Airport Kiosks Gain Altitude
If you’re like most business travelers, you’ve noticed that the lines at airline check-in counters have grown
agonizingly long since the advent of new security rules in the wake of Sept 11. So have the airlines. In
response, they’ve accelerated deployment of ATM-like machines near their check-in counters at airports to
process e-tickets, spit out boarding passes, and take payment for upgrades. Coming online are such
expanded features as payment for in-flight beverages and meals and the ability to process more complicated
transactions, such as stand-by, as well as machines that can handle international flights. And the technology
is moving beyond air travel. Already, some devices are handling transactions for multiple airlines, as well
as for airline, hotel, and car-rental check-in, a combined-use approach that some say will expand rapidly.
“That’s what’s keeping me busy,” says John A. Dungan, senior program manager for ARINC Inc.,
Annapolis, Md., a systems integrator that helped set up the first multi-airline machines last year.
Airlines have hooked up about 5,600 of these ticketing kiosks in the nation’s airports since the first
machine went live in 1995, and shipments for Lake Mary, Fla.-based Kinetics Inc., the largest maker of the
systems, are growing 50% annually. Consumers are increasingly flocking to the machines, too. Some 28%
of business travelers with electronic tickets now use them, up from 23% a year ago, according to Forrester
Research, and some airlines claim much higher percentages among domestic, e-ticket-carrying customers.
Continental Airlines, which deployed the first ticketing machine, now boasts a 70% usage rate among its 50
million passengers, for example. “It won’t be long before 90% plus will be the standard,” says Jim Brown,
a spokesman for Kinetics.
Top 10 Kiosk Deployers
Delta
860
Continental
779
Northwest
750
American
700
United
600
US Airways
480
Southwest
430
Alaska Air
400
AirTran
200
America West
Source: Digital Transactions
90
The reasons ticketing machines are flying high? Stringent security rules since the terrorist attacks of
Sept. 11, 2001, for one thing, require passengers to obtain a boarding pass at the check-in counter, creating
a chokepoint for travelers well before they ever get to the gate. By contrast, kiosks can process a check-in
these days in under a minute. Beyond that, airlines have begun to realize sizable savings on transaction
costs through the machines, which run $6,000 to $8,000 each in quantity. Continental, which will not
disclose how much its 779 kiosks have saved, says the machines allow the carrier to serve more customers
with the same levels of staff. They also allow the company to attract more business travelers, who want to
move through airports quickly and who also pay higher average fares than other passengers. That helps
support a revenue premium for Continental at 12% over the industry average on business travel. “We’re
absolutely seeing our expected (return on investment),” says Scott O’Leary, senior manager of e-services
programs for the airline.
On self-serve ticketing in general, which includes Web transactions, airlines cut their check-in costs to
16 cents per passenger, compared to $3.68 when a counter agent handles it, according to Forrester. Kinetics
estimates most airlines see a payback on these machines within a year, and sometimes in as little as six
months.
Now airlines, airports, and other parts of the travel industry are ready to exploit the technology even
further. Last October, the first kiosks to be shared by multiple airlines debuted at Las Vegas’s McCarran
International airport, perhaps best known for self-service devices of another kind—slot machines. Based on
a software standard known as common-use self-service (CUSS), the 30 airport kiosks can check in
passengers for a dozen carriers. Another six machines are hooked up at the Las Vegas Convention Center.
By noon on the day the IBM Corp. machines went live, they had already tallied 3,000 transactions. “At our
press conference to announce the machines, people were nudging cameramen aside to get to them,” recalls
ARINC’s Dungan. McCarran owns the network, which it branded SpeedCheck. Now, says Dungan, he’s
logging plenty of airline time himself talking to other airport authorities, which are attracted to the
technology because it allows them to more efficiently allocate common-area space.
Meanwhile, hotels are starting to get in on the action. Starwood Hotels & Resorts has deployed kiosks at
its W hotels in New York and Boston that allow guests to check into and out of rooms as well as check in
for flights. “We’re looking to expand to several dozen more Starwood properties,” says Kinetics’ Brown.
The company is also talking to car-rental companies and cruise lines about the same idea. Says Brown:
“We’re looking at the entire (travel) chain.”
