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McDonald's beefs up smart cards

In a boost to smart cards in Europe and possibly elsewhere, more than 870 McDonald's restaurants in Germany are installing smart-card terminals.

    In a boost to smart cards in Europe and possibly elsewhere, more than 870 McDonald's restaurants in Germany are installing smart-card terminals so visitors can download electronic cash onto smart cards, then spend it at the fast-food outlet and elsewhere.

    Called the Geldkart system, the McDonald's rollout uses smart-card terminals from VeriFone, a unit of Hewlett-Packard. Previously, smart-card users had to load cash at a bank or an ATM machine.

    "By moving into stores, they are making it more convenient to use," said Alistair Duncan, VeriFone's director of smart card business development, noting similar smart card activities in the United Kingdom, Holland, and Sweden. Smart cards are widely used in France too, but the French cards use a proprietary standard that can't interoperate with smart-card systems in other nations.

    Although the United States has lagged in adopting smart cards, analyst Allan Weiner of Dataquest thinks the McDonald's activity is worth watching.

    "This is a marketing trial. With a company like McDonald's, there's no reason why you wouldn't see it replicated in the United States," Weiner said. "There's a universality to McDonald's so if they can hit on certain good marketing points [in Germany], I think it will translate pretty well."

    McDonald's hasn't released specifics, but Weiner expects the fast-food chain to launch "frequent burger" rewards or other efforts to build loyalty among users who come into the stores to download cash.

    Smart cards, plastic cards the size of credit cards but with a computer chip embedded, are used more in Europe and Japan than in the United States, but U.S. banks have been experimenting with them, and card giants Visa and Mastercard are pushing to replace current magnetic stripe cards with smart cards that can handle multiple functions.

    In a McDonald's Germany pilot earlier this year, 55 restaurants reported strong usage. During the trial's first ten weeks, more than 30,000 transactions were recorded. Overall, nearly 40 million smart cards have been distributed in Germany since early 1997, VeriFone said.

    Jules Street, analyst at Killen & Associates noted that fast food is a high-volume, quick-pay, low-value commodity.

    "That's an ideal market for electronic media. Smart cards will make the transaction faster and easier, ultimately," Street said.

    Germany is not McDonald's first smart-card activity, and other marketers are warming up to smart cards in limited uses too.

    Since May, 210 McDonald's outlets in Quebec, Canada, have participated in a promotion that gives 120,000 members of the amateur Quebec Soccer Federation a smart card from Schlumberger loaded with promotional offers, dubbed the largest smart card sponsorship program in North America.

    Individual cards, also to be used next year for players to register for tournaments, were issued for a year and can be used at some movie rental and sporting goods stores.

    In addition to offering promotions or rebates with each purchase, sponsors sent a percentage of all sales made with a card to the soccer federation to distribute to the member's local club.

    In the United Kingdom, smart-card manufacturer Schlumberger announced last month that it will introduce bus passes on smart cards for schoolchildren. In Nottinghamshire, 10,000 students will use smart cards in an effort to reduce fraud and create a single ticket that can be used for multiple bus companies.

    The card, called Easypass, works with wireless card readers and has enough memory so that more than one application--electronic cash for example--could be used on the same card.

    Schlumberger yesterday announced a new smart card, Cyberflex Open 16K, which has twice the memory of earlier models.

    The new Schlumberger cards also support the JavaCard 2.0 specification and come with developer tools that support the PC/SC interface, the standard for how smart cards work with Windows PCs. The company's user discussion forum provides online technical support.