing customers to settle transactions at the table can reduce payment-processing costs. For example, a typical restaurant with 200 credit transactions per day can save an estimated $850 per month in processing costs by encouraging just 25 percent of customers to swipe debit cards rather than credit cards. Such savings provide a rapid return on investment. Settling transactions at the table also improves operational efficiency resulting in quicker table turns.
Legal Sea Foods Inc. implemented pay-at-the-table technology in a controlled rollout in which servers offered customers a choice between the new technology and the traditional payment method. In the initial phase of the rollout, Legal Sea Foods' management observed lower transaction costs, quicker table turns and, as an added bonus, higher average tips for the servers utilizing the new technology. Customers also fully embraced the change.
"We had one table close out the check using the new technology, and then order more food so they could use it again," said Ken Chaisson, vice president of information technology for the 33-unit Boston-based chain. "Response has been so favorable that pay-at-the-table will be the only payment option for both debit and credit card transactions by the end of 2007."
Adapting to change
Concerned about alienating customers? Think again. In a recent survey by Visa International, 70 percent of consumers said the benefits of protecting their personal or financial information from being lost or stolen outweigh any inconvenience or cost. Besides, adapting to new technology today is really nothing new. Just consider how quickly consumers embraced ATM machines, swiping their own credit cards for most purchases and checking themselves out at the grocery store when faced with long lines. Change comes; people adapt--especially when the outcome is increased security of financial information.
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