And the airlines are planning to make their machines handle more complex transactions, such as
passengers changing itineraries, flying standby, and checking bags after checking in on the Web. Already,
they make their machines accessible to passengers flying on tickets with airlines they have code-sharing
arrangements with. “All the plain-vanilla transactions have been absorbed by the machines,” says
Continental’s O’Leary. Next up? International travel. Carriers started dabbling in this last year, but
observers say 2004 will be a big year for machine deployment in foreign airports served by U.S. airlines.
The same forces driving deployment here, say experts, will lead to more and more kiosks overseas. Says
Kinetics’ Brown: “This will be increasingly common.”
Intuit-IMS: The Shape of Things to Come?
Just as the merchant-acquiring business was adjusting to an invasion of private-equity players buying up
independent sales organizations by the bushel (“Behind the ISO Consolidation Trend,” January/February),
ISOs and processors may have to brace themselves for an influx of acquisitive companies from other
markets. That prospect is only more likely now that Intuit Inc. has apparently made a success so far of its
recent $116-million acquisition of Innovative Merchant Solutions, a 5-year-old ISO in Calabasas, Calif.
Intuit and IMS closed on the deal last September, and “so far it’s been awesome,” says Joe Kaplan, IMS’s
chief executive and a veteran of the transaction-acquiring business.
As recently as a year ago, a company like $1.6-billion Intuit, purveyor of the popular Quicken and
QuickBooks accounting-software packages, may not have seemed a likely buyer of ISOs, which were and
are busily buying each other and being bought by private-equity funds seeking the steady returns promised
by transaction traffic. But Intuit saw an opportunity to expand its QuickBooks business, and IMS looked
like the vehicle to do it. The Mountain View, Calif.-based software giant had started its QuickBooks
Merchant Account Services unit three years ago to meet the transaction needs of small businesses, the
biggest customer base for QuickBooks. By the time it bought IMS, Intuit had signed up 40,000 clients for
the service, which allows merchants to use Intuit’s banking links to set up card-acceptance accounts, and
was generating $9 million in revenue from it annually.
But the software doesn’t automate entry of terminal-based card transactions, and Intuit had no entity to
sell and install terminals or to offer debit card acceptance based on personal identification numbers. That
cramped Intuit’s style when it came to selling account services to the broader market of 2.5 million
QuickBooks users. “It wasn’t a POS solution,” says an Intuit spokesperson. “Now with IMS we can own the
process from soup to nuts.”
It may be early to talk about “owning” the POS process, but both companies are working hard to exploit
their relative strengths. Both are at work on the software tweaks needed to make transactions at the terminal
flow into QuickBooks. And Kaplan is gearing up his sales force to go after the huge opportunity he sees in
selling payment services to that installed base of QuickBooks clients. “If we do it right,” he says, “our
world opens up.” IMS currently serves 100,000 merchant locations, and with Intuit behind it Kaplan figures
it can expand that base by 50% this year. Best of all, says Kaplan, these new merchant relationships may
prove hardier—and more profitable—than is typical between ISO and merchant. Says he: “Intuit has access
to a customer base that’s very loyal, unlike the credit card side where merchants sometimes will leave you
for a $1 advantage.” For its part, Intuit isn’t ruling out future acquisitions or other relationships with ISOs.
“We think there’s greater opportunity with greater focus in this area,” says the spokesperson.
Others are watching closely. A number of outside companies serving merchants and other small
businesses could be candidates to buy ISOs or transaction processors, say industry observers, particularly if
the Intuit-IMS integration continues to run smoothly. “There’s going to be a lot of large players entering
the game,” says Kaplan. “It just makes sense.”
From Air Carrier to Check Processor
It was one of those moments when a company has to decide what business it’s really in.
When banks began rallying behind a bill in Congress that would allow them to exchange check images as
if they were legally the same as paper checks, shudders went down the spines of executives at AirNet
Systems Inc. After all, the Columbus, Ohio-based company had made a thriving business out of flying timesensitive items, mostly checks, around the country on a fleet of 120 planes in hangars around the country.
Every night, it hauls 125,000 pounds of checks, or 70% of the nation’s check volume, and claims the
country’s 100 largest banks among its clients.
