RFID And Smart Cards Get Customers On Their WayRFID And Smart Cards Get Customers On Their Way

The retail industry has started its back-to-school shopping, and point-of-sale technology is topping the list of must-have items for the fall.

Smart cards--credit cards embedded with computer chips--are in at Target Corp., which is using an alliance with Visa U.S.A. to keep its costs down and its marketing exposure up. Fast-food leaders KFC, McDonald's, Pizza Hut, and Taco Bell are trying radio-frequency identification (RFID) systems that let diners wave a wand to pay for food. And at the pump, the Mobil Speedpass has two new competitors: the Philpass from Phillips 66 and a similar device in pilot at Shell.

Target's rollout last week is the most ambitious result of what suppliers say was a wave of requests for point-of-sale proposals from the retail sector this summer. The nation's fourth-largest general-merchandise retailer has tapped smart-card company Gemplus International S.A. to provide cards that customers can use in stores and on home PCs for a mammoth launch of smart Visa cards in fall 2002.

"This is a fairly unique window of opportunity for two reasons," says Patrick Gauthier, Visa U.S.A.'s senior VP of smart-card applications. More than 40% of U.S. retail terminals were installed before 1995 and use a client-server architecture, making them expensive to maintain because software upgrades must be done on individual machines. Many companies are now replacing those old terminals.

Plus, tech-savvy retailers are taking advantage of the slower economy to leapfrog competitors. "Lance Armstrong won the Tour de France by relentlessly attacking his opponent not on a long, flat run, but in the mountains," Gauthier says. "It's on the tough terrain that you see the difference between leaders and followers." Companies that invest in IT during tough times will emerge as leaders, he says.

Gauthier calls the Target contract "a new type of partnership." Visa is pushing hard for greater acceptance of smart cards, which cut fraud by authenticating users through personal identification numbers.

Last week, Phillips 66 began testing the RFID-based Philpass at the gas pumps and convenience stores of 20 stations in the Kansas City area, using the same Texas Instruments RFIDs as ExxonMobil and Shell and countertop readers from Marconi Commerce Systems. Customers link the RFID to a credit card when they register.