Already, the shift in payments to electronic transactions had made a dent in that business, as products
like debit cards took market share away from checks. Indeed, the company’s banking revenues leveled off
last year at $102 million. So AirNet did what any company that feels threatened by new legislation does: it
lobbied hard against it, leaning in particular on five Ohio congressmen on the House Finance Committee.
AirNet figured if it could hold off the passage of the bill, which ultimately became law last fall as the
Check Clearing for the 21st Century Act (Check 21), that would give the company time to diversify into
other small-package delivery markets and passenger charter.
Diversify AirNet did, but in a much more interesting way. Check 21, which takes effect in October,
allows banks without imaging technology to turn the check images they receive back into paper items,
called image replacement documents (IRDs), for processing. IRDs, though not as efficient as images, are
still cheaper and clear faster than paper. AirNet saw an opportunity to set up high-volume printers at its
seven regional hubs that could receive images and then print IRDs that the company’s planes would then
carry, on shorter routes, to the receiving banks served by the hubs. The combination of faster settlement
time and reduced transportation cost would cut banks’ per-item costs, since carrier costs typically account
for about 20% of banks’ check-handling costs. And AirNet would keep its planes flying and extend the
shelf life of its critical banking market. The result: AirNet went into the transaction-processing business,
launching in December a new subsidiary, called Fast Forward Solutions.
The new unit came about, in part, because AirNet’s legislative maneuvers were looking less and less
fruitful. “We thought, we could sit here and continue to ask the Ohio Republicans to continue stonewalling
implementation (of Check 21), which wasn’t winning us many favors with our bank clients, or we could
say, let’s embrace change, and what can we do to be a part of it,” says Jeff Harris, the banking veteran and
AirNet executive who took over as president of Fast Forward Solutions. Embracing change may well be the
best move the air carrier ever made. Fast Forward has made a deal with NetDeposit Inc. to use the Salt
Lake City-based software company’s check-processing gateway and is working on capacity studies at its
hubs to get its printer network established. And Harris, who says Fast Forward can cut banks’ paper-check
costs by 10% to 20%, expects to announce the company’s first customers shortly. “What Fast Forward is
selling is a forward-collection solution that transportation is a part of,” says Harris.
NetDeposit, a subsidiary of Zions Bancorporation, approached AirNet with the IRD idea a year ago.
Now the 3-year-old company will benefit from the introduction it will get into AirNet’s client base. Indeed,
Harris likens the Fast Forward relationship to NetDeposit to that of computer makers to Intel. “Fast
Forward’s desire is to be powered by NetDeposit like Intel Inside,” says Harris.
Harris has no delusions about the permanence of paper. Check imaging, he says, is inevitable. But IRDs
will prove to be a workable solution for the next three to five years, he figures, for banks that can’t
immediately make the investment in imaging gear. Even for large banks that may have some of the
infrastructure already in place, the cost of installing imaging equipment could run as much as $5 million.
That buys AirNet the breathing room it was looking for. And, by the way, says Harris, paper checks aren’t
going away completely. “There are still over 10,000 banks in America,” he says. “There will always be a
need to move checks.”
Chip And PIN Come To Canada
Plastic cards embedded with integrated-circuit chips for payment processing and other advanced functions
have struggled at the point of sale in North America for years (“Why Uncle Sam Yawns at Smart Cards,”
January/February). But now, with a major rollout of chip cards combined with personal identification
numbers going on Europe, the chip and PIN combo is leading smart cards back to Canada.
An ambitious multi-application smart card pilot launched late last year in Barrie, Ontario, is moving to
its next phase, which involves signing up more merchant locations in an effort to reach a goal of 200 in
the town of 60,000 people. Toronto-based Scotiabank, the issuer of the cards, will not release how many it
has issued so far, though it said in a statement announcing the project in 2001 that it planned to have
12,000 residents participating. “That’s still in the ball park,” says Gregg E. Friday, director of business
development for credit cards at the bank. The key for now, he says, is to test the card’s basic PIN security
function. Then the plan is to add on a loyalty feature and an electronic purse that could be used for smallvalue payments, relying on technology from Cardis Enterprises International B.V., a company based in
the Netherlands.
Paymentech Canada, which is processing transactions for the pilot, is signing up merchants in Barrie
that are already clients of the processor. “It’s going about as we expected,” says Drew Brown, president of
Paymentech Canada, which until its October 2002 acquisition by Dallas-based Paymentech L.P. was the
merchant-acquiring unit of Scotiabank. The terminals for the project are supplied by Ingenico Corp.,
formerly IVI Checkmate.
The first multi-application chip card project in Canada that is compliant with the so-called EMV
standard for smart card transactions, the Barrie pilot features Visa credit card transactions secured by
personal identification numbers. Instead of signing receipts, cardholders enter a PIN and insert their cards
in a chip reader. The entered PIN must match the PIN encoded in the chip. This is the same standard being
followed by U.K. issuers in a nationwide rollout of EMV-compliant cards now underway.
Scotiabank is hoping the cards, if they test successfully, will help build up the banks’ card portfolio and
transaction volume as cardholders spooked by rising fraud from identity theft respond to the added security
of chip-based PINs. Sponsoring the test, the bank figures, will also help. “There are advantages to being
there ahead, and disadvantages to not being there,” notes Friday.
For now, Friday is optimistic. “Eventually this will roll out,” he says. “Chip cards are here to stay.” The
EMV standard, missing in previous tests, may make a difference this time. Barrie was the site of an earlier,
non-EMV smart card pilot based on the Visa Cash Card. That project, in which Scotiabank was also the
issuer, ran from 2000 until last year, giving Barrie the longest exposure to smart cards in Canada. Two
other Canadian chip pilots involving other issuers, one starting in Guelph, Ontario and later moving to
Sherbrooke, Quebec, and one in Kingston, Ontario, also were in operation for a time.
Philips and Visa Report On Their Digital Content Alliance
Philips Electronics NV and Visa International have joined forces to show how the latest contactless
technology can change the way digital content and services are distributed, paid for, and accessed by
today’s universally connected consumer.
Following the announcement of an alliance between the two companies in May last year, Philips and
Visa have set up demos and concepts across different industries, including communications, consumer
electronics, computing, and digital content providers. The two organizations are showcasing proofs of
concept demonstrating the combination of Philips’s Near Field Communication (NFC) technology and
Visa’s Verified by Visa (VbV) security system “Both Visa International and Philips share a vision of
secure universal commerce and connectivity, whereby consumers can access and pay for physical and
digital services anywhere, at any time, using any device,” says Gaylon Howe, executive vice president,
consumer product platforms, Visa International.
The partners are highlighting the unique value derived from combining the latest consumer electronics,
wireless connectivity, and secure, universal payment. In one scenario, music lovers can download the right
to listen to a song to their PDA or their Visa payment card either by holding the PDA near a smart poster of
their favourite Universal Music pop star or by holding their contactless Visa card near a store kiosk selling
songs.
The smart poster contains an embedded microchip that sends the information to the PDA using NFC
technology. Payment is by VbV and the song rights can be stored utilizing Visa Smart Secure Storage
(VS3). The kiosk is enabled with RFID technology to capture payment information from the card and
transfer the rights to be stored in VS3. To hear the song, the user transfers the song rights to a Philips
Streamium internet radio using NFC, and the song is then played over the internet.
Mobile phone users can pay for concert or movie tickets at the box office by holding their phone next to
the payment terminal. The contactless chip in the phone transfers Visa payment data to the terminal and,
once payment is confirmed, sends the tickets back to the phone. The phone user can then transfer a ticket
using NFC to a friend’s mobile phone. Payment is made by a new Visa person-to-person payment concept.
Once at the venue, both ticket holders can use their phones to gain access and may also receive an
electronic discount coupon for an on-site merchant. “As we move into the rollout phase of NFC
technology, we are proud to present showcases which represent the first step in providing people with
secure access to attractive content using their mobile devices as the central element,” says Scott McGregor,
president and chief executive, Philips Semiconductors.
Among the partners working with Philips and Visa is global entertainment company Universal Music
France. “(We are) delighted to work with Philips and Visa as they both share our belief that content should
be securely and easily available in any form—physical or digital—to anybody, in any environment using a
flexible pricing plan,” says Pascal Nègre, president of Universal Music France. “The ability for users of
Universal Music France’s E-Compil music portal to access services through any channel on any device is
central to our vision for the future of the entertainment industry.”
Having demonstrated the technical concept of these applications, Philips and Visa will continue to
assess market demand and develop stakeholder business cases.
Visa Expands Its CEMEA M-payments Project
Visa International CEMEA (Central and Eastern Europe, Middle East and Africa region) has announced the
expansion of its new mobile-payment solution, enabling users to recharge mobile-phone airtime via shortmessaging service (SMS).
Following the extension of the agreement between Visa CEMEA and technology-provider Upaid, the
service is to be offered to banks and mobile-network operators across the region. The service was launched
in October in Morocco with Banque Marocaine du Commerce Extérieur (BMCE) and mobile operator
Méditel.
The solution enables prepaid mobile phone users to recharge air time direct from a Visa card account
simply by sending an SMS/text message. Customers can top up their own mobile phones as well as those of
families and friends. No special handsets or technology are required, making it a mass-market mobilepayment solution. “(Visa CEMEA) have taken an extremely consumer-oriented approach which we feel is
key to encouraging the use of a mobile phone to make payments,” says Ashley Ward, Upaid chief
executive.
The service is provided as a so-called plug-and-play solution to participating banks and operators, which
is suited to the needs of many Visa members in the CEMEA region. Once customers become familiar with
using their mobile phones to recharge their air time, a much wider range of payment applications becomes
possible.
Upaid is providing the technology behind the service, offering advanced platform functionality and a fully
hosted service. Visa member banks connect to the platform once to gain access to all participating operators,
and vice versa for operators. Initially contracted to partner Visa for the Morocco project, Visa and Upaid
have now extended their agreement until December 2005 to facilitate wider deployment.
The Upaid technology enables multiple banks and mobile operators to connect to a host platform that
authenticates and processes top-up transactions. The platform interacts with operator and bank systems to
authenticate the end-user based on his MSISDN (mobile phone number), combined with a PIN used to
initiate transactions. It then handles the transfer of transaction authorization and top-up message requests
between the bank and the operator.
Commenting on the service, Hilary Mitchell, vice president New Payment Solutions, Visa International
CEMEA, says: “We have selected Upaid as our ASP provider on the basis of their platform and their
people. The functionality and flexibility of the Upaid platform means that the service can expand in line
with CEMEA’s strategic roadmap to enable a range of customer-friendly solutions for remote payments.”
Within the CEMEA region, an estimated $10.5 billion will be spent on prepaid mobile recharges by
2005. Air-time top-up via a mobile phone and bank account will bring added convenience and costefficiencies to operators and consumers alike, while reducing the reliance on top-up vouchers, which are
considered expensive and inconvenient to administer.
A Research Report Forecasts a $7 Billion Mobile Infotainment Market
Not only are wireless infotainment services expected to generate worldwide revenues of $7.2 billion by
2008, but their success can make the mobile phone, more than ever, the indispensable tool for modern
living. These are some of the key findings from a new research report, “Mobile Infotainment: News, Travel
& Information,” now available from Alexander Resources, a specialist in wireless communications.
According to the report, infotainment encompasses personal/ peer-to-peer and third-party services that
are designed to support and enhance a user’s daily life while on the move. Personal/peer-to-peer services
include personal data/management as well as short-messaging service (SMS) and multi-media messaging
(MMS) applications. Third-party services include several subsegments: mobile news, sports and weather
services, mobile travel services and TV, celebrity, financial, and other services.
Increased reliance on the mobile phone is vital to the mobile industry as a whole and to its future profits,
potentially positioning infotainment as the cornerstone for future non-voice and voice-adjunct mobile
services.
The report forecasts worldwide revenues for wireless infotainment to grow from $1.5 billion in 2005 to
$7.2 billion in 2008. To reach these revenues the market must first overcome some significant hurdles.
These include market pricing, user willingness and ability to pay, the need for enhanced carrier billing
systems, and improved security and privacy measures.
The articles in this section are published by arrangement with Mobile Payments World, an online-only
newsletter published 22 times a year in the UK by European Card Review, Europe’s leading payments card
magazine. More details: www.mobilepaymentsworld.com.